De La Salle Araneta University!

College of Business!
Victoneta Avenue, Malabon City

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Fundamentals of Accounting 1 & 2

1
T-Gang Consulting of BSACC3A bought P 9,000 of furniture. Accumulated Depreciation had
a balance of P 3,000 prior to the recording of this years depreciation. Depreciation Expense at the
end of the year is P 2,000. What is the book value of the furniture at the end of the year?
A
P 4,000
C
P 11,000
B
P 6,000
D
P 3,000

2
Equities are legal and economic claims to the assets of a business. The owners claims on
the business assets are also known as
A
Accounts Payable
C
Liabilities
B
Outsider Claims
D
Capital

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A
B

The statement which presents the entitys operations during a specific period of time is the
Statement of Owners Equity C
Income Statement
Statement of Cash Flows
D
Balance Sheet

4
The purchase of office equipment on account will
A
increase an asset and increase owners equity
increase a liability
B
increase one asset and decrease another asset
decrease a liability

increase an asset and

increase an asset and

5
The performance of service for a customer or client and immediate receipt of cash will
A
increase one asset and decrease another asset
C
decrease an asset and
decrease a liability
B
increase an asset and increase owners equity
D
increase an asset and
increase a liability

6
The payment of an accounts payable will
A
decrease an asset and decrease owners equity
decrease a liability
B
increase one asset and decrease another asset
increase a liability

decrease an asset and

increase an asset and

7
A
B
C
D

A debit entry to the Cash account indicates

the payment of an expense
the borrowing of money from a bank
the billing of a client for services, payment subsequent to invoicing
the withdrawal of funds from the business by the owner

8
A
B
C
D

The trial balance is necessary in order to

post to the ledger
prepare the source documents
record entries into the journal
check the posting accuracy, that total debits equal total credits

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9
If the Income Summary account has a P 4,000 credit balance before it is closed to the
capital account, you know that
A
revenues exceeded expenses by P 2,000
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B
C
D

the company had a net loss for the year of P 4,000

the owner invested an additional P 4,000 in the business
the company had a profit for the year of P 4,000

10
A
B
C
D

The post closing trial balance is prepared as the next step in the accounting cycle after
combining the trial balance and adjustment figures
preparing the trial balance
journalizing and posting the closing entries
none of these

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11
A debit column total greater than the credit column total under the Income Statement
portion of the worksheet would mean
A
mistakes were made in the preparation of the adjusted trial balance
B
the company had a profitable year
C
the Income Summary account will have a credit balance after the nominal accounts are
closed
D
the company had a loss this year

12
The following accounts were closed to the Income Summary account: Salary Expense, P
500 debit; Telephone Expense, P 800 debit; Utilities Expense, P 250 debit; Service Revenue, P 1,200
credit. The amount and entry to close Income Summary to the Capital account would be
A
P 350 credit to the Income Summary account
B
P 350 debit to the Income Summary account
C
P 1,200 debit to the Income Summary account
D
P 2,050 credit to the Income Summary account

13
A
B

The Statement of Financial Position is another name for the

Statement of Owners Equity C
Income Statement
Statement of Cash Flows
D
Balance Sheet

14
A
B
C
D

The Balance Sheet reflects

Assets + Liabilities = Owners Equity
Beginning owners equity + Revenues = Expenses
Revenues - Expenses
Assets = Liabilities + (Beginning Owners Equity + Revenues - Expenses - Withdrawals)

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15
An asset account with a P 600 beginning balance, no deductions, and a P 1,000 ending
balance, would have the following amount recorded in it.
A
P 600 credit entry
C
P 600 debit entry
B
P 400 debit entry
D
P 400 credit entry

16
Failing to post the transaction of purchasing P 600 of office supplies on account would have
what effect on the trial balance?
A
debit total would equal the credit total
B
debit total would be P 600 greater than the credit total
C
debit total would be P 1,200 greater than the credit total
D
debit total would be P 600 less than the credit total

17
Arevalo Child Care Center paid P 9,000 for three months of rent in advance. The Prepaid
Rent account had a remaining balance of P 3,000 at the end of the accounting period. The adjusting
entry to reflect this must have been
A
debit Rent Expense and credit Prepaid Rent for P 3,000
B
debit Rent Expense and credit Prepaid Rent for P 6,000
C
debit Prepaid Rent and credit Rent Expense for P 12,000
Reviewer for 2015 Qualifying Examamination

debit Prepaid Rent and credit Cash for P 9,000

18

Regarding one purchase of merchandise, the following entries were made by Yap Company
Purchases
17,000
Accounts Payable - Supplier
17,000
#
Transportation - in
1,900
Accounts Payable - Supplier
1,900
#
What are the shipping terms regarding this transaction?
FOB destination, freight prepaid
C
FOB destination, freight collect
FOB shipping point, freight prepaid
D
FOB shipping point, freight collect

A
B

19
The collection of a P 4,000 account within the 2% discount period would result it
A
debit to Sales Discount for P 80
C
credit to Cash for P 3,920
B
debit to Accounts Receivable for P 3,920
D
credit to Accounts Receivable for P
3,920

20
Dissolution will arise
A
whenever a new partner is admitted through purchase of interest or through investment of
cash or non-cash assets
B
upon termination of the definite term or particular undertaking specified in the agreement
C
in case of civil interdiction of any partner
D
all of the above

21
The following income and loss allocation method recognized the services rendered by the
partners in terms of time and skill as well as the contribution made by each partner, except
A
interest allowance to partners, balance in agreed ratio
B
salary allowance to partners, balance in agreed ratio
C
bonus allowance to partners, balance in agreed ratio
D
equally

22
A
B

In the absence of agreement, the share of each partner in the profits and losses shall be
equally
C
according to average capital contribution
according to original capital contribution
D
all of the above

23
A
issue
B

The following will cause total retained earnings to decrease , except

purchase of treasury stock
C
declaration of bonus

24
A
B

Which of the following would not be considered a characteristic of a corporation?

right of succession
C
unlimited liability
separate legal entity D
created by operation of law

25
A
B
C
D

Which of the following will not decrease retained earnings?

declaration of scrip dividends
declaration of property dividends
declaration of liquidating dividends
retirement of share capital at more than the original issue price

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appropriation of retained earnings for plant acquisition

A and B only

26
Earnings per share is
A
net income minus annual dividends on undeclared non-cumulative preference shares
divided by the weighted average number of outstanding ordinary shares
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B
net income divided by weighted average number of outstanding ordinary shares
C
net income minus annual dividends on cumulative preference shares divided by the
weighted average number of outstanding ordinary shares
D
B and C but not A

27
A
B
C
D

A capital deficiency is eliminated in any of the following ways except

by contributing cash to the partnership
by distributing it as additional loss to the other partners
by declaring bankruptcy
by contributing non-cash assets

28
A
B
C
D

When there is no bidder for delinquent subscription, the subscribed shares

will be issued in the name of the board of directors
will be reverted back to unsubscribed shares
will be issued in the name of the corporation
will be issued to the delinquent subscriber

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29
On June 1, Ren Mar Corporation authorized ordinary share capital which was sold on a
subscription basis at a price in excess of par value, and 40% of the subscription price was collected.
On October 1, the remaining 60% of the subscription price was collected. Ordinary Share Premium
account will be credited on

A
B
C
D

30
A
B
C
D

June 1
Yes
No
Yes
No

October 1
No
No
Yes
Yes

The issuance of shares of ordinary share capital to shareholders

decreases ordinary share capital authorized
decreases ordinary share capital outstanding
increases ordinary share capital outstanding
increases ordinary share capital authorized

31
The accountant was not able to adjust the following: P 200 of service revenue was not
accrued; P 300 of unearned revenue had been earned, but no entry was made. What should be the
amount of net income if the incorrect net income was P 19,000?
A
P 19,250
C
P 19,500
B
P 19,410
D
P 18,300

32
A trial balance has debit and credit totals of P 7,000. The purchase of P 4,000 of office
supplies on account was omitted from the original journal entries. After recording and posting this
transaction, the new debit and credit totals for the trial balance would be
A
P 11,000
C
P 9,000
B
P 7,000
D
P 3,000

33
From this list of account balances, calculate the total credit column for the post-closing trial
balance: Cash, P 15,000; Accounts Receivable, P 3,000; Prepaid Rent, P 2,000; Building, P 30,000;
Accumulated Depreciation, P 13,000; Accounts Payable, P 6,000; Unearned Revenue, P 1,000;
Diana Park, Capital, P 30,000.
A
P 69,000
C
P 45,000
B
P 50,000
D
P 20,000

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34
The Balance Sheet of Mallari Company shows that capital is P 540,000 that is equal to 1/3 of
its total assets. How much are the total liabilities?
A
P 180,000
C
P 1,080,000
B
P 720,000
D
P 1,620,000

35
The assets of Sydney Company amounted to P 810,000 on December 31, 2008, but
increased to P 1,305,000 by December 31, 2009. During the same period, liabilities increased by P
270,000. Owners equity on December 31, 2008 amounted to P 495,000. What was the amount of
the Owners Equity on December 31, 2009?
A
P 585,000
C
P 1,035,000
B
P 720,000
D
P 1,080,000

36
Angelica Company has P 60,000 in revenues, P 132,000 in expenses, P 36,000 in owner
investment, P 9,000 in owners withdrawals, and P 45,000 in liabilities paid off. Owners equity
changes by
A
+ P 48,000
C
+ P 36,000
B
- P 45,000
D
- P 3,000

37
Marnie Company purchased P 1,450,000 of land with a P 500,000 cash down payment and
the balance taken as a note payable. How much did the total assets change?
A
+ P 1,450,000 C
- P 930,000
B
+ P 950,000
D
+ P 500,000

38
Jason Gubatan joined a partnership by contributing the following: cash, P 20,000; accounts
receivable, P 4,000; land, P 240,000 at cost and P 400,000 at fair value; and accounts payable, P
16,000. What will be the initial amount recorded in Gubatans capital account?
A
P 408,000
C
P 424,000
B
P 248,000
D
P 20,000

39
Resnel and Lana are combining their separate businesses to form a partnership. Cash and
non-cash assets are to be contributed for a total capital of P 600,000. The non-cash assets to be
contributed and the liabilities to be assumed are as follows.

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Resnel
Book Value
Fair Market Value

Book Value

Lana
Fair Market Value

Accounts Receivable
40,000
40,000
Merchandise Inventory
60,000
100,000
P 40,000
P 50,000
Equipment
120,000
90,000
80,000
100,000
Accounts Payable
30,000
30,000
20,000
20,000
The partners capital accounts are to be equal after all the contributions of assets and the
assumption of liabilities. The amount of cash to be contributed by Resnel is
A
P 200,000
C
P 100,000
B
P 300,000
D
P 210,000

40
A
B

Using the information in item 39, the total assets of the partnership is
P 630,000
C
P 360,000
P 650,000
D
P 340,000

41
Kimberly and Jessica are partners who share profits equally and losses in a 2:1 ratio. If they
have beginning capital balances of P 120,000 and P 118,000 respectively, made no additional
investments nor withdrawals, and suffered an unprofitable year with a loss of P 48,000, their capital
balances will be

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A
B
C
D

Kimberly
P 40,000
120,000
88,000
152,000

Jessica
P 30,000
118,000
102,000
134,000

42
Erika, Charisse Anne, and Katrina share profits and losses in the ratio of 2:3:5 respectively.
Their partnership realized a profit of P 1,800,000 during the year. Erika, with a beginning capital
balance of P 1,000,000, withdrew P 200,000 during the year. Erikas ending capital balance is
A
P 1,000,000
C
P 560,000
B
P 1,160,000
D
P 1,400,000

43
Kenneths interest in the partnership is P 110,000. Juan buys Kenneths interest for P
120,000. How much is the capital balance of Juan after the purchase?
A
P 140,000
C
P 110,000
B
P 120,000
D
P 130,000

44
JP and KY formed a partnership and have capital balances of P 100,000 and P 200,000
respectively. If they agreed to admit MC into the partnership, how much will MC have to invest to
have a 1/4 interest?
A
P 75,000
C
P 200,000
B
P 50,000
D
P 100,000

45
Anne, Christine, and Braga are partners with capital balances of P 80,000, P 120,000, and P
160,000 respectively. They share profits and losses in the ratio of 30:40:30. Christine decides to
withdraw from the partnership. Christine receives P 160,000 in the settlement of his interest. If the
bonus method is used, what is the capital balance of Christine immediately after the retirement of
Christine?
A
P 140,000
C
P 180,000
B
P 160,000
D
P 200,000

46
Using the information in item 45, and assuming bonus method is used, what is the total
partnership capital immediately after the retirement if Christine?
A
P 280,000
C
P 200,000
B
P 240,000
D
P 320,000

47
A partner retired from a partnership and received an amount which exceeds his capital
interest by P 40,000. The remaining partners have profit and loss ratio of 3:2. Under the bonus
method, the excess payment will be shared by the remaining partners as
A
P 48,000 and P 32,000 C
P 36,000 and P 24,000
B
P 12,000 and P 8,000 D
P 24,000 and P 16,000

48
Kenneth, Patrick, and James are partners who share profits and losses in the ratio of 2:3:5.
The partners have decided to liquidate the partnership. Their capital accounts show the following
balances: Kenneth, P 60,000 credit; Patrcik, P 90,000 credit; and James, P 30,000 debit after the
sale of non-cash assets and the payment of liabilities. What is the amount of cash available for
distribution?
A
P 120,000
C
P 160,000
B
P 180,000
D
P 150,000

49
T-Gang Corporation was organized on January 1, 2009 with authorized capital of 100,000
ordinary shares, P 20 par value. During 2009, Hunger Games Corporation had the following
transactions affecting the shareholders equity: January 10, issued 25,000 shares at P 22 per share;
March 25, issued 1,000 shares for legal services when the fair value was P 24 per share; September
Reviewer for 2015 Qualifying Examamination

30, issued 5,000 shares for an equipment when the value was P 26 per share. How much is the
balance of the Ordinary Share Capital account as of September 30?
A
P 700,000
C
P 634,000
B
P 620,000
D
P 704,000

50
Using the information in item 49, what amount should be reported as Premium on Ordinary
Shares?
A
P 84,000
C
P 50,000
B
P 54,000
D
P 34,000

51
John Paul Corporation has the following classes of share capital outstanding as of
December 31, 2015: Ordinary Share Capital, P 20 par value, 20,000 shares outstanding; 6%
Preference Share Capital, P 100 par value, cumulative, 2,000 shares outstanding. No dividends were
paid on preference shares for 2013 and 2014. On December 31, 2009, a total cash dividend of P
200,000 was declared. How much dividends would be received by ordinary shareholders?
A
P0
C
P 176,000
B
P 188,000
D
P 164,000

52
Using the information in item 51, how much dividends will be received by preference
shareholders?
A
P 200,000
C
P 12,000
B
P 24,000
D
P 36,000

53
On April 8, 2015, Rafael Corporation declared and issued 25% ordinary share capital
dividend. Prior to this date, Rafael Corporation had 20,000 shares of P 2 par value ordinary share
that were both issued and outstanding. The carrying value of each share of stock is P 20 at the time
of declaration of the dividend. As a result of the stock dividend, how much will be debited to
Retained Earnings?
A
P 40,000
C
P 100,000
B
P 10,000
D
P 75,000

54
Red Corporation and Yellow Corporation have Preference Share Capital outstanding. Red
Corporation has issued 3,000 shares of 5% Preference Share Capital, par value P 100. Yellow
Corporation has issued 5,000 shares of 10% Preference Share Capital, par value P 120. What is the
dividend per share for the Preference Share Capital for the two corporations?
A
P 5 for Red, P12 for Yellow
C
P 5 for Red, P 10 for Yellow
B
P 100 for Red, P 120 for Yellow
D
P 5 for Red, P 120 for Yellow

55
Kuya Kosa Corporation has 400 shares of 6% preference share capital outstanding, par
value is P 50 per share and market value is P 80 per share. The amount of cash dividends for the
year on this share capital would be
A
P 1,200
C
P 2,400
B
P
12
D
P 1,920

56
Tindahaneta Corporation has 6,000 shares of P 8 non-cumulative preference shares
outstanding and 12,000 ordinary shares outstanding. At the end of the year, cash dividends of P
180,000 were declared. How much dividends were paid on both classes of share capital?
A
P 48,000 and P 132,000
C
P 90,000 and P 90,000
B
P 60,000 and P 120,000
D
none of the given

57
Using the information in item 56, what is the dividend per share on both classes of share
capital?
A
P 10 and P 10
C
P 15 and P 2.50
B
P 8 and P 11
D
none of the given
Reviewer for 2015 Qualifying Examamination

58
Philip Vargas Corporation was organized on January 1, 2015 with authorized capital of
100,000 shares of P 10 par value ordinary share capital. During 2015, Philip Vargas Corporation had
the following transactions affecting shareholders equity: January 7, issued 40,000 shares at 12 per
share; December 2, purchased 6,000 treasury shares at P 13 per share. Profit for the year amounted
to P 300,000. What is the amount of shareholders equity as of December 31, 2015?
A
P 702,000
C
P 640,000
B
P 720,000
D
P 708,000

59
A, B and C have capital balances of P80,000, P80,000, and P40,000, respectively. Profits are
allocated 40% to A, 40% to B and 20% to C. The partners have decided to dissolve and liquidate the
partnership. After paying all creditors the amount available to distribution is P20,000. A and B are
personally solvent. C is personally insolvent. Under the circumtances, A and B will each
A
receive P10,000
C
receive P8,000
B
receive P 9,000
D
receive P6,000

60
Kris and Mark are partners who share profits and losses 70:30. They have capital account
balances of P170,000 and P260,000, respectively at the date they admit Frank into the partneship.
Frank invest P120,000 in the partnership for a 25 percent equity interest and the bonus method is
applied. What is the peso amount of bonus recognized in Frank's capital account at the date of
admission?
A
P70,000
C
P23,333
B
P52,500
D
P17,500

Reference: !
Valix, Peralta, Valix, Financial Accounting Vol. 1, Conanan Educational Supply, 2015!
Valix, Peralta, Valix, Financial Accounting Vol. 2, Conanan Educational Supply, 2014 !
Robles, Empleo, Intermediate Accounting Vol. 1, Millennium Books, Inc., 2014!
Robles, Empleo, Intermediate Accounting Vol. 2, Millennium Books, Inc., 2014!
Dayag, Advance Accounting 1, ReSA Review School, 2015!
Valix, Valix, Practical Accounting 1 Vol 1, Conanan Educational Supply, 2014 !
Valix, Valix, Practical Accounting 1 Vol 2, Conanan Educational Supply, 2015!
Uberita, Practical Accounting 1, Made Easy Books, 2015 !
Valix, Valix, Theory of Accounts Vol 1, Conanan Educational Supply, 2013!
Valix, Valix, Theory of Accounts Vol 1, Conanan Educational Supply, 2013!
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Reviewer for 2015 Qualifying Examamination