1. Which of the following is not depreciated?

a. Building
b. Land
c. Equipment
d. Machinery

2. The journal entries for a bank reconciliation

a. Are taken from the balance per bank only
b. May include a debit to office expense for bank service charges
c. May include a credit to accounts receivable for an NSF check
d. May include a debit to accounts payable for an NSF check

3. When preparing a bank reconciliation, bank credits are

a. Added to the bank statement balance
b. Deducted from the bank statement balance
c. Added to the balance per book
d. Deducted from the balance per book

4. Bank overdrafts, if material, should

a. Be reported as a deduction from the current asset section.
b. Be reported as a deduction from cash.
c. Be netted against cash and a net cash amount reported.
d. Be reported as a current liability.

5. Which of the following is considered as cash?

a. Bank Overdraft
b. 90-day time deposits
c. Treasury Bills
d. Traveler’s Check

6. Bank statements provide information about all of the following except

a. Checks cleared during the period.
b. NSF checks.
c. Bank charges for the period.
d. Errors made by the company.

7. Under the Perpetual Inventory System, which of the following accounts would be used?
a. Purchases
b. Purchases Discounts
c. Trade Discounts
d. Cash

8. Prime Costs include

a. Raw Materials
b. Factory Supplies
c. Administrative Expenses
d. Factory Worker’s Overtime Pay

9. Which of the following methods violate the matching principle?

a. Allowance Method c. Direct Write-off Method
b. Aging of Receivables Method d. Sales Method

10. Depreciation of an asset begins when

a. It was acquired
b. It is available for use
c. It was assembled in its location
d. When the management decides to do so

11. The top governing body of a corporation is known as the:

a. incorporators
b. shareholders
c. board of directors
d. officers

12. Upon forming the corporation, if SEC authorized 500,000 capital, the minimum paid-in capital should
be
a. 31,250
b. 50,000
c. 25,250
d. 50,250

13. Non-cash assets bought by a partnership are recorded at

a. Book Value
b. Carrying Value
c. Acquisition Cost
d. Fair Market Value

14. Treasury Stock is considered to be

a. authorized and issued shares
b. issued and outstanding shares
c. authorized and unissued shares
d. unissued and outstanding shares

15. A reverse share split:

I. Reduces the par value
II. Increases the number of shares
a. I only
b. II only
c. both I and II
d.neither I nor II

16. The most equitable distribution of partnership profit based on capital contributions uses which of the
following capital concept?
a. Original Capital Investment
b. Ending Capital
c. Beginning Capital
d. Average Capital

17. Treasury shares may be reissued as dividends, in which case the _____ of the shares be charged to
retained earnings
a. historical value
b. cost
c. fair value
d. selling price

18. Right of the corporation to continue as a juridical entity for the period stated in the Articles of
Incorporation despite the death of any shareholder
a. Right of Succession c. Right of Existence
b. Pre-emptive right d. none of the above
19. All of the following are found in a corporation’s shareholders’ equity except
a. Dividends in Arrears c. Treasury Stock
b. Ordinary Share d. Additional Paid-In Capital Stock
20. The maximum number of shares that may be issued is referred as
a. Authorized Shares c. Issued Shares
b. Oustanding Shares d. Repurchased Shares
21. If the entity used an expense method in recording supplies. Adjusting the entry to record the unused
supplies would have a credit entry on
a. Supplies Expense c. Cash
b. Supplies d. Unused Supplies
22. Which of the following is a characteristic of ordinary shares?
a. Voting rights c. Guaranteed dividends
b. Maturing date d. Receives dividends before preferred stock
23. Jeff and Aries formed a partnership, each contributing assets to the business. Jeff invested a machine
while Aries invested a land. At what amount should the partnership record each of the following assets?
Machine Land
a. Book Value Market Value
b. Market Value Book Value
c. Book Value Book Value
d. Market Value Market Value
24. Failure to record accrued salaries at year-end will result in an
a. understatement of liabilities
b. understatement of profit
c. understatement of assets
d. overstatement of expenses
25. Manufacturing Overhead will include
I. Depreciation of Factory Equipment
II. Salaries of Factory Workers
III. Direct Materials
IV. Real Property Taxes
V. Amortization of Patents
a. I and IV c. I, IV and V
b. I, III and V d. I and IV
26. Which of the following items appear in both the income statement and the statement of financial position
of the entity?
a. profit c. drawings
b. accounts receivable d. cost of goods sold
27. When the seller advances the transportation costs and the terms of sale are FOB shipping point, the
seller records the payment of the transportation costs by debiting
a. accounts payable c. transportation out
c. accounts receivable d. sales

28. Which of the following dividends will result in a decrease to shareholders’ equity.
I. Small Share Dividend
II. Large Share Dividend
III. Cash Dividend
IV. Property Dividend
a. I only c. III and IV
b. I, III and IV d. All of the above

29. In a corporate organization structure, who is capable of hiring employees?

a. Shareholders c. Board of Directors
b. Officers d. Members
30. If a partner is insolvent, his personal properties shall be distributed first to
a. Separate creditors c. As an additional investment in the partnership
b. Partnership creditors d. Partnership and separate creditors in pro-rata
31. Assuming that net purchases was 800,000 during the year and the ending merchandise inventory was
50,000 more than the beginning inventory of 100,000. How much was the cost of good sold?
a. 750,000 c. 860,000
b. 900,000 d. 800,000

32-33. Danhag Company has determined its 2008 Net Income is P3,000,000.In the first –time audit of
company financial statements, you determined the following error:
- P400,000 revenue received in advanced during 2008 was credited to revenue account. P100,000
was earned in 2008, P200,000 will be earned in 2009 and the remainder will be earned in 2010.

What will be the adjusted net income during 2008?

a.2,600,000 c. 3,000,000
b.2,800,000 d.2,700,000

What should be the balance of the Unearned Revenue Account?

a. 400,000 c. 200,000
b. 300,000 d. 100,000

34. Jonas Company’s Gross Profit is 25% of Cost of Goods Sold. The income statement showed the
following:

Gross Sales ?
Less: Sales Returns 10,000
Net Sales ?
Less: COGS ?
Gross Profit 50,000
What is the amount of gross sales?
a. 250,000 c. 260,000
b. 310,000 d. 210,000

35. On June 1, 2005 Amulung Company sold an FOB Shipping Point merchandise with a list price of
P5,000,000 to ABC. Amulung allowed trade discounts of 20% and 10%. Credit terms were 5/10, n/30 and
the sale was made FOB shipping point. Amulung prepaid P200,000 of delivery cost for ABC as an
accommodation. On June 11, 2005, Amulung received from ABC full remittance of
a. P3,420,000 c. P3,600,000
b. P3,620,000 d. P3,800,000

36. Total debits and total credits in selected accounts of Piat Company, after closing entries were posted
on December 31, 2005 are given below.

Debits Credits
Materials P 600,000 P 200,000
Goods in process 500,000 300,000
Material purchases 2,500,000 2,500,000
Purchase discounts 100,000 100,000
Transportation in 200,000 200,000
Direct labor 3,000,000 3,000,000
Manufacturing overhead 1,500,000 1,500,000
Finished goods 700,000 400,000

Cost of goods sold was

a. P7,100,000 c. P6,900,000
b. P7,000,000 d. P7,400,000
37. Bocaue Company had the following account balances on December 31, 2005.
Petty cash fund P50,000
Cash in bank – current account 10,000,000
Cash in bank – payroll account 2,000,000
Cash on hand 500,000
Cash in bank – restricted account for plant additions, expected to
be disbursed in 2006 4,000,000

The petty cash fund includes unreplenished December 2005 petty cash expense vouchers of P20,000
and employee IOUs of P10,000. The cash on hand includes a P100,000 check payable to Bocaue
dated January 15, 2006. What should be reported as “cash” on December 31, 2005?
a. P12,420,000 c. P11,420,000
b. P12,520,000 d. P12,450,000

38. The bookkeeper of Calumpit Company recently prepared the following bank reconciliation on December
31, 2005:

Balance per bank statement 20,000,000

Add: Deposit in transit 1,500,000
Checkbook and other bank charge 50,000
Error made by Calumpit in recording check No.
1005 (issued in December) 150,000
Customer check marked DAIF 500,000 2,200,000
Total 22,200,000
Deduct: Outstanding checks 1,900,000
Note collected by bank (includes P200,000 interest) 2,300,000 4,200,000
Balance per book 18,000,000

Calumpit has P1,000,000 cash on hand on December 31, 2005. The amount to be reported as cash
on the balance sheet as of December 31, 2005 should be
a. P19,600,000 c. P20,600,000
b. P18,600,000 d. P19,750,000

39. Binmaley Company operates in an industry that has a high rate of bad debts. On December 31, 2005,
before any year-end adjustments, the accounts receivable balance was P20,000,000 and its allowance for
doubtful accounts balance was P1,500,000. The year-end balance reported for the allowance for doubtful
accounts is based on the following schedule:

Time Outstanding Accounts Receivable Percent Uncollectible

Under 30 days P10,000,000 5%
31 - 180 days 5,000,000 10%
181 - 360 days 3,000,000 30%
More than one year 2,000,000 100%

The accounts which have been outstanding for more than one year and 100% uncollectible would be
written off immediately. What should be the doubtful accounts expense for the year ended December
31, 2005?
a. P1,900,000 c. P3,900,000
b. P2,400,000 d. P2,000,000
40. On September 30, 2005, Asingan Company discounted at the bank a customer’s P5,000,000 6-month
10% note receivable dated June 30, 2005. The bank discounted the note at 12%. The proceeds from this
discounted note amounted to
a. P5,092,500 c. P5,042,000
b. P4,842,000 d. P4,942,000

41. The work-in-process inventory of Bakun Company were completely destroyed by fire on June 1, 2005.
You were able to establish physical inventory figures as follows:

January 1, 2005 June 1, 2005

Raw materials P 60,000 P120,000
Work-in-process 200,000 -
Finished goods 280,000 240,000

Sales from January 1 to May 31, were P546,750. Purchases of raw materials were P200,000 and
freight on purchases, P30,000. Direct labor during the period was P160,000. It was agreed with
insurance adjusters than an average gross profit rate of 35% based on cost be used and that direct
labor cost was 160% of factory overhead.

The work in process inventory destroyed as computed by the adjuster

a. P314,612 c. P185,000
b. P366,000 d. P265,000

42. ABC Company has cash of 50,000, receivables of 100,000, furniture totaling 200,000. It has payables
of 60,000 and has a note payable amounting to 50,000. How much is the Equity?
a. 350,000 c. 460,000
b. 240,000 d. 200,000

43. Eternal Company acquired an equipment on January 1, 2005. The asset has an estimate useful life of
5 years and a salvage value of 500,000. An employee has prepared a depreciation schedule for this
equipment using sum-of-years digit method as follows:

2005 3,000,000
2006 2,400,000
2007 1,800,000
2008 1,200,000
2009 600,000

What is the acquisition cost of the equipment?

a. P9,500,000 c. P10,000,000
b. P9,000,000 d. 10,500,000

44-45

On June 1, 2016, May and Nora formed a partnership. May is to invest assets at fair values. She is to
transfer her liabilities and is to contribute sufficient cash to bring her total capital to P210,000 which is 70%
of the total partnership interest. Details regarding the book values of May’s business assets and liabilities
are as follows:
Book Values Fair Values
Accounts receivable (net) 53,800 53,000
Inventory 98,400 107,000
Equipment 25,800 34,000
Notes Payable 56,000 56,000
Nora agrees to invest cash of 42,000 and merchandise valued at current market value.
What is the value of merchandise to be invested by Nora?
a. 48,000 c. 42,000
b. 84,000 d. 38,000

What is the amount of cash to be invested by May?

a. 72,000 c. 26,000
b. 62,000 d.65,000

46. Mel and Jay are partners with capitals of P200,000 and 120,000 respectively. The Partnership
agreement provided the following:
1. 10 percent interest on their capital investments.
2 Annual Salary of P36,000 to Mel.
3. Remainder in 60:40 ratio.
What is the profit to be earned by the partnership before charges for interest, salary and the balance, so
that Jay will receive P40,000 in the remainder of the profit after salary and interest?
a. P168,000 c. P136,000
b. P138,000 d. P166,000

47. Cy, Tj and Joshua have equities in a partnership of 700,000, 800,000 and 500,000, respectively. They
also share profits and losses in a ratio of 2:3:5. The partners have agreed to admit Darwin to the partnership
if he will invest 400,000 for a one-fourth interest, the amount of Cy’s capital balance after the admission of
Darwin will be
a. 800,000 c. 660,000
b. 740,000 d. 700,000

48. The following Balance Sheet for the partnership of C, I and G were taken from the books on October
1, 2008.
Assets Liabilities and Capital
Cash P100,000 Liabilities P200,000
Other Assets 400,000 C, Capital 120,000
I, Capital 95,000
_________ G, Capital 85,000
Total Assets 500,000 Total Liabilities and Capital 500,000

The partners agreed to distribute profits as follows:

1. Annual salaries to C and I of P5,000 each
2. Annual interest of 5% on beginning capital
3. Bonus of 15% to C based on income after salaries, interest and bonus
4. Remaining profit: 25% to C, 35% to I and 40% to G
The partnership began its operations on Oct. 1, 2008 and net income as of Dec. 31, 2008 is P69,500.
Which of the following is true?
a. The bonus to C is P5,804
b. Net Income after salaries, interest and bonus is P38,696
c. I’s total share in the net income is P21,688
d. G’s share on the profit after salaries, interest and bonus is P13,543

49. E, F, G are partners sharing P/L in the ratio of 5:3:2. During the year their investments and
withdrawals are as follows:
Investments withdrawals
E 40,000 25,000
F 35,000 12500
G 75,000 12500
On December 31, 2009, the partners decided to liquidate their business. After exhausting partnership
assets, liabilities of 25,000 remain unpaid. E is personally solvent.
What amount of cash is to be paid to G upon Liquidation?
a. 37500 b. 37000 c. 18500 d. 18000

50. Sy, Ty, Uy, and vet are partners sharing profits in the ratio of 3/21, 4/21, 6/21, 8/21. Their capital
balances on December 31,2009 are Sy 500, Ty 12,500, Uy 12,500 and Vet 4,500.
The partners decided to liquidate their firm and they accordingly covert the non cash assets into 11,600
cash. After paying liabilities of 1,500, they have 11,100 to divide.

How much is the gain (loss) on realization?

a. (11,250) B. 18,900 C. (18,400) D. (18,900)

51. Lathan Company was organized on January 1,2006 with the following capital structures:

•12% Cumulative preference share,P100 par ,with liquidation value of P120,50,000 shares authorized,
issued and outstanding 20,000 shares,P2,500,000.

•Ordinary Share Capital, par value P50, authorized 80,000 shares, issued and outstanding 20,000
shares, P1, 200,000.

The net income for the years December 31, 2006 and December 31, 2007 were P2,000,000 and
P3,000,000, respectively. No dividends were declared. What is the December 31, 2008 book value per
ordinary share?

a.256 b. 260 c.291 d.285

52. Francisco Company was organized on January 2, 2006 with 300,000 ordinary shares with a P6
par value authorized. During 2006, Francisco had the following stock transactions:

January 2 Issued 60,000 shares at P10 per share

March 8 Issued 20,000 shares at P11 per share.

May 9 Purchased 7,500 shares at P12 per share.

July 2 Issued 15,000 shares at P13 per share.

August 17 Sold 5,000 treasury shares at P14 per share.

Francisco uses the FIFO method for purchase-sale purposes.

If Francisco uses the cost method to record treasury stock transactions, how much would be the Share
Premium at December 31, 2006?
a. 445,000 c. 465,000
b. 455,000 d. 485,000

53-54. On July 1, 2018, Lee Company sold goods in exchange for P2,000,000, 8-month, noninterest-
bearing note receivable.
At the time of sales, the market rate of interest was 12%. The entity discounted the note at 10% on
September 1, 2018.

What was the cash received from discounting?

a. 1,940,000 c. 1,938,000
b. 1,900,000 d. 2,000,000
What was the loss on note receivable discounting?
a. 100,000 b. 62,000
c. 60,000 d. 0

55. PG, JR and RJ are partners with capital balances of 350,000, 250,000 and 350,000 and a profit and
loss ratio of 30%, 20% and 50% respectively The partners agree to dissolve the business and upon
liquidation, all of the partnership assets are sold and sufficient cash is realized to pay all the claims except
one for 50,000. AJ is personally insolvent, but the two partners are able to meet any indebtedness to the
firm. On the partnership claim against the partnership, how much should PG and JR absorb?

PG JR
a. 40,000 10,000
b. 30,000 20,000
c. 35,000 15,000
d. 25,000 25,000

56. Sam, a partner in the ST Partnership, is entitled to 40% of the profits and losses. During 2016, Sam
contributed land with a fair value of 60,000. Also during 2016, Sam had drawings of 80,000. The balance
of Sam's capital account was 120,000 at the beginning of 2016 and 150,000 at the end of the year.

What is the partnership's profit (loss) for 2016?

a. (75,000)
b. (50,000)
c. 150,000
d. 125,000

57. Unearned Revenues was P6,000 at the end of March and P7,500 at the end of April. Service
Revenues was P42,000 for the month of April. How much cash was received assuming all revenues were
earned in cash?

a. P55,500
b. P49,500
c. P43,500
d. P40,500

58. Bernard Company took a physical count on December 31,2018 and determined that P3,000,000 of
goods were on hand. The entity determined that P200,000 of goods purchased in transit FOB destination
were actually received on January 2,2019. Also the entity had a merchandise accepted on consignment
that is not yet included in the inventory account amounting to P400,000. What amount of inventory should
be reported at year-end?

a. P3,000,000
b. P3,200,000
c. P3,600,000
d. P3,400,000
59. Villon Corporation had 80,000 ordinary shares outstanding in Jan. 2016. The corporation distributed a
15% share dividend in March and 10% share dividend in June. After acquiring 10,000 shares of treasury
stock in July, the corporation split its share 4-for-1 in December. How many ordinary shares are
outstanding as of December 31, 2016?

a. 451,500
b. 364,800
c. 368,800
d. 370,000

60. XYZ Partnership decided to liquidate. The Partners X, Y and Z are sharing profits and losses equally.
The partnership is being liquidated and after all assets are converted to cash and all liabilities paid, there
remained P52,000 cash available for distribution. X and Y have capital balances of P40,000 and P30,000,
respectively. Z has a debit balance of P18,000 in his capital account. If Z is personally insolvent, how
much cash will be distributed to X?

a. 34,000
b. 31,000
c. 26,000
d. 40,000