FINAL ROUND QUESTIONS

EASY ROUND:

1. The sales price for a product provides a gross profit of 25% of sales price. What is the gross
profit as a percentage of cost?

a. Not enough information is provided to determine

b. 25%

c. 33%

d. 20%

2. All of the following activities are reported on the statement of cash flows except

a. marketing activities

b. investing activities

c. operating activities

d. financing activities

3. The debit and credit analysis of a transaction normally takes place

a. Before an entry is recorded in a journal

b. When the entry is posted to the ledger

c. When the trial balance is prepared

d. At some other point in the accounting cycle

4. Accounts receivable arising from sales to customers amounted to P40,000 and P35,000 at the
beginning and end of the year, respectively. Income reported on the income statement for the
year was P110,000. Exclusive of the effect of other adjustments, the cash flows from operating
activities to be reported on the statement of cash flows is

5. Which of the following accounts is not reported in inventory?

a. Raw materials

b. Equipment

c. Finished goods

d. Supplies

6. After the accounts have been closed

a. All the accounts have zero balances.

b. The asset, liability and equity accounts have zero balances

c. The revenue , expense, income summary and retained earnings have zero balances

d. The revenue, expense and income summary accounts have zero balances

7. Which of the following would be an addition to net income when using the indirect method
to derive net cash flows from operating activities?

a. Payment of cash dividends

b. Decrease in accounts payable

c. Increase in merchandise inventory

d. Loss on sale of machinery and equipment

8. Which of the following should be included in inventory?

a. Goods out on consignment

b. Goods purchased FOB destination, still en route

c. Goods held on consignment

d. Goods held for pick-up by the buyer

9. Which of the following best defines an accrual?

a. Adjusting entries where cash flow precedes revenue or expense recognition

b. Adjusting entries where revenue or expense recognition precedes cash flow

c. Adjusting entries where cash flow and revenue or expense recognition are simultaneous

d. Adjusting entries where revenue and expense are recognized in the absence of cash flow

10. Under both the periodic and perpetual inventory system, which account is constantly updated
during the year?

a. Cost of goods sold

b. Cost of goods available for sale

c. Sales

d. Inventory
 AVERAGE ROUND

1. On June 30, 2013, Jane Inc. had outstanding 10% P250,000 face amount 15 year bonds maturing
on June 30, 2023. Interest is paid on June 30 and December 31, and bond discount and bond
issue costs are amortized on these dates. The unamortized balances on June 30, 2013 of bond
discount and bond issue costs were P13,750 and P5,000 respectively. Jane Inc. reacquired all of
these bonds at 96 on June 30, 2013 and retired them. Ignoring income taxes, compute for the
gain or loss on bond retirement.

2. Net realizable value of inventories is defined as the net amount that an enterprise expects to realize
from the sale of the inventories:

a. in the ordinary course of operations less estimated costs of completion and costs necessary to
make the sale.

b. plus the estimated costs of completion plus the estimated costs necessary to make the sale.

c. in a forced sale.

d. plus the estimated costs of completion.

3. Under the allowance method, the entries at the time of collection of an account previously written off
would

a. Increase net income

b. Have no effect on net income

c. Decrease the allowance for doubtful accounts

d. Have no effect on the allowance for doubtful accounts

4. Under PAS 39, loans and receivables are initially measured at

a. fair value

b. Fair value plus transaction costs that are directly attributable to the acquisition

c. Maturity value

d. Maturity value plus transaction costs that are directly attributable to the acquisition
5. Lea Inc. uses the conventional retail method to determine its ending inventory at cost. Assume
the beginning inventory at cost (retail) were P65,500 (P99,000), purchases during the current
year at cost (retail) were P568,000 (P865,600), freight-in on these purchases totaled P26,500,
sales during the current year totaled P811,000, and net markups were P69,000. What is the
ending inventory value at cost?

6. Which of the following is not treated as change in accounting estimate?

a. Doubtful accounts

b. Initial adoption to carry assets at revalued amount

c. Inventory obsolescence

d. Warranty cost

7. Accounts receivable usually appear in the balance sheet:

a. As current assets, immediately after cash and cash equivalents

b. As current assets, combined with cash and cash equivalents

c. As either current asset or noncurrent assets, depending on whether the allowance method or
the direct write-off method is used to account for uncollectible accounts

d. Only if the balance sheet method of estimating uncollectible accounts is used

8. For 2013, cost of goods available for sale for JP Corporation was P900,000. The gross profit
rate was 20%. Sales for the year were P800,000. What was the amount of the ending inventory?

9. Under the direct write-off method, uncollectible accounts expense is recognized

a. As a percentage of net sales during the period

b. As a percentage of net credit sales during the period

c. As indicated by aging the accounts receivable at the end of the period

d. As specific accounts receivable are determined to be worthless

10. The basic accounting issue for a lessor is

a. Revenue recognition during the lease term

b. Computing depreciation over the lease term

c. Expense recognition during the lease term

d. Determination of the cost of the leased asset

DIFFICULT ROUND
1. Where there is no partnership agreement then profits
and losses:
a. Must be shared equally
b. Must be shared in same proportion as capitals
c. Must be shared equally after adjusting for
interest on capital

d. None of these

2. You are to buy an existing business which has assets valued at buildings
50,000, Motor vehicles 15,000, Fixtures 5,000 and Stock 40,000. You are to
pay 140,000 for the business. This means that:

a. You have made an arithmetical mistake

b. You are Paying 40,000 for Goodwill
c. Buildings are costing you 30,000 more than their value
d. You are paying 30,000 for goodwill

3. A company wishes to pay out all available profits as dividends. Net profit is
26,600. There are 20,000 8% Preference shares of 1 each, and 50,000 Ordinary
shares of 1 each. 5,000 is to be transferred to General Reserve. What Ordinary
dividends are to be paid, in percentage terms?

a. 40 per cent
b. 60 per cent
c. 10 per cent
d. 20 per cent
4. At reporting date Guilder Limited estimated an impairment loss of P50,000 against its
single cash-generating unit. The company had the following assets: headquarters building
P100,000; plant P60,000; equipment P40,000. The net carrying amount of the plant after
allocation of the impairment loss is:

5. An entity should include one of the following items in its merchandise inventory.

a. Good purchased FOB shipping point still en route

b. Goods purchased FOB destination still en route

c. Goods sold FOB shipping point still en route

d. Goods held for pick up by the buyer

6. The adjusting entry for income earned but not yet collected will

a. Increase liability

b. Increase asset

c. Decrease asset

d. Decrease liability

7. Which of the following is considered government assistance?

a. Improvement in communication network.

b. Imposition on trading constraints on competitors

c. Free marketing advice

d. Improvement in parks and other recreational areas

8. The issuer of a 10 year term bond sold at par three years ago with interest payable May 1 and
November 1 each year shall report in its December 31 balance sheet

a. Liability for accrued interest

b. Addition to bonds payable

c. Increase in deferred charges

4. Contingent liability

9. Profit or loss computed based on the difference between income and expenses is according to

a. Natural presentation approach

b. Functional presentation approach

c. Transactions approach

d. Capital maintenance approach

10. The postclosing trial balance

a. Provides a convenient listing of account balances that can be used to prepare the financial
statements.

b. Does not include nominal accounts.

c. Is identical to the statement of financial position.

4d. Proves that accounts have been closed properly.