Easy Round JAM

1. Which ONE of the following statements best describes the term 'liability'?
a. An excess of equity over current assets
b. Resources to meet financial commitments as they fall due
c. The residual interest in the assets of the entity after deducting all its liabilities
d. A present obligation of the entity arising from past events

Answer: D

2. ___________________ are recognized when a decrease in future economic benefits related to a decrease in an asset
or an increase of a liability has arisen that can be measured reliably.

Answer: expenses

3. Which of the following statements is not normally an objective of financial reporting?

a. To provide information about an entity's assets and claims against those assets.
b. To provide information that is useful in assessing an entity's sources and uses of
cash.
c. To provide information that is useful in lending and investing decisions.
d. To provide information about an entity's liquidation value.

ANSwer: D

4. Which of the following is an internal user of a company's financial information?

a. Board of directors.
b. Stockholders in the company.
c. Holders of the company's bonds.
d. Creditors with long-term contracts with the company.

ANSwer: A

5. A chart of accounts is
a. a subsidiary ledger.
b. a listing of all account titles.
c. a general ledger.
d. a general journal.

ANSwer: B

6. The debit and credit analysis of a transaction normally takes place

a. when the entry is posted to a subsidiary ledger.
b. when the entry is recorded in a journal.
c. when the trial balance is prepared.
d. when the financial statements are prepared.

ANSwer: B
 7. Moon Company purchased equipment on November 1, 2016, by giving its supplier a 12-month, 9 percent note with a
face value of 48,000. The December 31, 2016, adjusting entry is
a. debit Interest Expense and credit Cash, 720.
b. debit Interest Expense and credit Interest Payable, 720.
c. debit Interest Expense and credit Interest Payable, 1,080.
d. debit Interest Expense and credit Interest Payable, 4,320.

ANSwer: B

8. Which of the following would not be reported in the stockholders' equity section of the balance sheet?
a. Retained earnings appropriated for future plant expansion
b. Dividends declared on preferred stock
c. Paid-in capital in excess of par value
d. Deficit in retained earnings

ANSwer: B

9. Lobo Co. was incorporated on July 1, 2016, with 200,000 from the issuance of stock and borrowed funds of 30,000.
During the first year of operations, net income was 10,000. On December 15, Lobo paid an 800 cash dividend. No
additional activities affected owners' equity in 2016. At December 31, 2016, Lobo's liabilities had increased to
37,600. In Lobo's December 31, 2016, balance sheet, total assets should be reported at:

Answer: 246,800.

10. The following changes in Patriot Corporation's account balances occurred during 2016:

Increase
Assets .................................................. ₱ 267,000
Liabilities ............................................. 81,000
Capital Stock ........................................... 198,000

Patriot paid dividends of ₱39,000 during the year. There were no changes in Retained Earnings for 2016 except
dividends and net income. What was Patriot's net income for 2016?

ANS: ₱27,000

Average
1. John and Eddie form a partnership on March 1, 2016 with the following investments:
John Eddie
Cash ₱10,000 ₱ 35,000
Land 105,000
Furniture and fixtures 35,000

John and Eddie agree to divide profits and losses in the ratio of 70:30, respectively, and to assume the ₱20,000
mortgage on the land of Eddie. If John is required to make his share in equity equal to 40% he must make an
additional investment of:

answer: ₱35,000
2. A shareholder who holds over 80% of the common shares cannot:
a. sell the shares to other parties.
b. be chairman of the board and company president at the same time.
c. elect all of the members of the board of directors.
d. bind the corporation to a contract with a third party.

Answer: D
The corporation, through its duly elected officers, can enter into contracts that bind the corporation, but a shareholder
cannot--there is no mutual agency relationship between shareholders and the corporation

3. The following cost data pertain to HABOL-HABOL Company for the month of June, 2016

06/01/16 06/30/16
Inventories ₱ 40,000 ₱ 50,000
Work-in-process 25,000 35,000
Finished goods 60,000 70,000

Other information:
Direct labor cost ₱ 120,000
Factory overhead applied 108,000
Cost of goods sold 378,000

Determine the cost of goods manufactured for June, 2016.

Answer: ₱388,000

CGS 378,000
+FG,end 70,000
-FG, beg 60,000
CGM 388,000

4. How would total stockholders’ equity be affected by the declaration of each of the following?
Stock dividend Stock split
a. No effect Increase
b. Decrease Decrease
c. Decrease No effect
d. No effect No effect

Answer: D
 5. A company reported ₱ 210,000 in sales. Its opening accounts receivable balance was ₱ 45,000 and its ending
accounts receivable balance was ₱ 50,000. The company also reported ₱ 20,000 in unearned revenues at the end of
the year. What was the amount of cash collected from customers for the year?

Answer: ₱225,000

Sales 210,000
AR,beg 45,000
AR, end (50,000)
Unearned revenues, end 20,000
Cash collected from customers 225,000

6. In translating financial statements of a foreign operation into the presentation currency of the reporting entity, assets
and liabilitiesare translated at
a. Closing rate
b. Spot rate
c. Forward rate
d. Historical rate
Answer: A

7. When Mill retired from the partnership of Mill, Jack and Jill, the final settlement of Mill’s interest exceeded Mill’s
capital balance. Under the bonus method, the excess
a. Was recorded as goodwill
b. Was recorded as an expense
c. Reduced the capital balances of Jack and Jill
d. Had no effect on the capital balances of Jack and Jill
Answer: C

8. It is said that no entry is required when share warrants are issued to existing shareholders because these warrants are
issued usually
a. with consideration
b. without consideration
c. as bonus
d. as stock dividends
ANSWER: b

9. The debit side of a trial balance totals ₱800 more than the credit side. Which one of the following errors would fully
account for the difference?
a. ₱400 paid for plant maintenance has been correctly entered in the cash book and credited to the plant asset
account.
b. Discount received ₱400 has been debited to discount allowed account.
c. A receipt of ₱800 for commission receivable has been omitted from the records.
d. The petty cash balance of ₱800 has been omitted from the trial balance.
(ACCA)

Answer: B 400 debit which should have been credited – correction will bring trial balance into agreement.
 10. The following changes in Jeremy Co.’s account balances occurred during 2016:
Increase/(Decrease)
Assets ₱ 89,000
Liabilities 27,000
Share capital 60,000
Share premium 6,000

Except for a ₱13,000 dividend payment and the year’s earnings, there were no changes in retained earnings for 2016.
Using the capital maintenance approach, the profit (loss) of ABC Co. for 2016 is

Answer: ₱9,000
Solution:
Increase/(Decrease)
Increase in assets 89,000
Increase in liabilities (27,000)
Net increase in net assets 62,000

Net assets
- Beg.
66,000 Additional investments (60K + 6K)
Dividends 13,000 9,000 Profit (squeeze)
End. 62,000

Difficult
1. Glitters Corp. is a newly organized business for a medical practice to specialize in genecology. Transactions for the
first month are:
 Invested in the business of ₱25,000 in exchange of common stock.
 Paid cash for land costing ₱15,000.
 Purchased a medical supplies for ₱2,000 on account.
 Glitters treated patients and earned service revenue of ₱8,000, receiving cash for half the revenue earned.
 Business paid the following expenses: salaries ₱1,400, office rent ₱1,000,Utilities ₱300.
 Business sold the supplies to another physician for cost of ₱500.
 Business borrowed ₱10,000 signing a note payable on the bank.
 Paid ₱1,500 on account.

The total debits in the trial balance of the business is ___________________.

Answer: ₱43,500

2. Tarzana Company reported total purchases of ₱3,200,000 in its accrual basis financial statement on December
31,2016. Additional information revealed the following:
Accounts Payable, December 31,2015 ₱ 900,000
Accounts Payable, December 31,2016 1,250,000
What is the amount of purchases under the cash basis on December 31, 2016?

Answer: 2,850,000
Solution:
Purchases, accrual P3,200,000
Accounts Payable, December 31,2005 900,000 4,100,000
Less: Accounts Payable December 31,2006 1,250,000
P2,850,000
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 3. Which of the following is a generally accepted accounting principle that illustrates the
practice of conservatism during a particular reporting period?
a. Capitalization of research and development costs.
b. Accrual of a contingency deemed to be reasonably possible.
c. Reporting investments with appreciated market values at market value.
d. Reporting inventory at the lower of cost or market value.

Answer: d.

4. In the Rom-Mel Partnership, Rom and Melhad a capital ratio of 3:1 and a profit and loss ratio of 2:1 respectively.
The bonus method was used to record Rod’s admittance as a new partner. What ratio would be used to allocate, to
Rom and Mel, the excess of Rod’s contribution over the amount credited to Rod’s capital account?
a. Rom and Mel’s new relative capital ratio
b. Rom and Mel’s new relative profit or loss ratio
c. Rom and Mel’s old capital ratio
d. Rom and Mel’s old profit or loss ratio
answer: D

5. Francisco Company was organized on January 2, 2016 with 300,000 ordinary shares with a ₱6 par value authorized.
During 2016, Francisco had the following stock transactions:
January 2 Issued 60,000 shares at ₱10 per share
March 8 Issued 20,000 shares at ₱11 per share.
May 9 Purchased 7,500 shares at ₱12 per share.
July 2 Issued 15,000 shares at ₱13 per share.
August 17 Sold 5,000 treasury shares at ₱14 per share.
Francisco uses the FIFO method for purchase-sale purposes.
If Francisco uses the cost method to record treasury stock transactions, how much would be the Share Premium at
December 31, 2016?

answer: ₱ 455,000
Solution January 2 [60,000 x (P10 – P6)] 240,000
March 8 [20,000 x (P11 – P6)] 100,000
July 2 [15,000 x (P13 – P6)] 105,000
August 17 [15,000 x (P14 – P12)] 10,000
Total Share Premium P 455,000
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6. Under this concept, a profit is earned only if the financial (or money) amount of the net assets at the end of the of
the period exceeds the financial (or money) amount of the net assets at the beginning of the period, after excluding
any distributions to, and contributions from, owners during the period.

Answer: Financial Capital Maintenance

7. Which of the following statements correctly relate to single-entry system?

I. Accrual basis financial statements cannot be prepared under a single-entry bookkeeping system
II. Under single-entry bookkeeping system financial statements are not likely to be fairly presented in
accordance with GAAP
III. Cash Receipts and Cash Disbursement Journals are utilized in both a single-entry bookkeeping
system and a double-entry bookkeeping system
IV. Internal control is inadequate under a single-entry bookkeeping system
V. Subsidiary ledger is utilized only in a double-entry bookkeeping system but not in a single-entry
bookkeeping system

Answer: II, IV (ii) income is required by GAAP to be computed using the transaction approach
8. The September 30 trial balance of ABC Co. shows the following information:
Accounts receivable 8,060 Equipment 42,120
Accounts payable 6,370 Other expense 4,940
Accumulated depreciation 21,060 Owner's drawings 5,460
Advertising expense 390 Owner's equity 28,600
Cash 7,540 Sales 12,480

Depreciation expense of ₱702 is not yet recorded. In an after-closing trial balance prepared on September 30, the total
of the credit column will be

Answer: ₱57,720
(Adapted)

Solution:
Dr. Cr.
Cash 7,540
Accounts receivable 8,060
Equipment 42,120
Accumulated depreciation 21,762 a
Accounts payable 6,370
Owner's equity 29,588 b
Totals 57,720 57,720

Accumulated depreciation - beg. 21,060

Depreciation expense 702
Accumulated depreciation - end. 21,762 a

Owner's equity - beg. 28,600

Sales 12,480
Depreciation expense (702)
Advertising expense (390)
Other expense (4,940)
Owner's drawings (5,460)

29,588
b
Owner's equity - end.

9. Roro, Inc. paid ₱7,200 to renew its only insurance policy for three years on March 1, 2016, the effective date of the
policy. At March 31, 2016, Roro’s unadjusted trial balance showed a balance of ₱300 for prepaid insurance and
₱7,200 for insurance expense. What amounts should be reported for prepaid insurance and insurance expense in
Roro’s financial statements for the three months ended March 31, 2016?

Answer: Prepaid insurance = ₱7,000 and Insurance expense= ₱500

Prepaid insurance = 7,200 x (36 mos. – 1 mo.)/ 36 mos. = 7,000 (rounded-off).

Insurance expense = 300 beg. balance + (7,200 x 1 mo. / 36 mos.) = 500
 10. The trial balance totals of Clint at 30 September 2016 are:
Debit ……………..₱ 992,640
Credit …………….₱1,026,480

Which TWO of the following possible errors could, when corrected, cause the trial balance to agree?
1) An item in the cash book ₱6,160 for payment of rent has not been entered in the rent payable account.
2) The balance on the motor expenses account ₱27,680 has incorrectly been listed in the trial balance as a credit.
3) ₱6,160 proceeds of sale of a motor vehicle has been posted to the debit of motor vehicles asset account.
4) The balance of ₱21,520 on the rent receivable account has been omitted from the trial balance.

Answer: 2 and 4
Effect of errors: (2) increased debit 55,360; (4) increased credit 21,520. Net effect of errors 33,840 net debit.

CLINCHER / EXTRA QUESTIONS

1. The following are all expressions of the normal accounting cycle, except:
A. Cash, inventory, and receivables.
B. Cash and receivables.
C. Cash, production, marketing, distribution, receivables, and post-sale services
D. Borrowings, investments, and sale

ANSWER: d

2. Which users need financial information to enable them to assess the ability of the enterprise to provide remuneration,
retirement benefits and employment opportunities?
A. Customers
B. Government and its agencies
C. Employees
D. Investors

ANSWER: c

3. The partners of Lon & Mab Partnership share net income and losses equally. After the realization of all noncash
assets and payment of all liabilities, Lon had a capital account balance of P3,800, and Mab had a capital deficit of
P3,800. Lon has personal assets of P30,000 and personal liabilities of P35,000; Mab has personal assets of P20,000
and personal liabilities of P18,000. The total amount that personal creditors of Lon should expect to receive after
marshaling of assets is:
A. P35,000
B. P33,800
C. P32,000
D. P30,000
ANSWER: c
4. The partners of Cey, Doy & Ebb had capital account balances of P40,000, P50,000, and P18,000, respectively, and
an income-sharing ratio of 4:2:1, respectively. If Cey received only P8,000 on the liquidation of the partnership, the
total amount received by all the partners on liquidation was:
A. P108,000
B. P56,000
C. P52,000
D. P24,000

ANSWER: c

5. The partners of Cey, Doy & Ebb had capital account balances of P40,000, P50,000, and P18,000, respectively, and
an income-sharing ratio of 4:2:1, respectively. Cey received P26,000 on liquidation. How much cash did Ebb receive
from the liquidation?
A. P26,000
B. P18,000
C. P14,500
D. P14,000

ANSWER: C

6. The subtotals of the Income Statement columns of the work sheet are P6,200 and P4,900, respectively. If the subtotal
of the Balance Sheet Debit column is P19,000, then the subtotal of the Balance Sheet Credit column should be
A. P20,300
B. P1,300
C. P17,700
D. P14,400

ANSWER: A
The net loss was P1,300 (the Credit column of the work sheet Income Statement less its Debit column). The subtotal
of the Balance Sheet Credit column will be P20,300 (P19,000 + P1,300).

7. Which is true about an adjusting entry?

A. only a permanent account is adjusted

B. only a temporary account is adjusted
C. a permanent account and a temporary account is adjusted
D. it is required to satisfy the realization principle only

ANSWER: c
8. After the closing procedure is complete, which of the documents proves the equality of debits and credits?

A. Income Statement
B. Account form balance sheet
C. Post-Closing Trial Balance
D. Work Sheet
ANSWER: c
The post-closing trial balance is specifically designed and prepared to prove the equality of debits and credits, and
partially test the clerical accuracy of the adjusting and closing procedures.

9. Optional entries that transfer the balances in balance sheet accounts which arose as a result of certain adjusting
entries to income statement accounts is the definition for which term below?

A. adjusting entries
B. reversing entries
C. closing entries
D. declarations of cash dividends

ANSWER: b
10. Which is not a feature of the corporate form of ownership?

A. Double taxation
B. Mutual agency.
C. Government regulation.
D. Adherence to generally accepted accounting principles.

ANSWER: b