EASY

1. Which of the following accounts normally has a credit balance?

A. Prepaid Taxes
B. Interest Income
C. Rent Expense
D. Equipment

ANSWER :

2. If a transaction causes total liabilities to decrease but does not affect the
owner’s equity, what change, if any, will occur in total assets?
A. Assets will be increased
B. No change in total assets
C. Assets will be decreased
D. None

ANSWER:

3. A company has assets of P45,000, no liabilities, and stockholders’ equity of

P45,000. It buys store fixtures worth P5,000 on credit. What effect would
this transaction have?

A. Both assets and stockholders’ equity increase by P5,000

B. Both assets and stockholders’ equity decrease by P5,000
C. Assets remain the same and stockholders’ equity increases by P5,000
D. Both assets and liabilities increase by P5,000

ANSWER:

4. The income summary account:

A. Generally has a credit balance after all the accounts that should be closed
have closed.
B. Summarizes revenues, expenses, and net earnings or loss for the
accounting period.
C. Summarizes changes in assets, liabilities, and net earnings or loss for the
accounting period.
D. Is used to close the retained earnings account.

ANSWER:

5. The essential characteristics of an asset include (choose the incorrect one):

A. The asset is the result of past transaction or event.
B. The asset provides future economic benefits.
C. The cost of the asset can be measured reliably.
D. The asset is tangible.
 ANSWER:

6. The “accounting policies section” of the notes to financial statements should

describe:

A. Only the measurement basis used in preparing the financial statements.

B. Only the specific accounting policies followed by the enterprise.
C. Both the measurement basis and accounting policies followed.
D. Nature of the enterprise’s operations and its principal activities.

ANSWER:

7. In your examination with S. Gonzales Travel and Tours, you discovered that a
bill documenting a service rendered to a customer on account in the amount
of P10,000 which was held pending for recording as of December 31. Upon
verification, you have learned that the bookkeeper intentionally failed to
prepare the entry. The entry to record the revenue earned includes a?

A. Debit to Service Income

B. Credit to Service Income
C. Debit to Unearned Service Income
D. Credit to Unearned Service Income

ANSWER:

8. An accrued expense can be best described as an amount

A. Paid and matched with earnings for the current period

B. Paid and not matched with earnings for the current period
C. Not paid and not matched with earnings for the current period
D. Not paid and matched with earnings for the current period

ANSWER:

9. Your company performs work for a customer, but as of year end, has received
no payment. If you do not record an adjusting entry at year end, how will the
financial statements be affected?

Net income Assets Liabilities

A. Overstated Not Affected Understated
B. Overstated Overstated Not Affected
C. Understated Not Affected Overstated
D. Understated Understated Not Affected

ANSWER:
 10. On November 1, 2014, you record a P20,000 note payable, debiting Cash
and crediting Notes Payable. The note matures on May 1, 2015 when
principal and accrued interest of 6% a year is due.

On December 31, 2014, your adjusting entry for accrued interest will include:
A. a debit to Interest Payable for P400
B. a debit to Interest Expense for P200
C. a credit to Interest Payable for P400
D. none of the above

ANSWERS:

AVERAGE

1. The following data were compiled prior to preparing the balance sheet of the
Conviction Corporation as of December 31, 2015:

How much shareholders’ equity is to be presented in 2015 statement of

financial position of Conviction Corporation?
ANSWER:

2. The company rents a space for Dream Company. As of the beginning of the
period, the company has not yet received payment of P30,000 from last
year’s service. This period, Dream Company used the space and so the
company earned P200,000 from rentals.
At the end of this period, the balance of Rent Receivable amounted to
P50,000.
 What amount of cash was received by the company from Dream during the
year?
ANSWER:

3. Which of the following errors would cause unequal totals in the trial balance?

A. The firm records P21,000 received from a customer in advance of

delivery of goods as a debit of P1,000 to cash and a credit of P21,000
to sales.
B. The firm fails to enter the cost of electric current used during the
month as an expense and fails to recognize the P22,000 owed to DLPC.
C. All these errors will cause unequal trial balance totals.
D. None of these errors will cause unequal trial balance totals.

ANSWER:

4. Adjusting entries that should be reversed include those for prepaid or

unearned items that:

A. create an asset or a liability account

B. were originally entered in a revenue or expense account
C. were originally entered in an asset or liability account
D. create an asset or a liability account and were originally entered in a
revenue or expense account

ANSWER:

5. A, B and C are partners in an accounting firm. Their capital account balances

at year-end were: A, P90,000; B, P110,000; C, P50,000. They share profits
and losses in a 4:4:2 ratio, after the following special terms:

a. Partner C is to receive a bonus of 10% of the net income after the

bonus.
b. Interest of 10% shall be paid on that portion of a partner’s capital in
excess of P100,000.
c. Salaries of P10,000 and P12,000 shall be paid to partners A and C,
respectively.

Assuming a net income of P44,000 for the year, the total profit share of
partner C would be:

ANSWER:

6. At December 31, Miga and Migo are partners with capital balances of P40,000
and P20,000, and they share profits and losses in the ratio of 2:1,
respectively.
 On this date Ami invests P17,000 in cash for a one-fifth interest in the capital
and profit of the new partnership.

Assuming that goodwill is not recorded, how much should be credited to

Ami’s capital account on December 31?

ANSWER:

7. The accounts and balances shown below were gathered from Paynter
Corporation's trial balance on December 31, 2015. All adjusting entries have
been made.

The amount that should be reported as current assets on Paynter

Corporation's 2015 statement of financial position is?

ANSWER:

8. Macy Corporation had the following purchase and sale transactions near the
end of 2015:

Amount included in the inventory of Macy at December 31, 2015 is?

ANSWER:

9. If a bonus is traceable to the previous partners rather than an incoming

partner, it is allocated among the partners according to the:
 A. Profit-sharing percentages of the previous partnership.
B. Profit-sharing percentages of the new partnership.
C. Capital percentages of the previous partners.
D. Capital percentages of the new partnership.

ANSWER:

10. Immaterial amounts of similar nature and function should be grouped or

condensed as one line item in the financial statements.

A. Consistency
B. Offsetting
C. Aggregation
D. Comparability

ANSWER:

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 P25,000 in exchange of common stock.

• Paid cash for land costing P15,000.
• Purchased a medical supplies for P2,000 on account.
• Glitters treated patients and earned service revenue of P8,000,
receiving cash for half the revenue earned.
• Business paid the following expenses: salaries P1,400, office rent
P1,000,Utilities P300.
• Business sold the supplies to another physician for cost of P500.
• Business borrowed P10,000 signing a note payable on the bank.
• Paid P1,500 on account.

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

ANSWER:

2. The shareholders’ equity of the Albert co. on June 30, 2015 was as follows:

On July 1, the following actions were taken:

 a. Ordinary shareholders turned in their old ordinary shares and
received in exchange new ordinary shares, 1 share of the new share being
exchanged for every 4 shares of the old. New ordinary share was given a
stated value of P60 per share.
b. One-half share of the new ordinary share was issued on each
share of preference share outstanding in liquidation of dividends in arrears on
preference share.
c. The deficit from operations was applied against the share
premium arising from the ordinary share restatement.

Transactions for the remainder of 2015 affecting the shareholders’ equity

were as follows:
What would be the total Shareholders’ Equity as of December 31, 2015?

ANSWER:

3. The statement of financial position of Toyota Products, Inc. shows the

accounts receivable balance at Dec. 31, 2014 as follows:

During 2015, transactions relating to the accounts were as follows:

a. Sales on account, P4,800,000

b. Cash received from collection of current receivable totaled
P3,920,000 after discounts of P80,000 were allowed for prompt payment.
 c. Customers’ accounts of P20,000 were ascertained worthless and
written off.
d. Bad accounts previously written off prior to 2014 amounting to
P5,000 were recovered.
e. Collections of P150,000 were made on the receivables (not
included in the collections previously given)
f. Based on assessment of the aging of receivables, it is estimated
that allowance for uncollectible accounts should be P59,000 at Dec. 31, 2015.

How much is the net realizable value of the accounts receivable at Dec. 31,
2015?

ANSWER:

4. On July 1, 2015, Velasquez and Carlos decided to pool their assets and form a
partnership. The firm is to take over business assets and assume business
liabilities, and capitals are to be based on net assets transferred after the
following adjustments:

a) Carlo’s inventory is to be valued at P14,000.

b) An allowance for doubtful accounts of 5% is to be established
on. the accounts receivable of each party.
c) Accrued liability of P800 is to be recognized on Velasquez’
books.
d) Equipment should be 50% depreciated.
e) Carlos is to invest additional cash so his interest will 60% in the
firm.

Financial position for Velasquez and Carlos on July 1 before the adjustments
are given as follows:

How much is the additional cash contribution of Carlos?

ANSWER:

5. Ortiz, and Ponce are partners sharing profits in the proportion of 5:3
respectively. The statement financial position on April 1, showed the
following:
 On this date, they agreed to admit Chan as a partner. The terms of the
agreement are summarized below:
a. Allowance for possible uncollectible accounts of P9,000 should
be set up.
b. Inventories must be restated at the present market value of
P320,000.
Ortiz, Ponce and Chan will divide profits in the ratio of 5:3:2 respectively. Their.
capital balances must be in proportion to this ratio.
Chan will be investing cash of P150,000 for his interest.

What is the capital balance of Ortiz immediately after the admission?

ANSWER:

6. When Mandy and Moore, partners who share earnings equally, were
incapacitated in an airplane accident, a liquidator was appointed to wind up
their business.

The accounts showed cash, P35,000; other assets, P110,000; liabilities,

P20,000, Mandy, capital, P71,000; Moore, capital P54,000. Because of highly
specialized nature of the non-cash assets, the liquidator anticipated that
considerable time would be required to dispose them. The expenses of
liquidating the business are estimated at 10,000.

How much cash can be distributed safely to Mandy at this point?

ANSWER:

7. Sonic’s accounts payable per general ledger control amounted to P5,440,000,

net of P240,000 debit balances in suppliers’ accounts. The unpaid voucher

file included the following items that not had been recorded as of December
31, 2015:

 A Company – P224,000 merchandise shipped on December 31, 2015, FOB

destination; received on January 10, 2016.
 B, Inc. – P192,000 merchandise shipped on December 26, 2015, FOB
shipping point; received on January 16, 2016.
 C Super Services – P144,000 janitorial services for the three-month period
ending January 31, 2016.
  MERALCO – P67,200 electric bill covering the period December 16, 2015 to
January 15, 2016. On December 28, 2015, a supplier authorized Sonic to
return goods billed at P160,000 and shipped on December 20, 2015. The
goods were returned by Sonic on December 28, 2015, but the P160,000
credit memo was not received until January 6, 2016.

What amount should be reported as current liability in Sonic’s December 31,

2015 balance sheet?

ANSWER:

8. The Evita Company uses cash basis accounting for their records. During
2016, Evita collected P500,000 from its customers, made payment of
P200,000 to its suppliers for inventory, and paid P140,000 for operating
costs. Evita wants to prepare accrual basis statements. In gathering
information for the accrual bass financial statements, Evita discovered the
following:

• Customers owed Evita P50,000 at the beginning of 2016 and

P35,000 at the end of 2016.
• Evita owed suppliers P20,000 at the beginning of 2016 and P
27,000 at the end of 2016.
• Evita’s beginning inventory was P42,000 and its ending
inventory was P44,000.
• Evita had prepaid expenses of P5,000 at the beginning of 2016
and P7,400 at the end of 2016.
• Evita had accrued expenses of P12,000 at the beginning of 2016
and P 19,000 at the end of 2016.
• Depreciation for 2016 was P51,000.

Determine the accrual basis net income of Evita Company for the year ended
December 31, 2016

ANSWER:

9. Jar, Ram, and Milo, who divide profits and losses, 50%, 30% and 20%,
respectively. Have the following October 31, 2011 account balances:
 The partnership’s assets are P211,200 (including cash of 64,200). The
partnership is liquidated and Milo receives P33,000 in final statement. How
much is the total loss on realization?

ANSWER:

10.Negros Company was incorporated in January 1, 2017 with the following

authorized capitalization:

During 2017, the entity issued 150,000 ordinary shares for a total of
P18,000,000 and 50,000 preference shares at P60 per share.

In addition, on December 15, 2017, subscriptions for 20,000 preference

shares were taken at a purchase price of P100. These subscribed share were
paid for on January 15, 2018.

Net income for 2017 was P5,000,000.

What amount should be reported as total contributed capital on December

31, 2017?

ANSWER:

CLINCHER

1. 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:

2. The Do It Corporation presented the following income statement and

statement of retained earnings for the year ended December 31, 2015 as
developed by its bookkeeper who has completed 12 units of accounting.
 The corrected retained earnings as of December 31, 2015 is
___________________.

ANSWER:

3. Changes in all the account balances of Camadillo Company for the current
year, except for the retained earnings, are as follows:

There are no entries in the retained earnings account except for net
income and a dividend declaration of P190,000 which was paid in the
current year.
 What is the net income for the current year?
ANSWER:

BUZZER ROUND
1. On March 1, 2012, II and MM formed a partnership with each contributing the
following assets:

The building is subject to mortgage loan of P800,000 which is to be assumed by the

partnership agreement provides that II and MM share profits and losses 30% and
70%, respectively.

On March 1, 2012 the balance in MM’s capital account should be:

ANSWER:

2. JJ and KK are partners who share profits and losses in the ratio of 60% :40%,
respectively. JJ’s salary is P60,000 and P30,000 for KK. The partners are also
paid interest on their average capital balances. In 2012, JJ Received P30,000
of interest and KK, P12,000.

The profit and loss allocation is determined after deductions for the salary
and interest payments.

If KK’s share in the residual income (income after deducting salaries and
interests) was P60,000 in 2012, what was the total partnership income?

ANSWER:

3. The partnership agreement of XX, YY, and ZZ provides for the year-end
allocation of net income in the following order:

• First, XX is to receive 10% of net income up to P200,000 and 20% over

P200,000
• Second, YY and ZZ is to receive 5% of the remaining income over P300,000
• The balance of income is to be allocated equally among the three partners

The partnership’s 2011 net income was P500,000 before any allocations to
partners.

What amount should be allocated to XX?

ANSWER:

4. The following condensed balance sheet is presented to the partnership of

AA, BB, and CC who share profit and losses in the ratio 4:3:3, respectively:

The partners agreed to liquidate the partnership after selling the other
assets for P200,000.

Upon the liquidation of the partnership, AA should have received?

ANSWER:

5. On January 2, 2011, BB and PP formed a partnership. BB contributed capital

of P175,000 and PP P25,000. They agreed to share profits and losses 80%
and 20%, respectively. PP is the general manager and works in the
partnership full time and is given salary of P5,000 a month; an interest of
5% in the beginning capital (of both partner) and a bonus of 15% of net
income before the salary, interest and the bonus.

The Profit and Loss statement of the partnership for the year ended
December 31, 2011 is as follows:

The amount of bonus to PP in 2011 amounted to:

ANSWER:

6. Selected records from the accounting records of Malakas Company are as

follows:
 What is the amount of gross margin?

ANSWER:

7. RR and XX formed a partnership and agreed to divide initial capital equally

even though RR contributed P25,000 and XX P21,000 in identifiable
assets.

Under the bonus approach to adjust the capital accounts, XX’s

unidentifiable assets should be debited for:

ANSWER:

8. Glenn Company provided the following information at year-end:

What is the amount of legal capital?

ANSWER:

9. Mara Company provided the following data at year-end:

 What total amount should be reported as shareholders’ equity?
ANSWER:

10. At the beginning of the current year, Ria Company issued 100,000
ordinary shares of P20 par value and 20,000 convertible preference
shares of P20 par value for a total of P800,000.

At this date, the ordinary share was selling for P36 and the convertible
preference share was selling for P27.

What is the share premium from the issuance of preference shares?

ANSWER:

11. During the current year, Hyatt Company issued for P110 per share,
15,000 convertible preference shares of P100 par value.

One preference share may be converted into three ordinary shares of

P25 par value at the option of the preference shareholder.

At year-end, all the preference shares were converted into ordinary

shares. The market value of the ordinary share at the conversion date
was P40.

What amount should be credited to share premium as a result of b

conversion?
ANSWER:

12. At the beginning of the current year, Rona Company issued 50,000
shares of P10 par value for P100 per share.

During the year, the entity reacquired 2,000 shares at P150 per share
and immediately cancelled these 2,000 shares.

In connected with the retirement of shares, what amount should be

debited
to retained earning?
 ANSWER:

13. During the current year, Line Company received a donation of 2,000
shares with P650 par value from a shareholder. On that date, the share
market value was P350. The shares were originally issued forP250 per
share.
What is the decrease in shareholders’ equity as a result of the donation?

ANSWER:

14. January 1, 2017, Vey Company had 125,000 shares issued which
included 25,000 shares as treasury.

• January 1 through October 31 – 13,000 treasury shares were

distributed to officers as part of a share compensation plan.
• November 1 – A 3-for-1 share split took effect.
• December 1 – the entity purchased 5,000 of its own shares to
discourage an unfriendly takeover. These shares were not retired.

How many shares were outstanding on December 31, 2017?

ANSWER:

15. The December 31, 2017, balance sheet of Madden Inc., reported total
assets of P1,050,000 and total liabilities of P680,000. The following
information relates to the year 2018:

The stockholders' equity section of the December 31, 2018, balance

sheet would report a balance of?

ANSWER:

16. A local partnership was considering the possibility of liquidation since

one of the partners is solvent (Tilman) and the others are insolvent.
Capital Balances at that time were as follows. Profits and Losses were
divided on 4:2:2:2 bases, respectively.
 Ding’s creditors filed a P25,000 claim against the partnership’s asset. At
that time, partnership held asset s reported at P360,000 and liabilities of
P120,000. If the assets could be sold for P228,000, what is the minimum
amount that Ding’s creditors would have received?

ANSWER:

17.The pre-emptive right of a common stockholder is the right to

a. share proportionately in corporate assets upon liquidation.

b. share proportionately in any new issues of stock of the same class.
c. receive cash dividends before they are distributed to preferred
stockholders.
d. exclude preferred stockholders from voting rights.

ANSWER:

18.Windsor Company has outstanding both common stock and

nonparticipating, non-cumulative preferred stock. The liquidation value
of the preferred is equal to its par value. The book value per share of the
common stock is unaffected by

a. the declaration of a stock dividend on preferred payable in preferred

stock when the market price of the preferred is equal to its par value.
b. the declaration of a stock dividend on common stock payable in
common stock when the market price of the common is equal to its par
value.
c. the payment of a previously declared cash dividend on the common
stock.
d. a 2-for-1 split of the common stock.

ANSWER:

19.Watt Co.'s stockholders' equity at January 1, 2017 is as follows:

Common stock, P10 par value; authorized 300,000 shares;

Outstanding 225,000 shares P2,250,000

Paid-in capital in excess of par 900,000
Retained earnings 2,190,000
Total P5,340,000
During 2017, Watt had the following stock transactions:
• Acquired 6,000 shares of its stock for P270,000.
• Sold 3,600 treasury shares at P50 a share.
• Sold the remaining treasury shares at P41 per share.
 No other stock transactions occurred during 2017. Assuming Watt uses
the cost method to record treasury stock transactions, the total amount of all
additional paid-in capital accounts at December 31, 2017 is?

ANSWER:

20.The occurrence which most likely would have no effect on 2017 net
income (assuming that all amounts involved are material) is the

a. sale in 2017 of an office building contributed by a stockholder in

2003.
b. collection in 2017 of a receivable from a customer whose account
was written off in 2016 by a charge to the allowance account.
c. settlement based on litigation in 2017 of previously unrecognized
damages from a serious accident which occurred in 2015.
d. worthlessness determined in 2017 of stock purchased on a
speculative basis in 2013.

ANSWER:

21. Generally accepted accounting principles

a. are fundamental truths or axioms that can be derived from laws of
nature.
b. derive their authority from legal court proceedings.
c. derive their credibility and authority from general recognition and
acceptance by the accounting profession.
d. have been specified in detail in the conceptual framework.

ANSWER:

22. Accounting information is considered to be relevant when it

a. can be depended on to represent the economic conditions and events

that it is intended to represent.
b. is capable of making a difference in a decision.
c. is understandable by reasonably informed users of accounting
information.
d. is verifiable and neutral.

ANSWER:
23.On October 1, 2015, the warehouse of ABC Co. and all inventories
contained therein was damaged by flood. Off-site back up of database
shows the following information:

Additional information:
Goods in transit as of October 1, 2015 amounted to P2,000, cost of
goods out on consignment is P1,200, and materials damaged by flood
can be sold at a salvage value of P500.
How much is the inventory loss due to flood on October 1, 2015?

ANSWER:

24. The Tan Company purchased machine on April 1, 2014 for P800,000.
The machine has the following data:

During 2014 and 2015, the company used the machine for 4,500 and
5,500 hours, respectively, and produced 40,000 and 60,000 units,
respectively.
What is the balance of accumulated depreciation in December 31, 2015
assuming Tan uses input method as depreciation method?
 ANSWER:

25. Information concerning the first month of operations of Avon is

presented below. (The periodic inventory system is used.)

The correct cost of goods sold is ___________________.

ANSWER: