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ASC Retention Handout
ASC Retention Handout
TRUE or FALSE
1. Income is recognized in the statement of comprehensive income when increase in future economic benefits
related to an increase in an asset or an increase in liability has risen that can be measured reliably.
2. Capital account is debited immediately if the owner withdraws money for personal use.
3. All transactions are accountable transactions.
4. Under allowance method in accounting for uncollectible accounts, Accounts receivable is only credited
when it is definitely uncollectible.
5. Customer’s stale check is no longer cash, therefore, should be added back to accounts receivable.
6. An overstated Ending inventory results to understated Cost of goods sold and understated Gross profit.
7. If there is no formal organization and commencement of business operation within 24 months from the
date of incorporation the corporation automatically dissolved and corporate powers are cease.
8. In the liquidation of a partnership, the gain or loss from the asset sold are divided in accordance with their
capital equity interest.
9. Share premium is credited upon the issuance of share capital for cash at more than the stated value.
10. Unissued share capital account can be seen in the book of final entry if the corporation uses a journal
entry method.
11. The accrual basis of accounting states that revenue and expense are earned and incurred at the when cash
is received.
12. In accounting terms, cash is any type of medium of exchange regardless if it is ready money or a
negotiable instrument payable in money.
13. In layman terms, check is cash.
14. The freight in account is an inventoriable cost.
15. VAT Payable is computed by deducting the total input tax coming from purchases from the total output
tax coming from sales.
16. Prime costs consist of direct labor and manufacturing overhead.
17. An outstanding check is a disbursement recorded by the company but not recorded on the part of the
bank and thus a deduction to cash balance per books in the reconciliation process.
18. Reversing entries are an optional part of the accounting cycle.
19. The manufacturing overhead represents indirect costs relating to the manufacturing of inventories.
20. A bank account on a closed bank is reconsidered as a receivable.
3. What is the appropriate measurement basis for a non-cash asset contributed by a partner in a partnership?
A. Fair Value at the date of contribution of the asset
B. Historical cost traced in the record of the contributing partner
C. Contributing partner’s tax basis for the asset
D. Assessed value of the non-cash asset
4. The interest acquired by the incoming partner is equal to the amount he invested. If the net assets on that
day are valued fairly, then there is a
A. Bonus from the new partner
B. Bonus to new partner
C. Bonus to old partners
D. Neither has bonus
7. A partner who contributes money or property as well as his work or industry to the capital of the
partnership is called
8. Five persons decide to organize a corporation. Which of the following situation illustrates best the
minimum requirement of the law to capital formation?
10. When ordinary shares are sold on a subscription basis and the entire subscription price has been
collected, the issuance of the share is recorded by
11. The concept of accounting that states that revenues are earned when service is rendered.
A. Cash Basis
B. Accrual Basis
C. Cost Recovery
D. Installment Basis
12. A company rendered service to a customer but has not received payment as of year-end. What type of
adjusting entry would be made?
A. Unearned Income
B. Prepaid Expense
C. Accrued Income
D. Bad Debts Expense
15. Which of the following inventories would least likely be accounted for under the perpetual inventory
system?
a. TVs and other appliances
b. Land sold by a real estate business
c. School supplies
d. Cars, automobiles
16. How would the declaration of a 15% share dividend by a corporation affect each of the following?
ROS is the owner of his own business. On December 31, ROS’ assets, liabilities,
revenues and expenses were:
19. On December 31, if net income equals P 15,000 and the ending owner’s equity is P20,000, and ROS
invested an additional P2,600 in his business, while withdrawing P6,000 during the year, the beginning
owner’s equity for this year was:
A. P 7,100 D. P 7,430
B. P 7,400 E. None Of The Above
C. P 8,400
1. Chris invested in a partnership a parcel of land which cost his father P200,000. The land had a market value
of P300,000 when James inherited it 3 years ago. Currently, the land is independently appraised at
P500,000 even though James insisted that he “wouldn’t take P900,000 for it.” The land should be recorded
in the accounts of the partnership at _________
2. On Mar. 1 2012 RAIN and BOW formed a partnership with each contributing the following assets:
Gang Nam
Cash P30,000 P 70,000
Machinery and Equipment 25,000 75,000
Building 125,000
Furniture and Fixtures 10,000
The building is subject to mortgage loan of P80,000 which is to be assumed by the partnership.
Agreement provides that RAIN and BOW share profits and losses 30% and 70% respectively. On Mar.
1 2012, what should be the balance in Nam’s capital account?
3. MARY had a P500,000 capital balance for 8 months and a P650,000 balance for 4 months. LITTLE had a
P380,000 capital balance for 5 months and a P500,000 balance for 7 months. How much of the year’s
P800,000 profit should MARY receive if profits and losses are distributed based on the ratio of the average
capital balances?
4. If loss for the year was P100,000, what is the share of Charles in the partnership profit?
5. If profit for the year was P150,000, what is the share of Tine in the partnership profit?
6. Partners JILL, JACK and HILL have capital balances in a partnership of P150,000, P100,000 and P200,000
respectively. Loss for the year was P330,000.
What will be JACK’s capital balance if JILL gets an P180,000 salary, JACK gets a P70,000 salary and
HILL gets 10% interest on his beginning balance with the remainder being divided at a 2:2:1 ratio?
7. Apo and Tau are partners who share profits and losses in a ratio of 3:2 respectively, and have the following
capital balances on Dec. 31,2012: Apo, Capital P2,000,000 Cr.; Tau, Capital P1,500,000 Cr.. Assume that the
partners agreed to let Gamma into the partnership by investing P1,000,000 for a ¼ interest. How much
will Apo’s capital balance be?
8. As of Dec. 31, 2012, the books of Bueno partnership showed capital balances of A, P40,000; B, P25,000; and
C, P5,000. The partner’s profit and loss ratio was 3:2:1, respectively. The partners decided to liquidate and
they sold all non-cash assets for P37,000. After settlement of liabilities amounting to P12,000, they still
have cash of P28,000 lest for distribution. Assuming that any capital deficiency is uncollectible, what
would be the share of A in the distribution of cash?
9. Enit Corp.’s shareholder’s equity accounts at Dec. 31, 2012 were as follows:
All ordinary shares outstanding at Dec. 31, 2012 were issued in 2011 for P26 a share. On Jan. 4, 2013,
Enit re-acquired 20,000 of its ordinary shares at P24 a share and retired them. Immediately after the
shares were retired, what was the balance in share premium?
10. On Dec. 1, 2012, Emson Corp. received donation of 2,000 shares of its P50 par value ordinary shares from
a shareholder. On that date, the share’s market value was P350 per share. The stock was originally issued
for P250 per share. By what amount would this donation cause total shareholders’ equity to decrease?
ABC Company reports a net sales of 750,000, gross profit of 560,000, and net profit of 375,000.
23. Determine the amount to be paid in full settlement of each of the invoices listed below, assuming that
credit for returns and allowances was received prior to payment.
Invoice Date List Price Trade Discount Frieght Terms Amount of Date Paid
(2012) Cost 2/10. 1/15. n/30 return
Feb 19 P 140,000 50%; 20% P2,000 FOB shipping point, P4,500 Mar 1
prepaid
Mar 16 P 110,000 30%; 20% P5,000 FOB shipping point, P5,600 Mar 31
collect
May 24 P 240,000 20%; 10%; 5% P6,000 FOB destination, P2,500 Jun 2
prepaid
Sept 17 P300,000 40%; 20% P2,500 FOB destination, P1,200 Oct 10
collect
24. The following data pertain to cash transactions and the bank account of NORWOOD company for the
month of June 2013:
Compute for the Unadjusted balance per books and the correct cash balance.
32. LEE Company had the following information relating to its accounts receivable:
Accounts receivable, 12/31/2012 P 200,000
Sales for 2013 (40% pertains to cash sales) 250,000
Collections from customers for 2013 including recoveries 100,000
Accounts written off, 10/21/2013 10,000
Collection of accounts written off in prior years 15,000
Estimated uncollectible receivables per aging of receivables at
12/31/2013 20,000
At the end of 2013, how much is LEE Company’s Accounts Receivable balance?
TANG TENG
Increase/ Increase/
Book Value (Decrease) in Book Value (Decrease) in
Book Value Book Value
Accounts Receivable P 50,000 0 P 70,000 P( 10,000 )
Inventory 30,000 5,000 40,000 0
Equipment 50,000 ( 10,000 ) - -
Land 100,000 20,000 150,000 30,000
Accounts Payable 50,000 0 70,000 0
Bonds Payable 30,000 0 40,000 0
TANG and TENG’s capital accounts after all the contributions of assets and the assumptions of liabilities
would have a 60:40 ratio.
34. Amount of Total assets of the partnership immediately after its formation.
NUYLES, ARANA, and ALMAZAN prepared the following trial balance for their partnership just before its
liquidation on October 25, 2013.
DEBIT CREDIT
Cash 200,000
Non-Cash Assets 800,000
Liabilities 150,000
TIU, Loan 200,000
TIU, Capital 350,000
ARANA, Capital 200,000
CRUZ, Capital 100,000
Totals 1,000,0000 1,000,000
TIU, ARANA, and CRUZ share profits and losses in the ratio of 3:2:1.
35. Assuming that all non-cash assets are sold at a gain of P150,000, how much cash is distributed to each
partner in settlement of their interests?
36. Assuming that after the sale of all non-cash assets and payment of all liabilities, ARANA receives cash
worth P50,000 in final settlement of his interest, how much must have been the total cash available for cash
distribution to partners including loan?
BELGA Company had the following balances in its shareholders’ equity balances as of December 31, 2013:
Share Capital, P10 par, 21,500 shares outstanding P 215,000
Additional Paid in Capital 101,000
Retained Earnings 221,000
The following shareholders’ equity transactions took place during 2012 and 2013:
a. Sold 1,000 treasury shares at P15 per share in 2012 and the remaining 1,000 shares at P18 per share
in 2013. Treasury shares costs P12.
b. Net profit for 2012 was P80,000 and for 2013 was P98,000.
c. Issued an additional 1,500 new shares at P18 per share in 2013.
d. Dividends declared in 2012 were P22,000 and in 2013 were P35,000.
Determine the balances of following to be shown in the December 31, 2011 statement of changes in equity of
BELGA Company.
41. YENG GUIAO, ALMAZAN, and NUYLES are partners. On August 31, 2013, NUYLES opted to retire from the
partnership. Prior to NUYLES’ retirement, the capital balances of the three partners are P25,000, P40,000 and
P35,000, respectively.
NUYLES is paid P39,000 in full settlement of his partnership interest. YENG GUIAO and ALMAZAN’s capital
after payment to NUYLES are P23,400 and P37,600, respectively.
Assuming NUYLES share 50% in partnership profits before his retirement, what is the ratio in the sharing of
profits of the partners before NUYLES’ retirement?
The following information was gathered from the accounting records of ASC COMPANY for the year 20xx.
Salaries for employees amount to P25,000 per week and is divided into two payments every 2 nd and
4th Friday of the month. December 31 falls this year on a Wednesday.
A small time store rented a space on the 1 st floor of ASC Co.’s building since July 1 and is billed by the
latter at the end of each month. At the end of December, ASC has not yet billed the lessee.
A 12% interest note payable was issued on October 15 and is payable for one year. Interest was
recorded at year-end.
Insurance expense has a balance of P50,000 per general ledger of which 40% of which is unexpired.
Equipment was bought this year on June 30 and has a 10% salvage value and has a useful life of 5
years. Depreciation expense is recognized this year at the amount of P9,000.
Accounts receivable as of year-end is P150,000. Allowance for bad debts at January 1 is P10,000.
During the year cash collections from customers amounted to P20,000 of which P3,000 was
recovered from an account previously written off. Accounts written off during the year amounted to
P28,000. 50% of the accounts receivable at year-end is 90% uncollectible.
ROS COMPANY sold to JVA COMPANY merchandise and billed the amount of P168,000. ROS offers a 2/10,
n/30 sales discount to all its customers. ROS is a VAT-registered company. JVA paid 5 days afterwards.
MRCQ COMPANY situated in Manila, recorded sales of P300,000 for the merchandise sold to HO COMPANY
which is situated in Cebu. The shipment terms are FOB Manila and HO will pay for freight charges that is
worth P12,000. Both companies are not VAT-registered.
50. JJ COMPANY cash account amounted to P150,000 as of December 31. JJ keeps all their cash in his account
on JLA Bank. The following information was gathered from the bank statement:
A credit memo was issued for the collection from a customer the amount of P25,000.
JLA Bank charges its depositors P500 per month as a service charge.
Alongside the bank statement was a check payable to JJ COMPANY marked “DAIF” worth P30,000.