DEPARTMENTAL (8th) EXAMINATIONS

FUNDAMENTALS OF ACCOUNTING, PART 2 (ACCTG 2A)

2nd SEMESTER, S.Y. 2016-2017
SET A
General Instructions:
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PART I – THEORY

1. For financial accounting purposes, assets of an a. partnership drawings, partnership liabilities,

individual partner contributed to a partnership are
recorded by the partnership at:
a. historical cost
b. book value
c. fair market value
d. lower of cost or market
2. The admission of a new partner under the bonus
method will result in a bonus to
a. the old partners only
b. the new partner only
c. either the new partner or the old partners, but not
both
d. none of the above
3. A partnership calls for allocation of profits and losses
by salary allocations, a bonus allocation, interest on
capital, with any remainder to be allocated by preset
ratios. If a partnership has a loss to allocate, generally
which of the following procedures would be applied?
a. Any loss would be allocated equally to all
partners
b. Any salary avocation criteria would not be used
c. The bonus criteria would not be used
d. The loss would be allocated using the profit and
loss ratios only
4. Which of the following statements is true concerning
the treatment of salaries in partnership accounting?
a. Partner salaries may be used to allocate profits
and losses; they are not considered expenses of
the partnership
b. Partner salaries are equal to the annual partner
draw
c. The salary of a partner is treated in the same
manner as salaries of corporate employees
d. Partner salaries are directly closed to the capital
account
5. The following is the priority sequence in which
liquidation proceeds will be distributed for a partnership
partnership loans, partnership capital balances
b. partnership liabilities, partnership loans,
partnership capital balances
c. partnership liabilities, partnership loans,
partnership drawings partnership capital
balances
d. partnership liabilities, partnership capital
balances, partnership loans
6. An advance cash distribution plan is prepared
a. Each time cash is distributed to partners in an
installment liquidation
b. Each time asset is sold in an installment
liquidation
c. To determine the order and amount of cash each
partner will receive as it becomes available for
distribution
d. None of these
7. Under cash priority program, when all of the priorities
are paid, any remaining cash distribution is
a. allocated to the partners based on their
respective profit or loss ratios
b. allocated to the partners based on the balances
in their capital accounts after allocation of losses
c. allocated to the partners based on their pre-
computed priorities
d. allocated to the partners based on the relative
values of their capital balances
8. A partner whose liability for partnership debts is limited
to his capital contribution is called
a. industrial partner c. limited partner
b. general partner d. secret partner
9. A partner who contributes his work, labor or industry to
the common fund of the partnership is called
a. limited partner c. industrial partner
b. capitalist partner d. managing partner
10. Which of the following results in the dissolution of a
partnership?
a. The withdrawal of a partner from a partnership
b. The receipt of share in profit by an existing
partner
c. The contribution of additional assets to the
partnership by a existing partner
d. The winding up of the partnership and the
distribution of remaining assets to the partners
19. Which of the following is entitled to dividends?
a. treasury shares c. total outstanding liability
b. total shares issued and outstanding d. all
20. Treasury shares are recorded at
a. fair value c. cost plus expenses
b. acquisition cost d. none of the above

11. In dividends, declaration, there are three important 21. Cash Dividends Payable when not yet paid as of
dates to remember, except- Statement of Financial Position date is presented as
a. date of declaration c. date of record a. Current Asset c. Current Liability
b. date of incurrence d. date of payment b. Non-current Liability d. Income
c.
12. The process of winding up the business activity is 22. The maximum life of a corporation to exist is –
converting non-cash assets into cash, paying its liabilities a. 30 years c. 25 years
and distribution of cash and the remaining assets to b. 55 years d. 50 years
individual partners-
a. realization c. liquidation 23. This is the portion of Accumulated Profits (Losses)
b. dissolution d. none of the above account which can be declared as dividends.
a. Appropriated b. Unappropriated
13. Partnership is said to be dissolved when a – b. Restricted c. All of the above
a. new partner is admitted in an existing
partnership 24. Share certificates are issued to subscribers upon –
b. partner dies a. full payment of subscription
c. partner retires b. c. authorization
d. any of the above c. date of subscription
d. partial payment of subscription
14. Admission of a new partner by investment will –
a. increase both the asset and capitalization of the 25. The Share Premium Account is recorded as a credit
partnership when –
b. increase the asset of the partnership only a. shares are sold higher that par value
c. increase the capitalization of the partnership only b. share are sold at par value
d. none of these c. shares are sold less than par value
d. none of these
15. Failure to stipulate on how profit and loss be divided
among partners. It should be – PART II – PROBLEM
a. in proportion to what has been contributed
b. settled in the court of law 26-28. Partner A and B have a profit and loss agreement
c. equally divided with the following provisions: salaries of P30,000 and
d. by other legal means agreeable among partners P45,000 for A and B, respectively; a bonus to A of 10% of
net income after salaries and bonus; and interest of 10%
16. Choose the situation which illustrates the minimum on average capital balances of P20,000 and P35,000 for
requirement of the law to corporate formation: A and B, respectively. One-third of any remaining profits
Authorized Subscribed Paid-In are allocated to A and the balance to B.
Capital Capital Capital
a. 100,000 25,000 5,000 If the partnership had net income of P102,500, how much
b. 100,000 5,000 5,000 should be allocated to Partner A?
c. 50,000 12,500 3,125 a. P 44,250 c. P 41,000
d. 60,000 15,000 5,000 b. P 47,500 d. P 41,167

17. The ownership in shares of a corporation is 29-31. Partners A, B, and C have capital balances of
evidenced by a document called – P20,000, P50,000, and P90,000, respectively, just before
a. shares c. share certificate liquidation. They split profits in the ratio of 2:4:4,
b. stock warrants d. none of the above respectively.

18. Which of the following statement is true concerning Under a cash distribution program, one of the partners
Accumulated Profits (Losses)? will get the following total amount in liquidation before any
a. it has a normal balance of a credit other partners get anything.
b. it represents the cumulative profit (losses) a. P 0 c. P40,000
c. it decreases when dividends are declared b. P15,000 d. P180,000
d. all of the above
32-34. The business assets of A and B appear below: a. An allowance for doubtful accounts of 3% of accounts
A B receivable is to be established.
Cash P 11,000 P 22,354 b. The merchandise inventory is to be valued at P23,000.
Accounts Receivable 234,536 567,890 c. Prepaid salary expenses of P600 and accrued rent
Inventories 120,035 260,102 expense of P800 are to be recognized.
Land 603,000 -
Building - 428,267 NORMAL is to invest cash to obtain 1/3 interest in the
Furniture & Fixtures 50,345 34,789 partnership.
Other Assets 2,000 3,600 Compute for: (1) AB’ adjusted capital before the
Total P 1,020,916 P 1,317,002 admission of NORMAL; and (2) the amount of cash
investment by NORMAL.
Accounts Payable P 178,940 P 243,650 a. (1)P35,347; (2) P11,971
Notes Payable 200,000 345,000 b. (1) P35,347; (2) P17,674
A, Capital 641,976 -
c. (1) P36,374; (2) P18,487
B, Capital - 728.352
d. (1) P28,174; (2) P14,087
Total P 1,020,916 P 1,317,002
44-46. A and B are partners in AB Repair Shop who
A and B agreed to form a partnership by contributing shared profit and loss in the ratio of 2:3. Their respective
their respective assets and equities subject to the capital balances are P30,000 and P45,000. C is admitted
following adjustments: in the partnership by investing cash of P20,000 for a 1/5
a) Accounts receivable of P20,000 in A's books and interest in the new firm.
P35,000 in B are uncollectible. How much is the new credit of the new partner (C)?
b) Inventories of P 5,500 and P6,700 are worthless a. 20,000 c. 18,000
in A’s and Bs respective books. b. 19,000 d. 21,000
c) Other assets of P2,000. and P3,600 in A’s and
B’s respective books are to be written off. 47-49. As of Dec. 31, 2016, the books of ABC
The capital account of the partners after adjustments will Partnership showed capital balances of: A, P40,000; B,
be: P25,000; C, P5,000. The partner’s profit and loss ratio
a. A, P615,942; B, P717,894 was 3:2:1, respectively. The partners decided to liquidate
b. A, P640,876; B, P683,050 and they sold all liabilities amounting to P12,000, they still
c. A, P640,876; B, P712,345 have cash of P28,000 left for distribution. Assuming that
d. A, P614,476; B, P683,052 any capital deficiency is uncollectible, the share of A in
the distribution of cash would be:
35-37. The same information in Number 1, how much a. 17,000 c. 18,000
total assets does the partnership have after formation? b. 17,800 d. 19,000
a. 2,337,918 c. 2,237,918
b. 2,265,118 d. 2,365,218 50-52. XYZ Corporation’s records included the following
shareholder’s equity accounts:
38-40. A and B are partners who share losses in the ratio Preference Shares, par value P150,
of 60%:40% respectively. A's salary is P60,000 and authorized 20,000 shares P 2,250,000
P30,000 for B. The partners are also paid interest on their Share Premium-Preference 150,000
average capital balances. In, 2016, A received 30,000 of Ordinary Shares, no par, P50 stated
interest and B, P12,000. The profit and loss allocation is value, 100,000 authorized shares 3,000,000
determined after deductions for the salary and interest In the Statement of shareholder’s equity, the
payments. If B' share in the residual income (income after number of issued and outstanding shares for each class
deducting salaries and interest) was P 60,000 in 2016, of stock is
what was the total partnership income?
Ordinary Shares Preference Shares
a. 192,000 c. 345,000
a. 60,000 17,000
b. 282,000 d. 387,000
b. 60,000 18,000
41-43. AB admits NORMAL as a partner in business. c. 63,000 17,000
Accounts in the ledger for AB on January 30, 2017, just d. 63,000 18,000
before admission of NORMAL, show the following
balances: 53-55. Villon Corp holds 10,000 shares of its P10 par
value ordinary shares as treasury shares reacquired in
Cash in Bank P 6,800 2014 for P120,000. On Dec. 12,2016, Villon reissued all
Accounts Receivable 14,200 10,000 shares for P190,000. Under the cost method of
Merchandise Inventory 20,000 accounting for treasury shares, the issuance resulted in a
Accounts Payable 8,000 credit to (MAKE JOURNAL ENTRY TO PROVE):
AB, Capital 33,000 a. gain on sale of P 70,000
It is agreed that for purposes of establishing AB’s interest, b. accumulated profits (losses) of P 70,000
the following adjustments shall be made: c. share premium of P70,000
d. ordinary shares of P100,000