Qualifying Exam Reviewer 2017 - Basic Accounting

Junior Philippine Institute of Accountants College of Business Administration University of the East - Caloocan Qualifying Exam Reviewer 2017 Basic Accounting

1.) Which of the following items has no effect on owner’s equity? a. Expense b. Owner’s Withdrawal

c. Purchase of land d. Revenue

Answer: C 2.) The asset created by a business when it makes a sale on account is termed__________ a. Accounts payable b. Accounts receivable

c. Prepaid Expense d. Unearned Revenue

Answer: B 3.) What is the law regulating the practice of accountancy in the Philippines? a. R.A. No. 9289 b. R.A. No. 9198

c. R.A. No. 9928 d. R.A. No. 9298

Answer: D 4.) All of the following describe accounting, except a. A service activity b. An information system c. An exact science rather than an art d. A universal language of business Answer: C 5.) The overall objective of accounting is a. To provide the information that the managers of an entity need to control the operations b. To provide information that the creditors can use in deciding whether to make additional loans

c. To measure the periodic income of the entity d. To provide quantitative financial information about an entity that is useful in making economic decision Answer: D 6.) These users require information on risk and return on investment a. Creditors b. Investors c. Lenders d. Customers Answer: B 7.) Equipment with an estimated market value of P60 000is offered for sale at P90 000. The equipment is acquired for P30 000 in cash and a note payable of P50 000 due in 30 days. The amount used in buyer’s accounting records to record acquisition is __________ a. P 80 000 b. P 60 000

c. P 90 000 d. P30 000

Answer: A 8.) Using accrual accounting, revenue is recorded and reported only______________ a. If cash is received after the services are rendered b. when cash is received at the time services are rendered c. when the services are rendered without regard to when cash is received d. when cash is received without regard to when the services are rendered Answer: C 9.) On January 1, 2016, Potter Company bought a building for P2,750,000 to serve as the Company’s office. It was estimated that the said building will be useful for 20 years. After the end of its useful life, the building can still be sold for P250,000. What is the amount of depreciation expense that should be recognized by Potter Company on December 31, 2016? a. P 100,000 b. P 125,000 c. P 150, 000 d. P 175, 000 Answer: B

10.) Which of the following entries records the receipt of a utility bill from the water company? a. debit Accounts Payable, credit Cash b. debit Accounts Payable, credit Utilities Payable c. debit Utilities Expense, credit Accounts Payable d. debit Utilities Payable, credit Accounts Receivable Answer: C 11.) The process of posting is mostly associated with_________ a. Financial Statements b. General Ledger

c. Source documents d. Worksheet

12.) An item retailing for P 100,000, subject to a trade discount of 25% is paid for within the discount period on terms 2/10, n/30. What is the amount of payment made? a. P 73,500 b. P 74,000

c. P 75,000 d. P 100,000

Answer: A 13.) As of December 31, Ravenclaw Merchandising Company’s records show the following amounts: Purchases P 1,250,000 Purchase discount 25, 000 Purchase returns 140,000 If Ravenclaw Company’s beginning inventory amounted to P 375,000, the Company’s total Cost of Goods Available for sale is________________ a. P 710,000 b. P 1,085,000 c. P 1,460,000 d. P 1,250,000 Answer: C 14.) A post-closing trial balance is prepared before a. Preparing financial statements b. Reversing the accounts c. Adjusting and closing the books d. Preparing a worksheet

Answer: B 15.) The unearned rent account has a balance of P 36,000. If P 4,000 of the P 36,000 is unearned at the end of the accounting period, the amount of the adjusting entry is a. P 4,000 b. P 40,000 c. P 32,000 d. P 36,000 Answer: C

16.) Treasury stock is classified as a(n) a. stockholder’s equity account b. contra-asset c. asset d. contra-stockholder’s equity account Answer: D 17.) Liquidation of partnership usually means that a. Assets are sold b. Liabilities are paid c. Remaining Cash is distributed to the partners d. All of the above Answer: D 18.) Erica and Mica formed a partnership on January 1, 2016 by investing P 50,000 each into EM Coffee Shop. On June 30, 2016, Mica invested an additional 50,000 into the business If they agreed to divide profit based on initial capital investment, how will they divide the P 120,000 profit they earned in 2016. a. P 60,000 to Erica and P60,000 to Mica b. P 40,000 to Erica and P80,000 to Mica c. P 80,000 to Erica and P40,000 to Mica d. P 100,000 to Erica and P20,000 to Mica Answer: A

19.) Erica and Mica formed a partnership on January 1, 2016 by investing P 50,000 each into EM Coffee Shop. On June 30, 2016, Mica invested an additional 50,000 into

the business If they agreed to divide profit based on ending capital investment, how will they divide the P 120,000 profit they earned in 2016. a. P 60,000 to Erica and P60,000 to Mica b. P 40,000 to Erica and P80,000 to Mica c. P 80,000 to Erica and P40,000 to Mica d. P 100,000 to Erica and P20,000 to Mica Answer: B 20.) If the partner withdraws from the partnership before the end of the accounting period, updating of the partnership books is a. Required b. Optional c. Not necessary d. None of the above Answer: A 21.) The following are kinds of partners except one, choose the exception: a. Capitalist partner b. Capitalist-secret partner c. Industrial-managing partner d. Limited-industrial partner Answer: D 22.) Blossom, Bubbles and Buttercup formed a partnership to which Blossom contributed a parcel of land with an acquisition cost of P 25,000. Bubbles contributed P 50,000 cash and Buttercup P 75,000 cash. The land has a fair value of P 50,000 at the formation date. The total capital credit of the partnership should be a. P 150,000 b. P 125,000

c. P 175,000 d. P 145,000

Answer: C 23.) Gumball and Darwin agreed to form a partnership from which Gumball will contribute P 300,000. If Darwin’s contributions is 1/3 of the total agreed capitalization, how much is the partnerships net assets after the formation using the bonus method? a. P 500,000 b. P 350,000

c. P 450,000 d. P 900,00

Answer: C 24.) This allowance for profit distribution is granted only if there is profit a. Bonus b. Interest

c. Salary d. All of the above

Answer: A Use the following information for questions 25 and 26: At December 31, Haha and Hehe are partners with capital balances of P 40,000 and P20,000, and they share profits and losses in the ratio of 2:1, respectively. On this date Hihi invests P 17,000 in cash for a one-fifth interest in the capital and profit of the new partnership. 25.) Assuming asset revaluation will be recorded, how much is the balance of Hehe’s capital after Hihi is admitted into the partnership? a. P 45,333 b. P 22,667 c. P 17,000 d. P 8,000 Answer: B 26.) Assuming bonus method is used and there is no increase in net assets is recognized, what would be the total capital of the partnership after the admission by investment of Hihi? a. P 85,000 b. P 60,000 c. P 61,600 d.P 77,000 Answer: D 27.) If the amount invested by the incoming partner is equal to the interest he acquires, then there is a. No bonus nor asset revaluation b. Positive asset revaluation c. Bonus to the old partners D. Bonus to the new partners Answer: A

28.) The total number of shares the corporate charter permits the corporation to issue is called a. outstanding stock b. issued stock c. authorized stock d. ordinary shares capital Answer: C 29.) If shares of stock are sold for less than their par value, the difference is called a. discount b. earnings c. a gain d. a premium Answer: A

Use the following data for number 30-32 As of December 31, 2016, the balances of the shareholder’s equity of Herbie Auto Inc. are shown below: Ordinary Share Capital, P6 par (30,000 shares authorized, 13 000 shares issued) _________

30.)

Premium-Ordinary Share Capital

P 17,000

Treasury Stock-Ordinary Share Capital (2,000 shares at P6 per share)

_________

Preference Share Capital, 5%, P12 par (16,000 shares authorized; 5,000 shares issued)

_________

Premium-Preference Share Capital

P 6,000

Preference Share Capital-Subscribed (2,000 shares)

_________

The amount of Ordinary Share Capital using the above data is: a. P 180,000 b. P 78,000 c. P 60,000

d. P 360,000 Answer: B 31.) The amount of Preference Share Capital using the above data is: a. P 60,000 b. P192,000 c. P 180,000 d. P 12,000 Answer: A 32.) The amount of Treasury Stock-Ordinary Share Capital using the above data is: a. P 360,000 b. P 60,000 c. P 12,000 d. P 180,000 Answer: C 33.) The balance of the income summary account of a corporation is transferred to which of the following accounts? a. Retained Earnings b. Share Capital c. Premium on Sale of Share Capital d. Cash Answer: A 34.) The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a: a. liquidating dividend b. stock split c. stock option d. preferred dividend Answer: B

35.) Characteristics of a corporation include: a. Shareholders who are mutual agents

b. Direct management by the shareholders (owners) c. its inability to own property d. shareholders who have limited ability Answer: D 36.) The entry to record the purchase of 5,000 shares of a corporation’s own P20 par common stock at P25, paid in cash, includes a debit to: a. Common Stock b. Paid-In Capital in Excess of Par

c. Retained Earnings d. Treasury Stock

Answer: D 37.) Unlimited liability of the partners in a limited partnership pertains to a. All the partners b, Limited partners only c. General partners only d. The entities that owes the partnership Answer: C 38.) When the investment of a new partner exceeds the new partner’s initial capital balance and asset revaluation is not recorded, who will receive the bonus? a. The new partner b. The old and new partners in their new profit and loss ratio c. The old partners in their new profit and loss ratio d. The old partners in their old profit and loss ratio Answer: D 39.) In the liquidation of the partnership, the first cash realized is used to a. Pay the creditors b. Pay the general partners c. Pay the industrial partners d. Pay all the partners Answer: A

40.) A corporation purchased 1,000 shares of its P10 par common stock at P20 and subsequently sold 500 of the shares at P30. What is the amount of revenue realized from the sale?

a. P0 b. P2,500 Answer: A

c. P 5,000 d. P15,000