UNIVERSITY OF CABUYAO (PAMANTASAN NG CABUYAO)

College of Business, Accountancy, and Administration

Bachelor of Science in Accountancy

BASIC FINANCIAL ACCOUNTING AND REPORTING

1. The best definition of assets is
a) collections of resources belonging to the company and the claims
on these resources.
b) owners’ investment in the business.
c) resources belonging to a company that have future benefit to the
company.
d) company’s Debts or obligations the company owes resulting from
past transactions.

2. A successful business man hired an Accounting Manager for his business.

Which of the following report would be your final product in order to
understand the situation of his business?
a) Cash budgets
b) Financial statements
c) Financial plans
d) Annual report

3. What is the law regulating the practice of accountancy in the Philippines?

a) R.A. No. 9289
b) R.A. No. 9928
c) R.A. No. 9198
d) R.A. No. 9298

4. All of the following describe accounting, except

a) A service activity
b) An information system
c) An exact science rather than an art
d) A universal language of business

5. The overall objective of accounting is

a) To provide the information that the managers of an entity need to
control the operations
b) To provide information that the creditors can use in deciding
whether to make additional loans
c) To measure the periodic income of the entity.
d) To provide quantitative financial information about an entity that
is useful in making economic decision

6. The asset created by a business when it makes a sale on account is termed

a) Accounts payable
b) Prepaid Expense
c) Accounts receivable
d) Unearned Revenue
7. Which of the following statements are true
I. Debit and credit can be interpreted to mean increase and
decrease, respectively.
II. The double-entry system is a logical method for recording
transactions and results in equal debits and credits for
each transaction.
III. A trial balance does not prove that all transactions have
been recorded or that the ledger is correct.
a) I and II
b) II only
c) II and III
d) III only

8. Comparison of the balance sheet of JPIA at the end of 2015 with its
balance sheet at the end of 2014 showed a decrease in total assets of
P69,000 and owners' equity by P15,000. The change in liabilities during
the year was
a) Increase of 84,000
b) Increase of 54,000
c) Decrease of 84,000
d) Decrease of 54,000

9. Which of the following items has no effect on owner’s equity?

a) Expense
b) Purchase of land
c) Owner’s Withdrawal
d) Revenue

10. Which of the following is incorrect regarding a trial balance?

a) It proves that the debits equal the credits after posting.
b) It proves that the company has recorded all transactions.
c) A trial balance uncovers errors in journalizing and posting.
d) A trial balance is useful in the preparation of financial
statements.

11. These users require information on risk and return on investment

a) Creditors
b) Investors
c) Lenders
d) Customers

12. Equipment with an estimated market value of P60, 000 is offered for
sale at P90 000. The equipment is acquired for P30 000 in cash and a note
payable of P50 000 due in 30 days. The amount used in buyer’s accounting
records to record acquisition is
a) P 80 000
b) P 90 000
c) P 60 000
d) P 30 000

13. Using accrual accounting, revenue is recorded and reported only

a) If cash is received after the services are rendered
b) when cash is received at the time services are rendered
c) when the services are rendered without regard to when cash is
received
d) when cash is received without regard to when the services are
rendered
14. On January 1, 2016, Potter Company bought a building for P2,750,000 to
serve as the Company’s office. It was estimated that the said building
will be useful for 20 years. After the end of its useful life, the building
can still be sold for P250,000. What is the amount of depreciation expense
that should be recognized by Potter Company on December 31, 2016?
a) P 100,000
b) P 125,000
c) P 150,000
d) P 175,000

15. Which of the following entries records the receipt of a utility bill
from the water company?
a) debit Accounts Payable, credit Cash
b) debit Accounts Payable, credit Utilities Payable
c) debit Utilities Expense, credit Accounts Payable
d) debit Utilities Payable, credit Accounts Receivable

16. The process of posting is mostly associated with

a) Financial Statements
b) Source documents
c) General Ledger
d) Worksheet

17. The assumption that the unit of measure remains sufficiently constant
over time is part of the
a) economic entity assumption
b) cost principle
c) historical cost principle
d) monetary unit assumption

18. Adjusting entries normally involve:

a) Real and nominal accounts
b) Nominal account only
c) Real account only
d) Neither real nor nominal account

19. At December 31, 2020, before any year-end adjustments, Karr Company's
Insurance Expense account had a balance of P1,450 and its Prepaid Insurance
account had a balance of P3,800. It was determined that P3,000 of the
Prepaid Insurance had expired. The adjusted balance for Insurance Expense
for the year would be
a) P3,000
b) P1,450
c) P4,450
d) P2,250

20. A debit column total is greater than the credit column in the income
statement section of the worksheet. This means that
a) Mistakes were made in the preparation of the adjusted trial balance
b) The company made a profit
c) The company had a loss
d) The Income Summary account will have a credit balance after the
nominal accounts are closed
21. The bookkeeper of Benetton Company recorded the payment of credit
customer as a debit to cash and credit to accounts payable. The erroneous
recording of transaction would result to
a) Overstatement of accounts receivable and accounts payable
b) Overstatement of accounts receivable and understatement of
accounts payable
c) Understatement of accounts receivable and overstatement of
accounts payable
d) Understatement of accounts receivable and accounts payable

22. Equipment account balance per as of December 31, 2020 was reported at
P500,000. During the year additional equipment was acquired for
P140,000 on October 1, 2020 and all equipment is to be depreciated at the
rate of 10% per annum. There is no scrap value. How much is the depreciation
expense for the year 2020?
a) P50,000
b) P39,500
c) P33,000
d) P35,600

23. Santa Claus Company pays cash for three months of rent in advance, at
a rate of P50,000 per month. The balance of the Prepaid Rent account two
months later would be
a) P25,000
b) P50,000
c) P100,000
d) P150,000

24. The entry to record the receipt of payment within the discount period
on a sale of P750 with terms of 2/10, n/30 will include a credit to
a) Sales Discounts for P15
b) Cash for P735
c) Accounts Receivable for P750
d) Sales for P750

25. The unearned rent account has a balance of P36,000. If P4,000 of the
P36,000 is unearned at the end of the accounting period, the amount of
the adjusting entry is
a) P 4,000
b) P 40,000
c) P 32,000
d) P 36,000

26. Biz Company purchased merchandise with an invoice price of P2,000

and credit terms of 2/10, n/30. Assuming a 360-day year, what is the
implied annual interest rate inherent in the credit terms?
a) 20%
b) 24%
c) 37%
d) 72%
27. A company shows the following balances:
Sales 1,000,000
Sales Returns and 180,000
Allowances
Sales Discounts 20,000
Cost of Goods Sold 560,000
What is the gross profit percentage?
a) 56%
b) 70%
c) 44%
d) 30%

28. The following accounts were found in the Ledger of Mega Company
on December 31, 2019
Dr. Cr.
Accounts receivable 123,800
Allowance for bad debts 8,000
Cash sales 913,800
Credit sales 1,851,000

Accounts receivable of P15,000 is to be written off, and that

the allowance for bad debts is to be adjusted to 10% of the
outstanding accounts receivable. Prepare the adjusting entry to
take up the provision for bad debts account on the books of Mega
Company.
a. Allowance for bad debts 108,800
Accounts receivable 108,800
b. Allowance for bad debts 18,800
Bad debts expense 18,800
c. Bad debts expense 18,880
Allowance for bad debts 18,880
d. Accounts receivable 108,800
Allowance for bad debts 108,800

29. An item retailing for P 100,000, subject to a trade discount of 25% is

paid for within the discount period on terms 2/10, n/30. What is the
amount of payment made?
a) P 73,500 c. P 75,000
b) P 74,000 d. P 100,000

30. Dennis Company purchased merchandise from Ann Company with freight terms
of FOB shipping point. The freight costs will be paid by the
a) seller
b) buyer
c) transportation company
d) buyer and the seller

31. If a customer agrees to retain merchandise that is defective because

the seller is willing to reduce the selling price, this transaction is
known as a sales
a) discount
b) return
c) contra asset
d) allowance
32. A perpetual inventory system would likely be used by a(n)
a) automobile dealership
b) hardware store
c) drugstore
d) convenience store

33. Which of the following accounts would appear on a worksheet for a

merchandising company that uses the periodic inventory system?
a) Cost of Goods Sold
b) Purchase Returns and Allowances
c) Income Summary
d) All of these

34. All of the following affect a capital account except

a) Partnership profit and loss
b) Payment of a liability
c) Additional investment
d) Withdrawal of a partner

35. Entries prepared at the end of accounting period to properly measure

net income or net loss
a) Closing entries
b) Adjusting entries
c) Post-closing entries
d) Reversing entries

36. A post-closing trial balance is prepared before

a) Preparing financial statements
b) Reversing the accounts
c) Adjusting and closing the books
d) Preparing a worksheet

37. Which of the following adjusting journal does not require a reversing
entry at the beginning of the period?
a) Dr. Unearned Rent Cr. Rent Revenue
b) Dr. Interest Receivable Cr. Interest earned
c) Dr. Prepaid Rent Cr. Rent Expense
d) Dr. Salary Expense Cr. Salary payable

38. The unearned rent account has a balance of P 36,000. If P 4,000 of the
P 36,000 is unearned at the end of the accounting period, the amount of
the adjusting entry is
a) P 4,000
b) P 40,000
c) P 32,000
d) P 36,000

39. It is the General Accepted Accounting Principle that states that a

business is presumed to go on in perpetuity so long as there is no threat
to their ability to continue operation.
a) Going Concern
b) Accrual basis of Accounting
c) Timeliness
d) Materiality
40. Merchandise purchase on account on June 11, 20x3 with terms 2/10/eom,
n/60 may have a discount until
a) June 21, 20x3
b) June 30, 20x3
c) July 10, 20x3
d) July 11, 20x3

41. Under periodic system, the purchase of merchandise on account and

subsequent sale of merchandise on account will involve which account(s)?
a) Sales, Purchases, Accounts payable, and Accounts receivable
b) Sales, Purchases, and Inventory
c) Sales, Inventory, Accounts payable, and Account receivable
d) Inventory and Sales

42. 25. The closing entry for Sales Discount is

a) Dr. Income summary; Cr. Sales Discount
b) Not used because Sales Discount is a permanent account which is
not closed
c) Dr. Sales Discount; Cr. Sales Revenue
d) Dr. Sales Discount; Cr. Income Summary

43. Which of the following is not considered in computing net cost of

purchases?
a) Transportation cost paid on purchased goods
b) Transportation cost paid on goods shipped to customers
c) Purchase return and allowance
d) Purchases

44. On March 1, 20x3 the company purchased merchandise worth P75,000,

VAT exclusive, with terms 2/10, n/60. The company was able to pay
on March 9, 20x3 the full amount. The entry to record the payment
would be
a) Dr. Accounts Payable 84,000;
Cr. Purchase discount 1,700; Cash 83,300
b) Dr. Accounts Payable 75,000
Cr. Purchase Discount 1,640; Cash 80,360
c) Dr. Accounts Payable 84,000
Cr. Purchase Discount 1,500; Input tax 180; Cash 82,320
d) Dr. Accounts Payable 84,000
Cr. Purchase Discount 3,464.29; Input tax 175.71; Cash
80,360

45. The cost of goods sold is 13,500. Beginning inventory is 9,000 and
ending inventory is P15,000. If there is no freight-in and total purchases
were P21,750, what were Purchase Returns and Allowances?
a) P13,500
b) P2,250
c) P14,250
d) P11,250
46. As of December 31, Ravenclaw Merchandising Company’s records show the
following amounts:
Purchases P 1,250,000
Purchase discount 25, 000
Purchase returns 140,000
If Ravenclaw Company’s beginning inventory amounted to P 375,000, the
Company’s total Cost of Goods Available for sale is

a) P 710,000
b) P 1,085,000
c) P 1,460,000
d) P 1,250,000

47. Marc’s Company purchased inventory; the invoice for P9,450 included in
450 for freight, and terms of 3/15, n/30. Merchandise in the amount
of P1,200 was returned, and the balance of the invoice was paid within
the discount period. How much is the cash disbursed?
a) P9,450
b) P8,016
c) P8,023
d) P9,000

48. A partnership
a) has only one owner
b) pays taxes on partnership income
c) must file an information tax return
d) is not an accounting entity for financial reporting purposes

49. On May 1, 20x3, July and June formed a partnership and agreed to share
profits and losses in the ratio of 3:7, respectively. July contributed a
computer that cost him P50,000. June contributed P200,000 cash. The
computer was sold for 55,000 on May 1, 20x3 immediately after the formation
of the partnership. What amount should be recorded in July’s capital
account on formation of the partnership?
a) P55,000
b) P51,000
c) P60,000
d) P50,000

50. The following are kinds of partners except one, choose the exception:
a) Capitalist partner
b) Capitalist-secret partner
c) Industrial-managing partner
d) Limited-industrial partner
51. When property other than cash is invested in a partnership, at what
amount should the non-cash property be credited to the contributing
partner’s capital account?
a) Fair value at the date of contribution
b) Contributing partner’s original cost
c) Assessed valuation for property tax purposes.
d) Contributing partner’s tax basis

52. Which is not an advantage of a partnership?

a) Flexibility of operation
b) Ease of formation
c) Unlimited liability
d) Wider source of capital

53. Unlimited liability of the partners in a limited partnership pertains

to
a) All the partners
b) Limited partners only
c) General partners only
d) The entities that owes the partnership

54. Blossom, Bubbles and Buttercup formed a partnership to which Blossom

contributed a parcel of land with an acquisition cost of P 25,000. Bubbles
contributed P 50,000 cash and Buttercup P 75,000 cash. The land has a fair
value of P 50,000 at the formation date. The total capital credit of the
partnership should be
a. P 150,000 c. P 175,000
b. P 125,000 d. P 145,000

55. Erica and Mica formed a partnership on January 1, 20x3 by investing P

50,000 each into EM Coffee Shop. On June 30, 20x3, Mica invested an
additional 50,000 into the business If they agreed to divide profit based
on initial capital investment, how will they divide the P 120,000 profit
they earned in 20x3.
a) P 60,000 to Erica and P60,000 to Mica
b) P 40,000 to Erica and P80,000 to Mica
c) P 80,000 to Erica and P40,000 to Mica
d) P 100,000 to Erica and P20,000 to Mica

56. Erica and Mica formed a partnership on January 1, 20x3 by investing P

50,000 each into EM Coffee Shop. On June 30, 20x3, Mica invested an
additional 50,000 into the business If they agreed to divide profit based
on ending capital investment, how will they divide the P 120,000 profit
they earned in 20x3.
a) P 60,000 to Erica and P60,000 to Mica
b) P 40,000 to Erica and P80,000 to Mica
c) P 80,000 to Erica and P40,000 to Mica
d) P 100,000 to Erica and P20,000 to Mica
57. M and K formed a partnership, each contributing assets to the business.
M contributed inventory with a current market value in excess of its cost.
K contributed real estate with a cost in excess of its market value. At
what amount should the business record each of the following assets?
a) Market value; market value
b) Cost; Market value
c) Market value; cost
d) Cost; cost

58. A business would be organized as a limited liability partnership to

a) Eliminate double taxation
b) Raise additional capital
c) Reduce regulation to the business
d) Limit the liability of the owners to their investment

59. A non-cash contributions of the partners to form a partnership are

recorded by the partnership at their
a) Agreed capital
b) Book value
c) Dissolution value
d) Original cost

60. The drawing account of a partner is used to record the following except
a) Regular withdrawals
b) Investment to the business
c) Share in profit and losses
d) Closing entry to the capital account

61. A partnership which has failed to comply with one or more of the legal
requirements for its establishment is classified as a(an)
a) Open partnership
b) De jure partnership
c) De facto partnership
d) Secret partnership

62. Baby and Love form a new partnership. Baby invests P300,000 in cash for
her 60 percent interest in the capital and profits of the business. Love
contributes land that has an original cost of P40,000 and a fair market
value of P70,000, and a building that has a tax basis of P50,000 and a
fair value of P90,000. The building is subject to a P40,000 mortgage that
the partnership will assume. What amount of cash should Love contribute?
a) P80,000
b) P40,000
c) P110,000
d) P15,000
63. Lily, Andrea and Violet form a partnership on May 1, 2011. They
agree that Lily will contribute office equipment with a total fair value
of P40,000; Andrea will contribute delivery equipment with a fair value
of P80,000; and Violet will contribute cash. If Violet wants a one-third
interest in the capital and profits, how much should she invest?
a) P40,000
b) P60,000
c) P120,000
d) P180,000

64. X and Y formed a partnership. X contributed cash of P550,000

while B contributed land with a carrying amount of P300,000 and
fair value of P750,000. The land has an unpaid mortgage of
P150,000 which is assumed by the partnership. How much is the
total capital of the partnership?
a) P1,300,000
b) P1,000,000
c) P2,150,000
d) P1,150,000

65. Wan, Tu, and Trii are to form a partnership. Wan is to contribute
cash of P100,000; Tu, P10,000; and, Trii, P100,000. Wan and Tri
are not to actively participate in the business but will refer
customers, while Tu will manage the firm. Tu has to give up his
present job which gives her an annual income of P120,000. The
partners decided that profits and losses shall be shared equally.
Upon formation, partners’ capital balances would be:
a) P70,000, P70,000, and P70,000, respectively
b) P100,000, P10,000, and P100,000, respectively
c) P100,000, P130,000,andP100,000, respectively
d) P110,000, P110,000, and P110,000, respectively

66. The prepaid insurance account shows a total of P48,000

representing the cost of a one-year insurance policy dated October
1, 2020. Prepare the necessary adjusting entry as of December 31,
2020.
a) Dr. Insurance Expense 12,000
Cr. Prepaid Insurance 12,000
b) Dr. Prepaid Insurance 12,000
Cr. Insurance Expense 12,000
c) Dr. Insurance Expense 16,000
Cr. Prepaid Insurance 16,000
d) Dr. Prepaid Insurance 16,000
Cr. Insurance Expense 16,000
Questions 67 and 68 are based on the following information:
Selected balance sheet accounts of Marc on December 31, 20x3 are
shown below:

Cash P30,000
Accounts receivable 25,000
Inventory 45,000
Furniture 32,000
Accounts payable 8,000

The following adjustments are to be made before he agree to

admit Bulky as a partner in exchange for his investment of
P20,000 cash:
• 3% bad debts should be provided.
• The fair value of the furniture is P27,000.
• P5,000 of the inventory is obsolete but can still be sold
for P3,000.

67. After adjustment, how much capital should be reflected in the

books of Marc?
a) P115,250
b) P116,250
c) P124,000
d) P132,250
68. How much is the total assets of the new partnership?
a) P116,250
b) P124,000
c) P124,250
d) P144,250

69. On October 1, 20x3, Noze and Aiki joined in a partnership. Noze

contributed cash while Aiki contributed merchandise worth P25,000 and a
second-hand delivery truck currently valued at P50,000 but encumbered by
a one-year chattel mortgage note for P15,000. If initial capital balances
are to conform to the profit-sharing ratio of 2:3, respectively, the
amount of cash contributed by Noze was:
a) P24,000
b) P30,000
c) P40,000
d) P50,000
70. James and Jack agreed to form partnership. James contributed Php 500,000
cash while Jack contributed Php 200,000 pesos cash. The partnership
agreement stipulates the following:
- Agreed Initial capital of Php 700,000
- A 60:40 interest in the equity of the partnership
Which partner should provide additional investments or withdrawals to
bring the partner’s capital credits equal to their respective interests
in the equity of the partnership?
b) James shall make an additional investment of Php 40,000 from his
initial contribution while Jack shall withdraw Php 40,000
c) James shall make an additional investment of Php 80,000 from his
initial contribution while Jack shall withdraw Php 80,000
d) James shall withdraw Php 80,000 from his initial contribution while
Jack shall make an additional investment of Php 80,000
e) James shall withdraw Php 40,000 from his initial contribution while
Jack shall make an additional investment of Php 40,000

71. Lexa and Clarke decide to form a partnership. The initial investments
of the partners will include cash of P120,000 for Leza and P80,000 for
Clarke. Lexa will transfer his office equipment with a book value of
P96,000 and a fair market value of P84,000 to the partnership. Clarke will
transfer his land fairly valued at P1,000,000 and the building there on
fairly valued at P600,000. Clarke has just bought the seat a lumpsum price
of P1,800,000. In addition, the partnership will assume the mortgage of
P400,000 on the building. What will be the total capital of the
partnership?
a) P1,484,000
b) P1,496,000
c) P1,684,000
d) P1,946,000

72. Elen and Kyla formed a partnership and agreed to divide initial capital
outlay equally, even though Elen contributed P100,000 and Kyla
contributed P84,000 in identifiable assets. Under the bonus approach to
adjust the capital accounts, Kyla’s unidentifiable asset should be debited
for
a) P46,000
b) P16,000
c) P8,000
d) P0

73. Alex and Belen formed a partnership and they agreed to share initial
capital equally, although Alex contributed P150,000 and Belen contributed
P126,000 in identifiable assets. Under the bonus approach to adjust
the capital accounts, Belen received (gave) a bonus equal to:
a) P24,000
b) P12,000
c) (P24,000)
d) (P12,000)
74. Brenda and Cathy formed a partnership and agreed to divide initial
capital equally, even though Brenda contributed P200,000 and Cathy
contributed P168,000 in identifiable assets. Under the bonus approach to
record the contributions of the partners, Cathy’s capital account should
be credited for?
a) P200,000
b) P184,000
c) P168,000
d) P100,000

75. On May 31, 2011, Ann, Ben, and Carlo formed a partnership by combining
their businesses. Ann give cash of P50,000. Ben gave a property with a
carrying amount of P30,000, an original cost of P40,000, and a fair market
value of P80,000. Ben’s property, however, has a P35,000 mortgage for
which the new partnership accepted legal responsibility. Carlo gave a
delivery equipment with a book value of P30,000, an acquisition cost of
P75,000, and an appraised value of P55,000. It was agreed that profits
and losses are to be shared equally. The partner with the biggest capital
account balance as of May 31,2011, is
a) Ann
b) Ben
c) Carlo
d) Maria

76. From the information above, how much is the capital balance of the
partner with the biggest capital account?
a) P50,000
b) P45,000
c) P60,000
d) P55,000

Questions 77 and 7 8 are based on the following information:

Finn, Raven, and Jasper are forming a new partnership. Finn will invest cash
of P120,000 and his office equipment costing P144,000 but has a market value
of P60,000. Raven is to invest cash of P192,000 and Jasper is to contribute
P60,000 cash and a brand-new delivery truck with a market value of P144,000
although he bought it for only P120,000. The partners will share profits and
losses in the ratio of 25:25:50 for Finn, Raven and Jasper, respectively.
The capital balances of the partners upon formation are:

77. What is the capital balance of Finn?

a) P264,000
b) P180,000
c) P192,000
d) P212,000

78. What is the capital balance of Raven?

a) P192,000
b) P212,000
c) P180,000
d) 264,000

79. What is the total capital balance of the newly formed partnership?
a) P556,000
b) P489,000
c) P528,000
d) P576,000
80. Gumball and Darwin agreed to form a partnership from which Gumball will
contribute P 300,000. If Darwin’s contributions is 1/3 of the total agreed
capitalization, how much is the partnerships net assets after the formation
using the bonus method?
a. P 500,000 c. P 450,000
b. P 350,000 d. P 900,000

81. This allowance for profit distribution is granted only if there is

profit
a. Bonus c. Salary
b. Interest d. All of the above

82. Which of the following statement is true?

I. Unless stated otherwise in the partnership contract,
profits and losses are shared among the partners in the
ratio of their capital equity balances.
II. Each partner's initial investment in a partnership should
be recorded at book value.
III. If a partner's investment in a partnership consists of
equipment that has accumulated depreciation, it would not
be appropriate for the partnership to record the
accumulated depreciation.
a) I only
b) I and II
c) II and III
d) III only

83. If the partner withdraws from the partnership before the end of the
accounting period, updating of the partnership books is
a) Required
b) Optional
c) Not necessary
d) None of the above

Use the following information for questions 84 and 85:

84. At December 31, Haha and Hehe are partners with capital balances of P
40,000 and P20,000, and they share profits and losses in the ratio of 2:1,
respectively. On this date Hihi invests P 17,000 in cash for a one-fifth
interest in the capital and profit of the new partnership. Assuming asset
revaluation will be recorded, how much is the balance of Hehe’s capital
after Hihi is admitted into the partnership?
a) P 45,333
b) P 22,667
c) P 17,000
d) P 8,000

85. Assuming bonus method is used and there is no increase in net assets is
recognized, what would be the total capital of the partnership after the
admission by investment of Hihi?
a) P 85,000
b) P 60,000
c) P 61,600
d) P 77,000
86. If the amount invested by the incoming partner is equal to the interest
he acquires, then there is
a) No bonus nor asset revaluation
b) Positive asset revaluation
c) Bonus to the old partners
d) Bonus to the new partners

87. When the investment of a new partner exceeds the new partner’s initial
capital balance and asset revaluation is not recorded, who will receive
the bonus?

a) The new partner

b) The old and new partners in their new profit and loss ratio
c) The old partners in their new profit and loss ratio
d) The old partners in their old profit and loss ratio

88. Liquidation of partnership usually means that

a) Assets are sold
b) Liabilities are paid
c) Remaining Cash is distributed to the partners
d) All of the above

89. In the liquidation of the partnership, the first cash realized is used
to
a) Pay the creditors
b) Pay the general partners
c) Pay the industrial partners
d) Pay all the partners

90. The total number of shares the corporate charter permits the corporation
to issue is called
a) outstanding stock
b) issued stock
c) authorized stock
d) ordinary shares capital

91. If shares of stock are sold for less than their par value, the difference
is called
a) discount
b) earnings
c) a gain
d) a premium
Use the following data for numbers 92 to 94:
As of December 31, 20x3, the balances of the shareholder’s equity of Herbie
Auto Inc. are shown below:
Ordinary Share Capital, P6 par
(30,000 shares authorized, 13 000 shares issued. . . . ?
Share Premium-Ordinary Share Capital. . . . . . . . . . . . P 17,000
Treasury Stock-Ordinary Share Capital
(2,000 shares at P6 per share). . . . . . . . . . . . . ?
Preference Share Capital, 5%, P12 par
( 16,000 shares authorized; 5,000 shares issued). . . . . ?
Share Premium-Preference Share Capital. . . . . . . . . . . P6,000
Preference Share Capital-Subscribed (2,000 shares). . . . . . ?

92. The amount of Ordinary Share Capital using the above data is:
a) P 180,000
b) P 78,000
c) P 60,000
d) P 360,000

93. The amount of Preference Share Capital using the above data is:
a) P 60,000
b) P192,000
c) P 180,000
d) P 12,000

94. The amount of Treasury Stock-Ordinary Share Capital using the above
data is:
a) P 360,000
b) P 60,000
c) P 12,000
d) P 180,000

95. The balance of the income summary account of a corporation is

transferred to which of the following accounts?
a) Retained Earnings
b) Share Capital
c) Premium on Sale of Share Capital
d) Cash

96. The reduction of par or stated value of stock by issuance of a

proportionate number of additional shares is termed a:
a) liquidating dividend
b) stock split
c) stock option
d) preferred dividend

97. Characteristics of a corporation include:

a) Shareholders who are mutual agents
b) Direct management by the shareholders (owners)
c) its inability to own property
d) shareholders who have limited ability

98. The entry to record the purchase of 5,000 shares of a corporation’s own
P20 par common stock at P25, paid in cash, includes a debit to:
a) Common Stock
b) Retained Earnings
c) Paid-In Capital in Excess of Par
d) Treasury Stock
99. A corporation purchased 1,000 shares of its P10 par common stock at P20
and subsequently sold 500 of the shares at P30. What is the amount of
revenue realized from the sale?
a) P0
b) P5,000
c) P2,500
d) P15,000

100. Treasury stock is classified as a(n)

a) stockholder’s equity account
b) contra-asset
c) asset
d) contra-stockholder’s equity account

end