Fundamentals of Accounting , Part 2

1. What is the correct order of the following events in the accounting process?
I. Financial statements are prepared
II. Adjusting entries are recorded
III. Nominal accounts are closed
a. I,II, III
b. II, I, III
c. III,II,I
d. II,III,I
2. he first step in the accounting c!cle is to
a. "ecord transactions in a journal
#. Analyze transactions from source documents
c. $ost journal entries to general ledger accounts
d. Adjust the general ledger accounts
%. Which of the following is not characteristic of proprietar! theor! that influences accounting for partnerships?
a. $artners& salaries are viewed as a distinguishing of income rather than component of net income.
#. $artnership is not viewed as separate entit!, distinct, ta'a#le entit!.
c. A partnership is characterized by limited liability.
d. (hanges in ownership structure of a partnership result in the dissolution of the partnership.
). Which of the following statement is correct with respect to a limited partnership?
a. A limited partner ma! not #e an unsecured creditor of the limited partnership.
#. A general ma! not also #e limited partner at the same time.
c. A general partner ma! #e a secured creditor of the limited partnership.
d. A limited partnership can #e formed with limited lia#ilit! for all partners.
*. +n ,anuar! 1, 2--., Atta and /o! agreed to form a partnership contri#uting their respective assets and e0uities
su#ject to adjustments. +n that date, the following were provided1
Atta /o!
(ash $ 22,--- .2,---
Accounts receiva#le 2--,--- .--,---
Inventories 12-,--- 2--,---
3and .--,---
/uilding *--,---
Furniture and fi'tures *-,--- %*,---
Intangi#le assets 2,--- %,---
Accounts pa!a#le 12-,--- 2*-,---
+ther lia#ilities 2--,--- %*-,---
(apital .2-,--- 2--,---

he following adjustments were agreed upon1
a. Accounts receiva#le of 2-,--- and )-,--- are uncollecti#le in A&s and /&s respective #oo4s.
#. Inventories of .,--- and 5,--- are worthless in A&s and /&s respective #oo4s.
c. Intangi#le assets are to #e written off in #oth #oo4s.
What will #e the capital #alances of the partners after adjustments?
Atta /o!
a. P 592,000 $ 5*-,---
#. .--,--- 5--,---
c. *62,--- 5*.,%--
d. .--,--- 5*-,---

.. When propert! other than cash is invested in a partnership, at what amount should the non7cost propert! #e
credited to the contri#uting partners& capital account?
a. Fair alue at the date of contri#ution.
#. (ontri#uting partner&s original cost.
c. Assessed valuation for propert! ta' purposes.
d. (ontri#uting partner&s ta' #asis.
5. 8a! 1, 2--., (o## and 8ott formed a partnership and agreed to share profits and losses in the ratio of %15
respectivel!. (o## contri#uted a parcel of land that cost him 1-,---.8oth contri#uted $ )-,--- cash. he land
was sold for $ 12,--- on 8a! 1, 2--.,immediatel! after formation of the partnership. What amount should #e
recorded in (o##&s capital account on formation of the partnership?
a. P!",000
#. 15,---
c. 1*,---
d. 1-,---
2. A#el and (arr formed a partnership and agreed to divide initial capital e0uall!, even though A#el contri#uted
$1--, --- and (arr contri#uted $2), --- in identifia#le assets. 9nder the #onus approach to adjust the capital
accounts, (arr&s unidentifia#le asset should #e de#ited for
a. $)., ---
#. 1., ---
c. 2, ---
d. 0

6. 8ar! admits ,ane as a partner in the #usiness. /alance sheet accounts of 8ar! just #efore the admission of ,ane
show1 (ash, 2.,---. Accounts receiva#le, 12-,---, 8erchandise inventor!, 12-,--- and accounts pa!a#le,
.2,---. It was agreed that for purposes of esta#lishing 8ar!&s interest, the following adjustments #e made1 1.
an allowance for dou#tful accounts of %: of accounts receiva#le is to #e esta#lished. 2. 8erchandise inventor!
is to #e adjusted upward #! 2*,--- and % prepaid e'penses of %,.-- and accrued lia#ilities of ),--- are to #e
recogni;ed.
If ,ane is to invest sufficient cost to o#tain 2<* interest in the partnership, how much would ,ane contri#ute to the new
partnership?
a. 15.,---
b. !90,000
c. 6*,---
d. 11%,62-
1-. If the partnership agreement does not specif! how income is to #e allocated, profit and loss should #e allocated
a. =0uall!
#. In proportion to weighted average of capital invested during the period.
c. =0uita#ilit! so that partners are compensated for the time and effort e'pended on #ehalf of the
partnership.
d. In accordance #ith their capital contribution.

11. Which of the following is not a component of the formula used to distri#ute income?
a. >alar! allocation to those partners wor4ing.
#. After all other allocation, the remainder divided according to the profit and loss sharing ratio.
c. Interest on the average capital investments.
d. Interest on notes to partners.

12. he A/( partnership reports net income of $.-, ---. If partners A, /, and ( have income ratio of *-:, %-:, and
2-: respectivel!. What is the share of partner ( from the net income of the partnership, if he was given a
capital ratio of 2*:?
a. %-,---
b. !2,000
c. 12,---
?. 1*,---

1%. Which of the following will not comprise financial statements of a partnership #usiness?
a. >tatement of Financial $osition
b. $tatement of %hanges in &#ner's ()uity
c. >tatement of (omprehensive Income
d. >tatement of (ash Flow
!*. Which of the following can #e found in a >tatement of Financial $osition of a partnership #usiness #ut not in the
sole proprietorship?
a. +wner&s e0uit!
b. Accumulated ?epreciation
c. Partner's ()uity
d. Accounts pa!a#le
!5. he #asic components of financial statements include all of the following, e'cept
a. $tatement of +etained (arnings
b. >tatement of (hanges in =0uit!
c. (ash Flow statement
d. >tatement of recogni;ed gains and losses
!,. he elements of financial statements shall #e measured in
a. (onstant pesos
b. -ominal pesos
c. Fi'ed pesos
d. Fle'i#le pesos
!.. he following information is availa#le from ?omi (ompan!&s accounting records for the current !ear1
$urchases *,%--,---
$urchase discounts 1--,---
/eginning inventor! 1,.--,---
=nding inventor! 2, 1*-,---
Freight out )--,---

What is the cost of goods sold for the current !ear?
a. ),5*-,--- c. *,-*-,---
b. *,,50,000 d. *,2*-,--
12. Ni44oe! (ompan! showed net income of $)2-,--- in its income statement for the current !ear. >elling e'penses
were e0ual to 1*: of sales and also 2*: of cost of sales. All other e'penses were 1%: of sales. What was the
gross profit for the current !ear?
a. ),---,--- c. !,,00,000
#. 2,)--,--- d. 2,---,---
16. Which of the following should #e presented on the statement of changes in partner&s e0uit!?
a. otal comprehensive income for the period showing separatel! the total amounts attri#uta#le to
owners of the parent and to minorit! interests.
#. he amounts of transactions with owners in their capacit! as owners, showing separatel! contri#utions
#! and distri#utions to owners.
c. For each component of e0uit!, a reconciliation #etween the carr!ing amount at he #eginning and the
end of the period, separatel! disclosing each change.
d. All of the aboe
20. A statement of changes in partner&s e0uit! should include all of the following, e'cept
a. Partner's payments of loans
b. Investment during the period
c. /eginning capital #alances
d. =nding capital #alances
2!. >tatement of Financial $osition anal!sis is useful in assessing an entit!&s li0uidit! which is the a#ilit! to
a. $atisfy short/term obligations
b. 8aintain profita#le operations
c. 8aintain past levels of preference and ordinar! dividends
d. >urvive a major economic downturn
22. Accrued revenue would normall! appear on the #alance sheet under
a. $lant assets c. 3ong7term lia#ilities
b. %urrent assets d. (urrent lia#ilities
20. Which of the following indicates a cash inflow from operating activities?
a. $a!ments to emplo!ees
b. +eceipt from royalties, fees, commissions and other reenues
c. "eceipts from sale of propert! and e0uipment
d. "eceipts from investment #! owners
2*. Which of the following indicates a cash outflow from investing activities?
a. Payments to ac)uire property plant and e)uipment
b. $a!ments for ta'es
c. $a!ments to settle notes pa!a#le
d. $a!ments to emplo!ees
2*. Which of the following results in dissolution of a partnership?
a. he contri#ution of additional assets to the partnership #! an e'isting partner.
#. he receipt of a draw #! an e'isting partner.
c. he winding of the partnership and the distri#ution of the remaining assets to the partners.
d. 1he #ithdra#al of a partner from a partnership
2.. $artnership A has an e'isting capital of $5-, ---. wo partners currentl! owned the partnership in split
profits *-<*-. A new partner is to #e admitted and will contri#ute newt assets with a fair value of $6-, ---.
For no goodwill or #onus @depending on which ever method is usedA to #e recogni;ed, what is the interest in
the partnership granted the new partner?
a. %%.%%:
#. *-.--:
c. 5,.252
d. 5*.--:
25. In 8a! 2--., Imelda, a partner of an accounting firm decided to withdraw when the partner&s capital
#alances were1 8i4ee, $.--, ---B "aul, $.--, ---B and Imelda, $)--, ---. It was agreed that Imelda is to
ta4e the partnership&s full! depreciated computer with a secondhand value of $2), --- that costs the
partnership $%., ---. If profits and losses are shared e0uall!, what would #e the capital #alances of the
remaining partners after the retirement of Imelda?
8i4ee "aul
a. $.--,-- $.--,---
#. $*62,--- $*62,---
c. P,0",000 P,0",000
d. P,12,--- $.12,---
22. "an4en purchases *-: of 3ar4&s capital interest in the C and 3 partnership for $22, ---. If the capital
#alances of Cim and 3ar4 are $)-, --- and $%-, --- respectivel!. "an4en&s capital #alance following the
purchase is
a. $22,---
#. %*,---
c. 2-,---
d. !5,000
26. he following information pertains to A/( partnership of Amor, /ing, and (ora1
Amor, capital @2-:A $2--,---
/ing, capital @%-:A 2--,---
(ora, capital @*-:A %--,---
+n this date, the partners agreed to admit ?oll! to the partnership. Assuming ?oll! purchase *-: of the
partner&s capital and pa!s $*--, --- to old partners, how would this amount #e distri#uted to them?
a. $1--,--- $1*-,--- $2*-,---
b. P!00,000 P!*5,000 P225,000
c. $1..,..5 $1..,..5 $1..,...
d. $1*-,--- $1*-,--- $2--,---
%-. When a partnership #usiness dissolved and formed a corporation, one of the partner rendered a services
and in return the #usiness gave him shares to compensate for the rendered service, in this case, when
shares are issued for services received, the measure is e0ual to the
a. Fair alue of such serices
#. $ar value of the share issued
c. /oo4 value of the shares issued
d. Fair value of the shares issued
%1. When a partner withdraws from a partnership ta4ing assets that represent less than his capital #alance,
a. No #onus results
b. 1he remaining partner receies a bonus
c. he withdrawing partner receives a #onus
d. he remaining partners owe the withdrawing partner the difference.
%2. he doctrine of marshaling of assets
a. Is applica#le onl! if the partnership is insolvent
#. Allows partners to first contri#ute personal assets to unsatisfied partnership creditors.
c. Is applicable if either the partnership is insolent or indiidual partners are insolent.
d. Amount owed to personal creditors and to the partnership for de#it capital #alances are shared
proportionatel! from the personal assets of the partners.
%%. he following is the priorit! se0uence in which li0uidation proceeds will #e distri#uted for a partnership.
a. $artnership lia#ilities, partnership capital #alances, partnership loans
#. $artnership lia#ilities, partnership loans, partnership drawings, partnership capital #alances
c. Partnership liabilities, partnership loans, partnership capital balances
d. $artnership drawings, partnership lia#ilities, partnership loans, partnership capital #alances
%). $edro and ,uan who share profits and losses e0uall!, decided to li0uidate heir partnership when their net
assets amounted to $2.-,---, and capital #alances of $15-,--- and $6-,---, respectivel!.
If the non7cash assets were sold for amount e0ual to its #oo4 value, what amount of cash should $edro and
,uan received?
$edro ,uan
a. $ 1%-,--- $ 1%-,---
b. !.0,000 90,000
c. 12-,--- 2-,---
d. 16*,--- .*,---
%*. /ecause of ver! unprofita#le operations, partners Nal, 3ou and Dee decided to dissolve the partnership
when their capital #alances and profit and loss ratio were1
Nal, capital E%-:F $ 15*,---
3ou, capital E2-:F 12*,---
Dee, capital E*-:F 15*,---
otal
9pon li0uidation, all of the partnership&s assets are sold and sufficient cash is reali;ed to pa! all lia#ilities e'cept
one for $2*,---. Dee is personall! insolvent, #ut the others are capa#le of meeting an! inde#tedness of the
firm. /! what amount would the capital of Nal change?
a. $ 5,*-- decrease
#. 1*-,--- decrease
c. !95,000 decrease
d. No change

%.. As of ?ecem#er %1, the #oo4s of A8= $artnership showed capital #alances of A7$)-,---B 87 $2*,---B and =7
$ *,---. he partner&s profit and loss ratio was %1211 respectivel!. he partners decided to dissolve and
li0uidate. he! sold all the non7cash assets for $%5,--- cash. After settlement of all lia#ilities amounting to
$12,---, the! still have $22,--- cash left for distri#ution.
he loss on the reali;ation of the non7cash assets was
a. )-,--- c. )),---
#. *2,000 d. )*,---
%5. Assuming in No. %., that an! partner&s capital de#it #alance is uncollecti#le, the share of A in the $22,---
cash for distri#ution would #e
a. 16,--- c. )-,---
#. 12,--- d. !.,"00
%2. he condensed #alance sheet of Ale', ,a! and ,ohn as 8arch %1, 2-1- follows1
(ash $ 22,--- 3ia#ilities $ )2,---
+ther assets 2.*,--- Ale', capital 6*,---
,a!, capital 2-,---
,ohn, capital 5-,---
otal $26%,--- otal $ 26%,---

%6. A corporation has the following attri#utes e'cept
a. =njo!s the right of succession
#. An artificial #eing with a personalit! separate and apart from its shareholders.
c. (reated #! operation of law
d. None of the a#ove
)-. he advantage of a corporation from a partnership is
a. he death of a shareholder will not dissolve the corporation #ecause of its power of succession.
#. Its management is centrali;ed on the #oard of directors
c. >hareholders have limited lia#ilit!
d. All of the aboe
)1. It is the process of #ringing together the incorporators or the persons interested in the #usiness, of
procuring su#scriptions or capital for the corporation and of setting in motion the machiner! that leads to
the incorporation of the corporation itself.
a. (ommencement c. advertisement
#. Promotion d. organi;ation
)2. When should /!7laws #e adopted?
a. &ne month from the issuance of he certificates of incorporation by the $(%.
#. wo months from the issuance of he certificates of incorporation #! the >=(.
c. hree months from the issuance of he certificates of incorporation #! the >=(.
d. >i' months from the issuance of he certificates of incorporation #! the >=(.

)%. Which of the following are not permitted to issue no7par value shares?
a. 1rust companies c. 3ending associations
#. =ducational institutions d. None of the a#ove
)). When /radle! (ompan! incorporated, it was authori;ed to issue 1,---,--- shares of common stoc4. It
immediatel! issued *-,--- shares. In 2--5, it issued an additional 2-,--- shares. In 2-1-, it repurchased
*,--- shares with the intent of reissuing them. +n the ?ecem#er %1, 2-1-, #alance sheet, /radle! (ompan!
would show
a. *-,--- shares issued and )*,--- shares outstanding
b. .0,000 shares issued and ,5,000 shares outstanding
c. 5-,--- shares issued and 5-,--- shares outstanding
d. 1,---,--- shares issued and outstanding.
)*. (hoose a situation which illustrates the minimum re0uirement of the law to corporate formation1
Authori;ed >u#scri#ed $ain7in (apital
a. $ 1--,--- $ 2*,--- $ *,---
#. 1--,--- *,--- *,---
c. *-,000 !2,500 0, !25
d. .-,--- 1*,--- *,---
).. hese are persons who #ring a#out or cause to #ring a#out the formation and organi;ation of a corporation
a. 9nderwriters c. Promoters
#. >u#scri#ers d. Incorporators
)5. hese represent the record of all #usiness transactions. his normall! includes the journal and the ledger.
a. >hareholders& ledger c. 3oo4s of accounts
#. >u#scri#ers& ledger d. 8inutes #oo4
)2. his is 4ind of shares in which a specific amount is fi'ed in the articles of incorporation and appearing on the
certificate of stoc4.
a. $ar c. No7par
#. Goting d. Non7voting
)6. his is a stoc4 that has #een issued #! the corporations as full! paid and later reac0uired #ut not retired.
a. $romotion shares c. 1reasury shares
#. (onverti#le shares d. ?e7#awi shares
*-. $olar (ompan! issued 2-,--- new $1-- par ordinar! shares at a fair value of $12- each. $olar identified
costs in relation to the shares issue1
$rofessional fees )--,---
Internal management time in managing the process %--,---

What is the increase in e0uit! as a result of the issuance of shares?
a. %,2--,--- c. 2,6--,---
#. 0,020,000 d. 2,65-,---
*1. At the #eginning of the current !ear, Alto (ompan! declared 1 for * reverse share split, when the mar4et
value of the share was $1--. $rior to the split, Alto had 1--,--- shares of $1- par value issued and
outstanding. After the split, what is the par value of the share?
a. 1- c. 50
#. 2- d. 2
*2. In case shares are issued for outstanding lia#ilities, what is the measure for recording?
a. /oo4 value of the shares issued
b. Amount of liabilities set off
c. Fair value of the shares issued
d. $ar value of the shares issued
*%. he 3uc4! (ompan! was authori;ed to issue $)--,--- ordinar! shares divided into ),--- shares with a par
value of 1-- per share.
9sing the ,ournal entr! method, what is the entr! on that date?
a. 8emo entr! onl!
#. 9nissued +rdinar! shares )--,---
Authori;ed +rdinar! >hares )--,---
c. >u#scription +rdinar! >hares )--,---
Authori;ed +rdinar! >hares )--,---
d. No entr! even a memorandum
*). >u#scription receiva#le and other receiva#les from sale of shares which are not collecti#le shall #e
presented as
a. +ther asset
#. 5eduction from the related subscribed share capital in the shareholders' e)uity section
c. (urrent asset
d. 3ong7term investment
**. 3oss on retirement of treasur! shares shall #e de#ited to
a. "etained =arnings
#. >hare premium from treasur! shares and then to retained earnings
c. >hare premium from treasur! shares, share premium from original issuances and then to retained
earnings
d. $hare premium from original issuances, share premium from treasury shares and then retained
earnings.
*.. Corina (ompan! was organi;ed on ,anuar! 1, 2-1- with 1--,--- shares authori;ed of $1-- par value. +n
,anuar! *, Corina issued 5*,--- shares at $1)- per share and on ?ecem#er %1, Corina purchased *,---
shares at $11- per share. Corina used the par value method of recording the purchased of treasur! shares.
What is the #alance of the share premium from treasur! shares on ?ecem#er %1, 2-1-?
a. 2--,--- c. *-,---
#. !50,000 d. -
*5. he total cost of treasur! shall #e reported as
a. 5eduction from shareholders' e)uity
#. Asset
c. ?eduction from retained earnings
d. ?eduction from share premium
*2. What is the effect of a thing donated to the corporation?
a. Increase the asset and decrease the e0uit!
#. Increase the asset and stoc4holders e)uity
c. ?ecrease the asset and stoc4holders e0uit!
d. ?ecrease the asset and increase stoc4holders e0uit!
*6. +n ?ecem#er 1 of the current !ear, 3ine (ompan! received a donation of 2,--- shares with $*- par value
from a shareholder. +n that date, the share mar4et value was $%*-. he shares were originall! issued for
$2*- per share.
What is the decrease in shareholders& e0uit! as a result of the donation?
a. 5--,--- c. 2--,---
#. *--,--- d. -
.-. It is contri#utions, including shares of the corporation, received from shareholders should #e recorded at
the fair mar4et value of the items received, with the credit going to share premium. his is called
a. (ontri#uted capital c. 5onated capital
#. 3egal capital d. Diven capital
.1. his represent the cumulative #alance of periodic net income or loss, dividend distri#utions, prior period
errors, changes in accounting polic! and other capital adjustments.
a. +etained (arnings c. Investment
#. Net Income d. Income >ummr!
.2. +n ,ul! %1 of the current !ear, >un (ompan! purchased *--,--- shares of >tar (ompan!. +n ?ecem#er %1,
>un distri#uted 2*-,--- shares of >tar as a dividend to >un&s shareholders. his is an e'ample
a. Property diidend
#. Investment dividend
c. 3i0uidating dividend
d. >toc4 dividend
.%. he issuer should charge retained earnings for the mar4et value of shares issued in a
a. 1 for * stoc4 dividend
b. ! for " stoc4 diidend
c. ) for 1 stoc4 split
d. 2 for 1 stoc4 split
.). +n Novem#er 1, 2-1-, Drande (ompan! declared a propert! dividend of e0uipment pa!a#le on 8arch 1,
2-11. he carr!ing amount of the e0uipment is $%,---,--- and the fair value is $ 2,*--,--- on Novem#er 1,
2-1-.
However, the fair value less cost to distri#ute the e0uipment is $2,2--,--- on ?ecem#er %1, 2-1- on 8arch
1,2-11.
What is the dividend pa!a#le on ?ecem#er %1,2-1-?
a. 2,*--,--- c. %,---,---
#. 2,200,000 d. -
.*. With regards to No. .), what is the measurement of the e0uipment on ?ecem#er %1, 2-1-?
a. 2,*--,--- c. %,---,---
#. 2,200,000 d. 2,---,---
... he following information pertains to 8ega (ompan!1
?ividends on its 1-,--- cumulative preference shares of 1-:, $1-- par value have not #een
declared or paid for % !ears.
reasur! shares were ac0uired at a cost of $1,*--,---. he treasur! shares had not #een reissued as
of !ear7end.
What amount of retained earnings should #e appropriated as a result of these items?
a. !,500,000 c. %--,---
#. 1,2--,--- d. -
.5. =ast (ompan!, a calendar !ear compan!, had sufficient retained earnings in 2-1- as a #asis for dividends
#ut was temporaril! short of cash. =ast declared a dividend of $1,---,--- on April 1,2-1-, and issued
promissor! notes to its shareholders in lieu of cash. he notes, which were dated April 1, 2-1-, had a
maturit! date of 8arch %1, 2-11 and a 1-: interest rate.
How should =ast account for the scrip dividend and related interest?
a. ?e#it retained earnings for $1,---,--- on April 1,2-1-
#. ?e#it retained earnings for $1,1--,--- on 8arch %1,2-11
c. ?e#it retained earnings for $1,---,--- on April 1,2-1- and de#it interest e'pense for $1,---,--- on
8arch %1, 2-11
d. 5ebit retained earnings for P!,000,000 on April !,20!0 and debit interest e6pense for P.5,000 on
5ecember 0!, 20!!.
.2. 9ndistri#uted stoc4 dividend should #e reported as
a. A current lia#ilit! c. an addition to share capital outstanding
#. A reduction in total shareholders& e0uit! d. A note to F>
.6. A retained earnings appropriation is used to
a. A#sor# a fire loss when a compan! is self7insured
#. >mooth periodic income
c. $rovide for a contingent loss that is pro#a#le and measura#le
d. +estrict earnings aailable for diidends
.0. 3ong (ompan! had 1-,--- shares issued and outstanding at ,anuar! 1, 2-1-. ?uring 2-1-, 3ong too4 the
following actions1
8arch 1* ?eclared a 27for7a share split, when the fair value of he share was $2- per share.
?ecem#er 1* ?eclared a $* per share cash dividend.

In the statement of changes in e0uit! for 2-1-, what amount should #e reported as dividends?
a. *-,--- c. 2*-,---
#. !00,000 d. 6*-,---
.!. In computing #asic earnings per share, the amount of preference dividends on noncumulative preference
shares shall #e
a. ?educted from net income whether declared or not
b. Added to net income onl! when declared
c. 5educted from net income only #hen declared
d. Ignored
.2. An entit! has an ordinar! IAJ class, nonvoting share, which is entitled to a fi'ed dividend of .: per annum.
he IAJ class ordinar! share will
a. /e included in the Iper shareJ calculation after adjustment for the fi'ed dividend.
b. /e included in the Iper shareJ calculation for =$> without adjustment for the fi'ed dividend.
c. -ot be included in the 7per share8 calculation for (P$.
d. /e included in the calculation of diluted =$>.
.0. 8anufacturing costs would include #ut
a. Indirect materials used
b. $ales salaries e6pense
c. Indirect la#or cost
d. ?epreciation on factor! e0uipment
.*. he purchases7raw materials account is de#ited when
a. 5irect materials are purchased
b. indirect materials are purchased
c. direct materials are placed into production
d. indirect materials are placed into production
5*. Kew (ompan! has a jo# costing s!stem and an overhead application rate of 12-: of direct la#or cost. ,o#
No. %% is charged with direct material of $12,--- and overhead of $5,2--. ,o# No. %) has direct material of
$2,--- and direct la#or of $6,---. What amount of direct la#or cost has #een charged to ,o# No. %%?
a. ,,000 c. 5,2--
#. 2,.)- d. 1),)--
5.. Application rates for factor! overhead #est reflect anticipated fluctuations in sales over a c!cle of !ears
when the! are computed under the concept of
a. 8a'imum capacit! c. -ormal capacity
#. $ractical capacit! d. ='pected actual capacit!
55. (horo4ee (o. applies factor! overhead on the #asis of direct la#or hours. /udget and actual data for direct
la#or and overhead for the !ear are as follows1
/udget Actual
?irect la#or hours .--,--- .*-,---
Factor! overhead costs $ 52-,--- $5.-,---
he factor! overhead for (horo4ee for the !ear is
a. &erapplied by P20,000
#. +verapplied #! $)-,---
c. 9nderapplied #! $2-,---
d. 9nderapplied #! $)-,---
52. Worle! (o. has underapplied overhead of $)*,--- for the !ear. /efore disposition of underapplied
overhead, selected !ear7end #alances form Worle!&s accounting records were

>ales $ 1,2--,---
(ost of Doods >old 52-,---
?irect materials inventor! %.,---
Wor4 in process inventor! *),---
Finished goods inventor! 6-,---

9nder Worle!&s cost accounting s!stem, over or under applied overhead is assigned to appropriate inventories
and cost of goods sold #ased on !ear7end #alances. In its !ear7end income statement, Worle! should report cost of
goods sold of
a. 5.*,--- c. .2),---
#. .5.,500 d. .22,*--
56. How much is the total manufacturing cost of a product that consume $*--,--- of raw materials, *-: of raw
materials e0uivalent to direct la#or and a manufacturing cost of $2*-,---?
a. $5*-,--- c. P!,000,000
#. $ *--,--- d. $ 2*-,---
2-. 9nder a jo# order cost s!stem, the peso amount of the general ledger entr! involved in the transfer of
inventor! from wor4 in process to finished goods is the sum of costs charged to all jo#s
a. %ompleted during the period
#. (ompleted and sold during the period
c. In process during the period
d. >tarted in process during the period.
21. What is the difference of the wor4sheet of a 8anufacturing (ompan! from that of other forms of #usiness
organi;ation?
a. It has a purchases account
#. It omits the depreciation and accumulated depreciation account of the compan!
c. Includes a pair of columns for cost of goods manufactured.
d. It omits the nominal accounts
22. he anal!sis for financial statement is important for all of the compan!, there are man! #ases that can #e
used for comparison of this anal!sis, which one is not #eing use?
a. Intercompan! #asis
#. Intracompan! #asis
c. Industr! averages
d. +atio analysis
"0. $rovides a rough appro'imation of the average time that it ta4es to collect receiva#les
a. Aerage age of receiables
#. Inventor! turnover
c. Accounts receiva#le
d. None of the a#ove
2). his is a techni0ue for evaluating a series of financial statement data over a period of time.
a. 9orizontal analysis
#. Gertical anal!sis
c. Intercompan! anal!sis
d. "atio anal!sis
2*. Assume (ompan! A has a profit of $2,---,--- with net sales of $2*,---,--- and (ompan! / has a profit of
$1,2--,--- on net sales of $6,---,---. (ompan! A and (ompan! / have profit7to7net7sales ratios of 2: and
2-: respectivel!. If the two compan! wor4s of the same industr!, which of the following is true?
a. %ompany 3 is better managed than %ompany A
#. (ompan! A is 0uite good than (ompan! A
c. (ompan! A has a higher profit margin
d. All of the a#ove
2.. 8easures management&s efficienc! in using its assets to earn profits
a. /asic earnings per share
#. +eturn on total assets
c. "eturn on ordinar! e0uit!
d. None of the a#ove
25. Lou have #een as4ed to evaluate the li0uidit! position of Cim Fitness (enter. he following data are from
Cim&s annual report1
(ash $2.-,---
rading Investments 12-,---
Accounts "eceiva#le
,an 1 %12,---
?ec %1 )22,---
8erchandise Inventor!
,an 1 *-),---
?ec %1 %52,---
(urrent 3ia#ilities )2-,---
(ost of Doods >old .,---,---
(redit >ales 1-,---,---
What is the (ompan!&s wor4ing capital?
a. $*--,--- #. $5--,--- c. $%*-,--- d. $2--,---

22. /ased on Num#er 25, what is Cim&s Inventor! turnover?
a. 2..* b. 2,." c. 1%.5 d. %-.-

26. /ased on Num#er 25, what is Cim&s Average age of receiva#les?
a. 1% da!s #. 22 da!s c. 2. days d. 2,." days

6-. /ased on Num#er 25, what is Cim&s 0uic4 ratio?
a.!. ," b. !."9 c. 2.- d. 2.*

61. he following data are from the financial statements of FAI3A, Inc.1
?ec. %1, 2-1- ,an. 1, 2-1-
otal Assets $ 12-,--- $1)-,---
otal =0uit! 1)),--- 112,---
otal $reference =0uit! %-,--- %-,---
$reference ?ividend ?eclared 2,)--
$rofit 2-,---
Interest ='pense *,5*-

(alculate the ratio on return on otal Assets1
a.1*.1-: #. 1).*-: c. 12.6: d. 1..-6:

62. /ased on M 61, what is return on ordinar! e0uit!?
a.!..9,2 b. !0.5,2 c. 1).*5: d. 12.*:

6%. (o;! is anal!;ing the earnings performance of the /aliwag >tar ransport (orporation. >he has gathered the
following data from /aliwag >tar&s financial statements and from a report of the closing mar4et prices of shares1

$rofit for 2-1- $ 5)%,---
$reference dividends declared during 2-1- .-,---
+rdinar! dividends declared ?ec. %1, 2-1- .2-,---
Num#er of /aliwag >tar ordinar! shares outstanding1
,an. 1, 2-1- 1,1-- shares
?ec. %1,2-1- 1,%-- shares
8ar4et price per ordinar! share on ?ecem#er %1,2-1- $1*

What is the /asic earnings per ordinar! share?
a. .5. b. .*5 c. .26 d. .5*

6). /ased on Num#er 6%, what is the $rice7earnings ratio?
a. 2-.2*11 #. 2..%.11 c. %).)*11 d. )2.1211

6*. /ased on Num#er 6%, what is the compan!&s dividend !ield on ordinar! share?
a. 0.**2 b. 2.52 c. ).)): d. 1.2:

6.. he president of (orpu;, Inc., has as4ed !ou to gather some statistics a#out his compan!&s solvenc!. Lou have
complied the following data1

$rofit $6--,---
Income a' "ate %*:
Interest ='pense 1--,---
otal 3ia#ilities 2,-)2,---
otal =0uit! ),%*2,---

What is the compan!&s imes interest earned ratio?
a.1*.2* c. !*."5
#.12..5 d. 12.6-

65. 9sing the data in M 6., what is (orpu;& de#t ratio?
a.2%N #. %2: c. )*: d. 12:

62 9sing the data in M 65, what is (orpu;& =0uit! ratio?
a.,"2 b. ,92 c. 56: d. 5*:

66. 8easures how readil! a compan! can meet interest pa!ments with profit earned from operations
a. times interest earned ratio c. e)uity to total assets ratio
#. de#t to total assets ratio d. none of these

1--. >hows the percentage of he compan!&s assets financed #! de#t
a. e0uit! to total assets ratio c. times interest earned ratio
b. debt to total assets ratio d. none of these