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Fundamentals of Accounting , Part 2


1. The following adjusting entries are not reverse at the beginning of the new accounting period?
a. Accrued expenses
b. Accrued revenue
c. Prepaid expense recorded under the asset method
d. Unearned revenue recorded under the revenue method

2. The rent expense account on ecember !1 before adjustment is P2"#$$. At %ear end" it was ascertained that
P1"2&$ is unexpired. The amount of the re'uired adjustment on ecember !1 is(
a. P2"#$$
b. P1"2&$
c. P1")&$
d. P*"1&$

!. +hich of the following characteristics is a disadvantage?
a. ,oluntar% association
b. -ase of dissolution
c. Unlimited liabilit%
d. Participation in partnership income

*. The partnership agreement is contained in the articles of partnership" an express contract among the partners.
.uch an agreement ordinaril% does not include
a. The rights and duties of the partners
b. The allocation of income or loss among the partners
c. The provision for arbitration of disputes" dissolution" and li'uidation
d. The limitation on a partner/s liabilit% to creditors

&. 0n 1arch 1" 2$11" -spejo and A'uino formed a partnership. -spejo contributed cash. A'uino" previousl% a
sole proprietor" contributed propert% other than cash" including land subject to a mortgage" which was
assumed b% the partnership. A'uino/s capital account at 1arch 1" 2$11 should be recorded at
a. 2oo3 value of the propert% at 1arch 1" 2$11
b. 4air mar3et value of the propert% at 1arch 1" 2$11
c. 2oo3 value of the propert% less the mortgage pa%able at 1arch 1" 2$11
d. 4air mar3et value less the mortgage pa%able at 1arch 1" 2$11

). 5o%no% invested cash of P)$"$$$6 land of P2$$"$$$ with an appraised value of P*1$"$$$6 store furniture
costing P*$"$$$ less accumulated depreciation of P1$"$$$6 mortgage note pa%able P1&"$$$ plus accrued
interest for a %ear at 178. 9f the mortgage note is to be assumed b% the partnership" 5o%no%" capital should
be credited for
a. P*7&"$$$
b. P&*&"$$$
c. P*72"!$$
d. P&1&"$$$

2

:. A partner invested into a partnership a building with a P&$$"$$$ carr%ing value and P7$$"$$$ fair mar3et
value. The related mortgage pa%able of P2&$"$$$ was assumed b% the partnership. As a result of the
investment" the partner/s capital account will be credited for
a. P7$$"$$$
b. P&$$"$$$
c. P&&$"$$$
d. P2&$"$$$

7. 0n 1arch 1" 2$11" ;ore<co" 5arvasa and .oria formed a partnership b% combining their separate business
proprietorships. ;ore<co contributed cash of P12$"$$$. 5arvasa contributed propert% with a P:$"$$$ carr%ing
amount" a P7$"$$$ original cost and P1)$"$$$ fair value. There is a mortgage liabilit% of P)$"$$$ assumed b%
the partnership. .oria contributed e'uipment with a P)$"$$$ carr%ing amount" a P1&$"$$$ original cost and
P11$"$$$ fair value. The partnership agreement specifies that profits and losses are to be shared e'uall%.
+hich partner has the largest 1arch 1" 2$11" capital balance?
a. ;ore<co
b. 5arvasa
c. .oria
d. All capital account balances are e'ual

#. A and 2 are partners. 2oth contributed e'ual amount of assets but A will manage the business . The best
profit sharing ratio will be
a. -'uall%
b. .alar% to A and 2" remaining profit to be shared e'uall%
c. 2(1
d. .alar% to A" remaining profit to be shared e'uall%

1$. All of the following statements are true except
a. The industrial partner is not liable for losses
b. Profits or losses are divided e'uall% among the partners unless the partnership agreement specifies
otherwise
c. Profits and losses are divided according to partners/ agreement
d. ;osses shall be divided according to profit sharing ratio if there is no agreement as to distribution of
losses

11. Aris" Terr% and 4el% have the following profit and loss agreement.

Partners Aris and Terr% will receive salaries of P7$"$$$ each.
Partner 4el% will get a bonus of 1$8 of profit after salaries and bonus
=emaining profits are shared b% Aris" Terr% and 4el% in the ratio of !(*(!" respectivel%.
The partnership had a profit of P172"$$$. >ow much should be allocated to 4el%?
a. P&*")$$
b. P 7"$$$
c. P 7"1*$
!

d. P17"2$$

12. ,irgie was credited with a salar% of P:2"$$$" interest of P2$"$$$ on her capital contribution. .he was charged
with P)"$$$ as her share in the negative balance on a 1(2 ratio. The capital contributions are P1$$"$$$ for
,irgie and P2$$"$$$ for =ose with ,irgie as managing partner.
>ow much was the profit or loss share of =ose?
a. P#$"$$$
b. P12"$$$
c. P?12"$$$@
d. P!$"$$$
1!. To meet the objective of providing information about financial position" financial performance and cash flows
of an entit%" financial statements should provide information about all of the following" except
a. Assets" liabilities and e'uit%
b. 9ncome and expenses" including gains and losses
c. Aontributions b% and distribution to owners in their capacit% as owners
d. 5ature of the entit%/s business activities

1*. An anal%sis of 2urma Aompan%/s liabilities disclosed the following(

Accounts pa%able" after deducting debit balance in suppliers/
accounts amounting to P1$$"$$$ P*"$$$"$$$
Accrued expenses 1"&$$"$$$
.hortBterm notes pa%able 2"$$$"$$$
.toc3 dividends pa%able 1"$$$"$$$

>ow much should be presented as total current liabilities in the statement of financial
position?
a. P7"&$$"$$$
b. P7")$$"$$$
c. P:"&$$"$$$
d. P:")$$"$$$

1&. A complete set of financial statements includes the following components" except
a. .tatement of financial position" statement of comprehensive income and statement of cash flows
b. .tatement of changes in e'uit%
c. 5otes" comprising a summar% of significant accounting policies and other explanator% information
d. =eports and statements such as environmental reports and value added statements

1). +hich of the following is included in a complete set of financial statements?
a. A statement b% the board of directors of compliance with local legislation
b. A statement of changes in e'uit%
c. .ummari<ed statements of financial position for the last five %ears
d. ,alue added statement

1:. 9t is the total of income less expenses" excluding the components of other comprehensive income.
a. Aomprehensive income
b. Profit or loss
*

c. Accounting income
d. -conomic income

17. The following information is provided b% =omarie Aompan% for the current %ear

5et sales #$$"$$$
.ales returns and allowances 1$"$$$
Aost of sales &*$"$$$
istribution cost 1!&"$$$
Administrative cost 1$$"$$$
4inance cost 2$"$$$

The net income is
a. P1$&"$$$
b. P11&"$$$
c. P #&"$$$
d. P1$$"$$$

1#. At the beginning of 2$1$" the capital balances of =iver and =osario are P2*"$$$ and P2)"$$$" respectivel%.
=ivera and =osario share profits and losses in a !(: ratio. uring 2$1$" the partnership experienced a P*$"$$$
loss. =ivera withdrew P1$"$$$ from the partnership during the %ear and =osario withdrew P17"$$$. +hat will
be the balance in =ivera/s capital on ecember !1" 2$1$?
a. P!")$$
b. P2"$$$
c. P12"$$$
d. P2)"$$$

2$. Partner A'uino had a beginning capital balance of P!&"$$$ and made additional investment of P2:"$$$ during
the %ear. >e also made a drawing of P&"$$$ a month. The post closing capital balance of Cuinto is P:2"$$$.
+hat is the share in the partnership profit?
a. P:$"$$$
b. P1&"$$$
c. P)$"$$$
d. P:2"$$$

21. An entit% shall classif% an asset as current when ?choose the incorrect one@
a. The entit% expects to reali<e the asset or intends to sell or consume it within the entit%/s normal
operating c%cle
b. The entit% holds the asset for the purpose of trading
c. The entit% expects to reali<e the asset within twelve months after the reporting period
d. The asset is cash or a cash e'uivalent that is restricted to settle a liabilit% for more than twelve months
after the reporting period

22. -ast Aompan%/s trial balance reflected the following account balances on ecember !1" 2$1$.

Accounts receivable 2$$"$$$
Accumulated depreciation !$$"$$$
Aash and cash e'uivalents 1&$"$$$
9nventor% &$$"$$$
-'uipment 1"$$$"$$$
Prepaid expense 2$"$$$
&

;and &$$"$$$

9n the ecember !1" 2$1$ statement of financial position" what amount should be reported as total current
assets?
a. P7:$"$$$
b. P7&$"$$$
c. P#:$"$$$
d. P#&$"$$$

2!. 9n a statement of cash flows using indirect approach for operating activities" an increase in inventor% is
presented as
a. 0utflow of cash
b. 9nflow and outflow of cash
c. Addition to net income
d. eduction from net income

2*. .un Aompan% provided the following data for the preparation of the statement of cash flows for the current
%ear(

9ncrease in accounts receivable !$$"$$$
ecrease in income tax pa%able 1:$"$$$
epreciation 1"$$$"$$$
5et income 2&$"$$$
Dain on sale of e'uipment **$"$$$
;oss on sale of building 21$"$$$

Using the indirect method" what amount should be reported as cash flow from operating activities?
a. P:7$"$$$
b. P:$$"$$$
c. P77$"$$$
d. P&&$"$$$

2&. +hich of the following will not result in dissolution of a partnership?
a. Admission of a new partner
b. 2an3ruptc% of a partner
c. 5egative capital balance of a partner
d. 9ncapacit% of a partner

2). Darcia invested P2$$"$$$ for a 1E! interest in a partnership in which the other partners have capital totaling
P&2$"$$$ before admitting Darcia. After distribution of the bonus" what is Darcia/s capital?
a. P2$$"$$$
b. P2*$"$$$
c. P1:!"!*$
d. P1$)"))$

2:. +hen a partner withdraws from a partnership ta3ing assets that represent more than his capital balance"
a. 5o bonus results
b. The remaining partners receive a bonus
c. The withdrawing partner receives a bonus
)

d. The withdrawing partner owe the remaining partners the difference

27. 2" a partner in the A2A Partnership died. 0ne of the partners with the consent of the remaining partners"
purchased 2/s interest for P*$$"$$$. 2/s capital after the boo3s were closed was P!&$"$$$. This will (
a. 5ot affect the partnership assets and the partners/ e'uit%
b. ecrease the partners/ assets and the partners/ e'uit% b% P!&$"$$$
c. ecrease partners/ e'uit% onl% b% P!&$"$$$
d. ecrease partnership assets onl% b% P!&$"$$$

2#. =.T Partnership is selling electronic e'uipment and supplies. Profits and losses are shared &(!(2. The boo3s
are 3ept on a calendar basis

After the business has been in operation for several %ears" .onn% died on .eptember !$. The
wife of .onn% desired to sell .onn%/s interest to the partnership for P!:$"$$$. After the boo3s
were closed" the partners/ capital accounts had credit balances as follows(

=o% P&$$"$$$
.onn% !$$"$$$
Tro% 2$$"$$$

The capital balance of =o% after the cash settlement to .onn%/s wife is
a. P*&$"$$$
b. P*)&"$$$
c. P&&$"$$$
d. P&!&"$$$

!$. +hich of the following would not be underta3en when a partnership decides to incorporate?
a. Adjust the partnership/s assets to be transferred to the corporation
b. Aonvert the noncash assets into cash
c. Alose the partnership boo3s
d. Transfer the assets and liabilities to the corporation in exchange for shares of stoc3

!1. 0n ecember !1" 2$1$" A2A Partnership was dissolved. The fair mar3et values of its assets and liabilities are
as follows(
Aurrent assets P1")$$"$$$
-'uipment 2"1$$"$$$
;iabilities :$$"$$$
0n Fanuar% 2" 2$11" A2A Partnership was incorporated" with &"$$$ shares of P1$$ par value
ordinar% shares issued. >ow much should be credited to share premium?
a. P!"2$$"$$$
b. P2"&$$"$$$
c. P2"!$$"$$$
d. P2"$$$"$$$

:

!2. 9n li'uidation" the sale of the nonBcash assets is called
a. =eali<ation
b. 5et proceeds
c. Dain from sale
d. ;oss from sale

!!. -" D" ; and share profits in the ratio of 2(1(1(1. The partnership cannot meet its obligations to creditors and
dissolution is authori<ed on 1arch !1" 2$11. A balance sheet for the partnership on this date shows balances
as follows(

Aash P #$"$$$ ;iabilities P2)&"$$$
0ther assets *$$"$$$ " ;oan 2&"$$$
-" Aapital &$"$$$
D" Aapital &$"$$$
;" Aapital &$"$$$
" Aapital &$"$$$
Total Assets P490,000 Total Liabilities and Capital P490,000

The personal status of partners on this date is determined to be as follows(

Partners Personal Assets Personal ;iabilities
- P2&$"$$$ P1&$"$$$
D 1$$"$$$ 1&$"$$$
; 1&$"$$$ 12&"$$$
2$$"$$$ 2&$"$$$

0ther assets of the partnership are sold and reali<ed for P12$"$$$. Additional contribution b%
appropriate parties in meeting the claims of firm creditors were made.

The amount that will be paid to the personal creditors of would be(
a. P2&$"$$$
b. P21:"&$$
c. P2$$"$$$
d. P2!&"$$$

!*. Ging" Cueen and Prince are partners sharing profit and loss in the ratio of 1(1(2" respectivel%. Their capital
balances are P&$$"$$$ for Ging" P!$$"$$$ for Cueen and P2$$"$$$ for Prince. ;iabilities amounted to
P2$$"$$$. There is also a loan pa%able to Prince" P&$"$$$. The cash balance amounted to P!$$"$$$ and it
increased to P1"*$$"$$$ as a result of the sale of the nonBcash assets. >ow much is the available cash for
distribution to the partners
a. P1"*$$"$$$
b. P1"2$$"$$$
c. P1"1&$"$$$
d. P 2&$"$$$
7


!&. 9f the proceeds from the sale is less than the boo3 value of the nonBcash assets sold" the result will
a. ecrease the partnership assets but increase the partners/ e'uit%
b. 9ncrease the partnership assets but decrease the partners/ e'uit%
c. ecrease both the partnership assets and the partners/ e'uit%
d. 9ncrease both the partnership assets and the partners/ e'uit%

!). Annie" -m% and 1ar% are in the process of li'uidating their partnership and their account balances as of
1arch 1" 2$11 are as follows(
ebit Aredit
Aash 1&"$$$
5onBcash assets !&"$$$
-m%" ;oan :"$$$
Annie" capital &"$$$
-m%" capital 1:"&$$
1ar%" capital 2$"&$$

The profit and loss sharing ratio has been *(!(! between Annie" -m% and 1ar%" respectivel%. 9f
Annie has personal assets of P2&"$$$ and personal liabilities of P22"&$$ and that the partnership
reali<ed P12"&$$ from the sale of its nonBcash assets" 1ar% must receive
a. P2$"&$$
b. P12"&$$
c. P1!"$$$
d. 5ot given

!:. +hich of the following is not correct with respect to an installment li'uidation of a partnership?
a. All remaining li'uidation expenses are anticipated
b. All nonBcash assets are assumed to be worthless
c. istributions to partners are alwa%s made according to their profit sharing percentages
d. Partners with the greatest abilit% to absorb losses and expenses are the first to receive installment
distributions

!7. The partnership of 2ravo" A'uino and 9co share profits and losses in the ratio of &(!(2" respectivel%. The
partners voted to dissolve the partnership when its assets" liabilities and capital were as follows(

Assets ;iabilities and Aapital
Aash P !$"$$$ ;iabilities P &$"$$$
0ther assets !2$"$$$ 2ravo" Aapital 7$"$$$
A'uino" Aapital 11&"$$$
9co" Aapital 1$&"$$$
Total P!&$"$$$ Total P!&$"$$$

The partners agreed to li'uidate the partnership b% installment. The first sale of the non cash assets having a
boo3 value of P1&$"$$$ reali<ed P1$$"$$$. 0n the cash available" priorit% is the pa%ment of the liabilities and
the balance is to be distributed to the partners. >ow should the remaining cash be distributed?
2ravo A'uino 9co
a. P&$"$$$ !$"$$$ 2$"$$$
b. *$"$$$ 2*"$$$ 1)"$$$
#

c. $ *7"$$$ !2"$$$
d. $ !1"$$$ *#"$$$

!#. A corporation has the following attributes except
a. An artificial being with a personalit% separate and apart from its shareholders
b. 9t is created b% mere agreement of the incorporators
c. -njo%s the right of succession
d. >as the powers" attributes and properties expressl% authori<ed b% law or incident to its existence.

*$. +hich of the following statements is true?
a. The death of the shareholder dissolves the corporation
b. .hareholders have unlimited liabilit%
c. .hareholders are not general agents of the business
d. 0wnership shares cannot be easil% transferred

*1. The corporate powers shall cease and the corporation be deemed dissolved if a corporation does not formall%
organi<ed and commence the transactions of its business within
a. 0ne %ear from the date of its incorporation
b. Two %ears from the date of its incorporation
c. Three %ears from the date of its incorporation
d. 4ive %ears from the date of its incorporation

*2. The shareholders or members mentioned in the Articles of 9ncorporation originall% forming and composing the
corporation and who are signatories thereof are called
a. 9ncorporators
b. Aorporators
c. Promoters
d. .ubscribers

*!. The par value of ordinar% shares is e'ual to
a. A designated peso amount per share established in the articles of incorporation
b. The amount received b% the corporation when the share was originall% issued
c. The amount at which the share is currentl% trading in an organi<ed mar3et
d. The boo3 value of the ordinar% shares

**. Trina Aorporation was organi<ed on Fanuar% 1" 2$11 with authori<ed capital of P1"$$$"$$$ consisting of
1$$"$$$ shares of P1$ par ordinar% share. .ubse'uentl%" incorporators subscribed for 2&"$$$ shares at P12.
>ow much must be paid up upon subscription to compl% with the re'uirement of the .-A?
a. P!$$"$$$
b. P2&$"$$$
c. P )2"&$$
d. P :&"$$$

*&. Ten persons decided to organi<e a corporation. +hich of the following situation illustrates best the minimum
re'uirement of the law to capital formation?

Authori<ed capital subscribed capital paidBin capital
a. P2$$"$$$ P*$"$$$ P1$"$$$
b. P2$$"$$$ P&$"$$$ P1$"$$$
c. P2$$"$$$ P&$"$$$ P12"&$$
d. P2$$"$$$ P)$"$$$ P12"$$$
1$


*). The most powerful person in a corporation is the
a. President
b. ,ice president
c. Ahairman of the board
d. 9ncorporator

*:. These represent the record of all business transactions which normall% include the journal and the ledger
a. .ubscription boo3
b. 2oo3s of accounts
c. .toc3 certificate boo3
d. .toc3 and transfer boo3

*7. The portion of the paid in capital representing amounts paid b% shareholders in excess of par is
a. .hare premium
b. 0rdinar% shares
c. Preference shares
d. ;egal capital

*#. The share gives its owners certain advantage over ordinar% shareholders
a. Aonvertible share
b. Aallable share
c. 0rdinar% share
d. Preference share

&$. Asle% Aompan% was organi<ed on Fanuar% 1" 2$11 with authori<ed capital of 1$$"$$$ shares of P2$$ par value.
uring 2$11 Asle% had the following transactions affecting shareholders/ e'uit%(

Fanuar% 12 issued 2&"$$$ shares at P22$ a share
1arch 2$ issued 1"$$$ shares for legal services when the fair value was P2*$ a share
August 2& issued &"$$$ shares for a tract of land when the fair value was P2)$ a share

+hat amount should Asle% report for share premium at ecember !1" 2$11?
a. P&*$"$$$
b. P&$$"$$$
c. P7*$"$$$
d. P7$$"$$$

&1. 0n 1arch 1" 2$11" 4lor Aorporation had the following shares issued and outstanding(
0rdinar% shares" noBpar" P1$ stated value" 2$"$$$ shares originall% issued for P!$ per share
Preference shares" P1$ par value" )"$$$ shares originall% issued for P&$ per share.

4lor/s 1arch 1" 2$11 statement of shareholders/ e'uit% should report

0rdinar% shares Preference shares .hare premium
a. P)$$"$$$ P )$"$$$ P2*$"$$$
b. P)$$"$$$ P!$$"$$$ P$
c. P2$$"$$$ P!$$"$$$ P*$$"$$$
d. P2$$"$$$ P )$"$$$ P)*$"$$$

&2. 9f shares are issued for services rendered" the shares shall be recorded at
11

a. 4air value of the shares issued
b. 4air value of services rendered
c. Par value of shares issued
d. 2oo3 value of shares issued

&!. +hat is the entr% to record issuance of share after all cash have been received from a share subscription
following the journal entr% method?
a. .ubscribed ordinar% shares
0rdinar% shares

b. .ubscribed ordinar% shares
0rdinar% shares
.hare premium

c. .ubscribed ordinar% shares
Unissued ordinar% shares

d. .ubscriptions receivable
.ubscribed ordinar% shares
.hare premium

&*. +inwin Aorporation was authori<ed to issue P*$$"$$$ ordinar% shares divided into *"$$$ shares with a par
value of P1$$ per share. 0n Ful% 1!" 2$11" the compan% received subscriptions for 1"$$$ at par from various
individuals. As at .eptember 2&" 2$11" )$$ $f the subscribed shares have been full% paid and the stoc3
certificates issued correspondingl%. The entr% to record the issuance of stoc3 certificate for the )$$ shares is

a. .ubscription receivable )$"$$$
.ubscribed ordinar% shares )$"$$$

b. Aash )$"$$$
.ubscription receivable )$"$$$

c. .ubscribed ordinar% shares )$"$$$
0rdinar% shares )$"$$$

d. Aash )$"$$$
0rdinar% shares )$"$$$

&&. +hich statement is incorrect concerning treasur% shares?
a. Treasur% shares shall be recorded at cost irrespective of whether ac'uired below or above par value
b. The total cost of treasur% shares should be deducted from e'uit%
c. Treasur% share is a current asset
d. Dains or losses on sales of treasur% shares shall not be credited or charged to income

&). The following statements relate to retirement of treasur% shares. +hich statement is incorrect?
a. 9f an enterprise/s share capital is retired the share capital account is reduced b% its par value and the
number of shares issued is reduced b% the shares retired
b. The treasur% shares account is credited at cost
c. 9f the retirement results in a gain ?par value exceeds the cost@" such gain shall be credited to retained
earnings
12

d. 9f the retirement results in a loss ?cost exceeds par value@ such loss shall be debited to share premium
from original issuance" share premium from treasur% shares and to retained earnings" accordingl%.

&:. 9n 2$1$" =onald Aorporation issued &"$$$ shares of P1$ par value ordinar% shares for P1$$ per share. 9n 2$11"
=onald ac'uired 2"$$$ of its shares at P1&$ per share and immediatel% canceled these 2"$$$ shares. 9n
connection with the retirement of these 2"$$$ shares" =onald should debit
.hare premium =etained earnings
a. 2$"$$$ 27$"$$$
b. 1$$"$$$ 17$"$$$
c. 17$"$$$ 1$$"$$$
d. 27$"$$$ $
&7. +hich of the following statements about donated capital is not true?
a. 9f the donation is in the form of shares of the corporation" the account share premium or donated
capital is credited at the time the shares are issued
b. onated capital is shown as part of share premium
c. The receipt of the donated shares is recorded b% means of a memorandum entr%
d. The donated asset increases the total assets and total shareholders/ e'uit% b% the boo3 value of the
asset received

&#. The shareholders decide to donate to the entit% an aggregate of 1$"$$$ ordinar% shares of their stoc3holdings
with par of P1$$. The entr% to record the receipt of the donated shares b% the entit% is
a. Aash 1"$$$"$$$
onated capital 1"$$$"$$$

b. onated capital 1"$$$"$$$
0rdinar% shares 1"$$$"$$$

c. 0rdinar% shares 1"$$$"$$$
onated capital 1"$$$"$$$

d. 1emo entr%( H=eceived from shareholders as donation 1$"$$$ ordinar% shares with P1$$ par value.I

)$. 0n ecember !1" 2$1$" -than Aorporation received a donation of 2"$$$ shares of its P&$ par value ordinar%
shares from a shareholder. 0n that date" the share/s mar3et value was P!&$ per share. The stoc3 was
originall% issued for P2&$ per share. 2% what amount would this donation cause total shareholders/ e'uit% to
decrease?
a. P:$$"$$$
b. P&$$"$$$
c. P2$$"$$$
d. P$

)1. +hich is incorrect concerning retained earnings?
a. Appropriated retained earnings shall be clearl% distinguished from unappropriated retained earnings
b. ividend declaration reduce retained earnings
c. A deficit in retained is presented as an asset
d. The retained earnings account is credited with the corporation/s profit or debited with the loss

)2. A dividend which is a return to shareholders of a portion of their original investment is
a. Aash dividend
b. ;i'uidating dividend
c. Propert% dividend
1!

d. .hare dividend

)!. +hich is correct concerning share splits?

a. The par or stated value per share is decreased
b. The number of authori<ed" issued and outstanding shares is increased
c. There is no change in the balances of the shareholders/ e'uit% accounts
d. All of the above

)*. The outstanding share capital of ;ion Aompan% at ecember 1&" 2$1$" consisted of the following(
J !$"$$$ shares of 1$8 cumulative preference share" par value P1$$ per share" full%
participating as to dividends. 5o dividends were in arrears in prior %ears.
J 2$$"$$$ shares of ordinar% share par value P1$ per share.

0n ecember !1" 2$1$" ;ion declared dividends of P1"$$$"$$$. +hat was the amount of
dividends pa%able to ordinar% shareholders?
a. P*$$"$$$
b. P)$$"$$$
c. P:$$"$$$
d. P2$$"$$$


)&. At ecember !1" 2$1$ and 2$11" Aarre% Aorporation had outstanding *$"$$$ shares of P1$$ par value )8
cumulative preference share and 2$$"$$$ shares of P1$ par value ordinar% share. At ecember !1" 2$1$"
dividends on arrears on the preference share were P12$"$$$. Aash dividends declared in 2$11 totaled
P**$"$$$. 0f the P**$"$$$" what amounts were pa%able on each class of share capital?

Preference share 0rdinar% share
a. **$"$$$ $
b. !)$"$$$ 7$"$$$
c. !2$"$$$ 12$"$$$
d. 2*$"$$$ 2$$"$$$$

)). +hich statement is correct concerning appropriations of retained earnings?
a. Appropriations reduce total retained earnings
b. The onl% proper wa% to eliminate an appropriation of retained earnings after it has served its purpose is
to revert to the unappropriated retained earnings
c. An appropriation of retained earnings means that assets are segregated for a specific purpose
d. +hen treasur% share is purchased" retained earnings must be appropriated e'ual to the par or stated
value of the treasur% share.

):. +hich of the following would result in an increase in the =etained -arnings account?
a. Aash dividend declared
b. .hare dividend declared
c. ;oss for the period
d. Positive prior period adjustments

)7. The balance of retained earnings of Dusting Aompan% at the beginning of the %ear was P)&$"$$$. uring the
%ear" Dusting earned revenues of P*"&$$"$$$ and incurred expenses of P!"7$$"$$$" dividends $f P&$$"$$$
1*

were declared and paid" and the balance of the cash account increased b% P22$"$$$. The compan%/s profit
and the %earB end balance in the retained earnings account" respectivel%" are
Profit =etained -arnings
a. P2$$"$$$ P1"$:$"$$$
b. P:$$"$$$ P1"$:$"$$$
c. P2$$"$$$ P 7&$"$$$
d. P:$$"$$$ P 7&$"$$$

)#. Gimex Aorporation was organi<ed on Fanuar% 1" 2$$7 at which date it issued 1$$"$$$ shares at P1$ par
ordinar% shares at P1& per share. uring the period Fanuar% 1 to ecember !1" 2$1$" Gimex reported profit of
P*&$"$$$ and paid cash dividends of P2!$"$$$. 0n Fanuar% 1$" 2$1$" Gimex purchased )"$$$ shares of its
ordinar% shares at P12 per share. 0n ecember !1" 2$1$" Gimex sold *"$$$ treasur% shares at P7 per share
and retired the remaining treasur% shares. Gimex uses the cost method of accounting for treasur% shares.
+hat is the total shareholders/ e'uit% at ecember !1" 2$1$?
a. P1":2$"$$$
b. P1":$*"$$$
c. P1")7$"$$$
d. P1")77"$$$

:$. 2eaut% Aompan% has the following information in its e'uit% accounts(
Number of shares Amount
Preference share capital" P&$$ par value 2"2$$ 1"1$$"$$$
Treasur% preference shares" at cost 1$$ 11$"$$$
0rdinar% share capital without par value ?at issue price@ !"$$$ )$$"$$$
=etained earnings 2"&$$"$$$

ue to the substantial amount of retained earnings" the compan%/s 2oard of irectors resolved to pa% a 1$$8
stoc3 dividend on all shares outstanding" capitali<ing amounts of retained earnings e'ual to the par value and
the issue price of the preference and ordinar% shares outstanding" respectivel%" and thereafter to pa% a cash
dividend of 1$8 on preference share and a cash dividend of P1$ per ordinar% share. +hat is the total
shareholders/ e'uit% of 2eaut% Aompan% after effecting the above transactions?
a. P!"72$"$$$
b. P!"71$"$$$
c. P!"#&&"$$$
d. P*"$#$"$$$

:1. +hich of the following statements is incorrect?
a. The boo3 value per share of preference shares is the sum of its li'uidation value plus an% current and
dividends in arrears divided b% the number of preference shares outstanding
b. Aumulative preference shares entitle the holders to participate with the holders of ordinar% shares
proBrata in the remainder after the ordinar% shareholders have receive their initial share
c. 0rdinar% shareholders/ e'uit% is obtained b% deducting from total shareholders/ e'uit% the preference
shareholders/ e'uit%
d. +hen onl% a single class of share is outstanding" the boo3 value per share is computed b% dividing the
total shareholders/ e'uit% b% the number of shares outstanding

1&

:2. 2a3er Aompan% had &"$$$ shares of P&$$ par value ordinar% share outstanding and &$$ shares of P1"$$$ par
preference share outstanding. The current mar3et price of the ordinar% stoc3 is P1"2$$ per share and total
shareholders/ e'uit% amounts to P!")$$"$$$. The preference shareholders have a li'uidation preference of
P1"*$$ per share and no dividends in arrears. The boo3 value per share of ordinar% share is
a. P&1$
b. P&2$
c. P&7$
d. P717

:!. +hich of the following is not a merchandising business?
a. +herelse 2outi'ue
b. 1ercur% rugstore
c. 5able Tailoring .hop
d. Duan<on -lectronics .hop

:*. +hich of the following statements is not correct?
a. A manufacturing cost usuall% has three separate inventories namel% raw materials" wor3 in process
and finished goods
b. Prime cost consist of direct materials and direct labor
c. Aonversion cost consist of direct labor and manufacturing overhead
d. Aonversion cost plus the prime cost e'uals the total manufacturing cost

:&. This inventor% is what the manufacturers sell to its merchandisers.
a. 4inished goods inventor%
b. +or3 in process inventor%
c. =aw materials inventor%
d. 4actor% supplies inventor%

:). The purchase K raw materials account is debited when
a. irect materials are ordered
b. irect materials are bought
c. irect materials are placed into production
d. irect materials are returned to vendor

::. The following data were available fro 1i3e Aompan%/s record on ecember !1" 2$1$(

=aw materials inventor%" Fanuar% 1 P1$"$$$
Purchases 7&"$$$
Purchases returns and allowances &"$$$
4reight out 2"$$$
=aw materials" ecember !1 1&"$$$

2ased on the above information" which of the following is correct?
a. The raw materials used is P:!"$$$
b. The raw materials available for sale is P#$"$$$
c. The raw materials available for use is P#$"$$$
d. The raw materials used is P::"$$$

:7. +hich of the following statements is not correct?
a. Aost of goods manufactured is the same as total manufacturing cost
b. Aost of goods manufactured plus wor3 in process "end e'uals total cost of goods placed in process
1)

c. Total manufacturing cost plus the decrease in wor3 in process e'uals the cost of goods manufactured
d. Aost of goods manufactured plus the finished goods inventor%" beginning e'uals goods available for
sale

:#. .heraton Aompan% reported the following information for the current %ear(

-nding goods in process 1"$$$"$$$
epreciation on factor% building !2$"$$$
.ales salaries 2:$"$$$
2eginning raw materials *$$"$$$
irect labor 1"#7$"$$$
4actor% supervisor/s salar% &)$"$$$
epreciation on head'uarters building 21$"$$$
2eginning goods in process :)$"$$$
-nding raw materials !*$"$$$
9ndirect labor !)$"$$$
Advertising &$$"$$$
Purchases of raw materials 2"!$$"$$$

+hat is the cost of goods manufactured for the current %ear?
a. P&"!*$"$$$
b. P&"&7$"$$$
c. P&"&&$"$$$
d. P&"72$"$$$

7$. The following data were available from 1ar3 Aompan%/s record on ecember !1" 2$1$(

4inished goods inventor%" Fanuar% 1 1"$$$"$$$
4inished goods inventor%" ecember !1 1"2$$"$$$
Aost of goods manufactured &"$$$"$$$
;oss on sale of plant e'uipment 1$$"$$$

+hat is the cost of goods sold for the current %ear?
a. P*"7$$"$$$
b. P&"2$$"$$$
c. P*"#$$"$$$
d. P&"!$$"$$$

71. The following information was ta3en from Ga% Aompan%/s accounting records for the current %ear(

9ncrease in goods in process inventor% &$$"$$$
9ncrease in raw materials inventor% 1&$"$$$
ecrease in finished goods inventor% !&$"$$$
=aw materials purchased *"!$$"$$$
irect labor pa%roll 2"$$$"$$$
4actor% overhead !"$$$"$$$
4reight out *&$"$$$

+hat is the cost of goods sold for the current %ear?
a. P#"!$$"$$$
b. P#"1&$"$$$
1:

c. P7")&$"$$$
d. P#"$$$"$$$

72. +hich of the following statements concerning wor3sheet for a manufacturing compan% is not correct?
a. The wor3sheet for a manufacturing compan% includes a pair of columns for cost of goods
manufactured
b. 2eginning raw materials inventor% and wor3 in process are debited in the manufacturing column while
the related ending inventories are credited
c. The difference between the total debits and total credits of the cost of goods manufactured columns
is extended to the credit column of the statement of recogni<ed income and expense
d. 2eginning finished goods inventor% is extended to the debit side of the statement of recogni<ed
income and expense columns

7!. The 1oondance mar3eting team is wor3ing so hard after learning that the sales last %ear of 1atasha " a
competitor" was higher than 1oondance Aompan%/s sales. +hat t%pe of comparative anal%sis is this?
a. 9ntracompan% basis
b. 9ndustr% averages
c. 9ntercompan% basis
d. 5one of the above

7*. This tool of financial statement anal%sis shows the increase or decrease in the financial statement data this
%ear over last %ear" expressed as either an amount or a percentage.
a. >ori<ontal anal%sis
b. ,ertical anal%sis
c. =atio anal%sis
d. 5one of the above

7&. Aompares one indicator to another and gives significant insight into the performance and relative importance
of two indicators
a. ,ertical anal%sis
b. >ori<ontal anal%sis
c. =atio anal%sis
d. 5one of the above

7). +hich of the following statements is true?
a. A net profit of P2$$"$$$ is alwa%s better than a net profit of P1&$"$$$
b. A compan% with a current assets of P1$$"$$$ is alwa%s more solvent than a compan% with a current
assets of onl% P&$"$$$
c. A high ratio of owners/ e'uit% to total liabilities is favorable to creditors
d. All of the above

7:. This measures the average time period between bu%ing the inventor% and receiving cash proceeds from its
sales.
a. 0perating c%cle
b. Average age of receivables or collection period
c. Average age of inventor%
d. 9nventor% turnover

77. >ow man% da%s must there be in the operating if the inventor% turns over 1$ times in a %ear and the
receivable turns over # times? Use !)$ da%s in one %ear.
a. *$
17

b. !)
c. 1)
d. :)

7#. A compan% has sales of P*&$"$$$ ?:$8 are credit sales@. The gross profit ratio is 2&8. The accounts receivable
turnover is 12 times while the inventor% turnover is * times. >ow much is the average accounts receivable?
a. P2)"2&$
b. P!:"&$$
c. P7*"!:&
d. 5one of the above


#$. .elected information from the accounting records of Arian Aompan% is as follows(

Accounts receivable" ecember !1" 2$$# #$$"$$$
Accounts receivable" ecember !1" 2$1$ 1"$$$"$$$
9nventories at ecember !1" 2$$# 1"1$$"$$$
9nventories at ecember !1" 2$1$ 1"2$$"$$$
Accounts receivable turnover & times
9nventor% turnover * times

+hat was Ariane/s gross margin or gross profit for 2$1$?
a. P&":&$"$$$
b. P!"7$$"$$$
c. P1"#&$"$$$
d. P1&$"$$$

#1. .hows the relationship between profit and ordinar% shareholders/ investment in the compan%
a. 2asic earnings per ordinar% share
b. =eturn on total assets
c. =eturn on ordinar% e'uit%
d. 5one of the above

#2. +hich ratio is most helpful in appraising profitabilit%?
a. AcidBtest ratio
b. ebt ratio
c. Times interest earned
d. =eturn on assets

#!. Pare3o% Aompan% has earnings per share of P&.2$ and pa%s dividend of P!.12 and has a mar3et price of P*1.)$
per share. The priceBearnings ratio is
a. 7
b. 1!.!!
c. 21.!!
d. &.!!

#*. 1a%den Aompan% had )$$"$$$ ordinar% shares issued and outstanding at ecember !1" 2$$#. uring 2$1$"
no additional ordinar% shares were issued. 0n Fanuar% 1" 2$1$" 1a%den issued *$$"$$$ preference shares.
uring 2$1$" 1a%den declared and paid P2$$"$$$ cash dividend on the ordinar% share and P11$"$$$ on the
preference share. 5et income for 2$1$ was P:&$"$$$. +hat should be the basic earnings per share?
a. $.:!
1#

b. $.#2
c. 1.$:
d. 1.2&

#&. The following data are from the financial statements of Amihan" 9nc.

ecember !1" 2$$# ecember !1" 2$1$
Total assets 1*$"$$$ 17$"$$$
Total e'uit% 112"$$$ 1**"$$$
Profit 17"$$$ 2$"$$$
9nterest expense *"2&$ &":&$

The 2$1$ return on total assets ratio is
a. 1!.#18
b. 1).$#8
c. 11.2&8
d. 12.&8


#). The ratio of earnings before interest and taxes to total interest expense is a measure of
a. ;i'uidit%
b. .olvenc%
c. Activit%
d. Profitabilit%

#:. .olvenc% is of least interest to
a. .hortBterm creditors
b. 2ondholders
c. .hareholders
d. 2an3 holding the compan%/s 1$B%ear note

#7. The following data pertain to Aredence Aorporation/s for the %ear ended ecember !1" 2$1$(

0perating income P7$$"$$$
9nterest expense 1$$"$$$
9ncome tax expense 21$"$$$

+hat was the times interest earned ratio?
a. *.# times
b. :
c. 7
d. 11

##. The following data are from the financial statements of +0+" 9nc.(

Profit P2&)"$$$
9ncome tax rate !&8
9nterest expense )*"$$$
Total liabilities 7*$"$$$
Total e'uit% &)$"$$$

2$

The e'uit% ratio of +0+ is

a. *$8
b. )$8
c. )).):8
d. 17.2#8

1$$. As of the end of 2$1$" 9ce Aompan% had total assets of P!:&"$$$ and e'uit% of P2$)"2&$. 4or 2$11" its
budget for capital investment projects is P)2"&$$. To finance a portion of the capital budget" the compan%
ma% borrow from a ban3 which set a condition that the loan would be approved" provided that the 2$11/s
debt ratio should be the same as the debt ratio in 2$1$. >ow much debt should be incurred to satisf% the
ban3/s condition?
a. P27"12&
b. P!*"!:&
c. P&1"1!7
d. P)2"&$$



































21





Anser !e" # Fundamentals of Accounting , Part 2
1. A &1.
2. 2 &2. 2
!. A &!. A
*. &*. A
&. &&. A
). A &). A
:. A &:. A
7. A &7.
#. &#.
1$. 2 )$.
11. 2 )1. A
12. 2 )2. 2
1!. )!.
1*. )*. A
1&. )&. 2
1). 2 )). 2
1:. 2 ):.
17. A )7.
1#. 2 )#. A
2$. A :$. A
21. :1. 2
22. A :2. A
2!. :!. A
2*. :*.
2&. A :&. A
2). 2 :). 2
2:. A ::. A
27. A :7. A
2#. A :#. A
!$. 2 7$. A
!1. 2 71.
!2. A 72. A
!!. 2 7!. A
!*. 2 7*. A
!&. A 7&. A
!). A 7). A
!:. A 7:. A
!7. 77.
!#. 2 7#. A
*$. A #$.
*1. 2 #1. A
*2. A #2.
*!. A #!. A
**. #*. A
*&. A #&. 2
*). A #). 2
22

*:. 2 #:. A
*7. A #7. A
*#. ##. A
&$. A 1$$.A

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