ACC 102 CFE

Multiple Choice
Identify the choice that best completes the statement or answers the question.

____ 1. The start-up capital of a business consisted of P1,000,000 cash provided by the business owner
and an additional P250,000 from a bank loan. The total start-up assets of the business therefore is
a. P1,250,000 c. P750,000
b. P1,000,000 d. P250,000

____ 2. At the start of the period, a business has total assets of P500,000 and total liabilities of P300,000.
During the period, the business earned total income of P1,000,000 and incurred total expenses of
P640,000. No additional investments or withdrawals were made by the owner. How much is the
total equity at the end of the period?
a. 480,000 c. 560,000
b. 520,000 d. 640,000

____ 3. If the liabilities of a business increased P75,000 during a period of time and the owner's equity in
the business decreased P30,000 during the same period, the assets of the business must have:
a. Decreased P105,000.
b. Decreased P45,000.
c. Increased P30,000.
d. Increased P45,000.
e. Increased P105,000.

____ 4. If assets are P365,000 and equity is P120,000, then liabilities are:
a. P120,000.
b. P245,000.
c. P365,000.
d. P485,000.
e. P610,000.

____ 5. The business purchases inventory on account (on credit).

a. Cash c. Accounts payable
b. Accounts receivable d. Prepaid supplies

____ 6. All of the following are liability accounts except:

a. Accounts Payable.
b. Unearned Ticket Revenue.
c. Taxes Payable.
d. Commissions Earned.
e. Notes Payable.

____ 7. The right side of a T-account is a(n):

a. Debit.
 b. Increase.
c. Credit.
d. Decrease.
e. Account balance.

____ 8. A record in which the effects of transactions are first recorded and from which transaction amounts
are posted to the ledger is a(n):
a. Account.
b. Trial balance.
c. Journal.
d. T-account.
e. Balance column account.

____ 9. A journal entry with more than one debit or more than one credit is called a
a. simple journal entry. c. complicated journal entry.
b. compound journal entry. d. sophisticated journal entry.

____ 10. All of the following statements regarding a sales invoice are True except:
a. A sales invoice is a type of source document.
b. A sales invoice is used by sellers to record the sale.
c. A sales invoice is used by buyers to record purchases.
d. A sales invoice gives rise to an entry in the accounting process.
e. A sales invoice does not provide objective evidence about a transaction.

____ 11. Wisconsin Rentals purchased office supplies on credit. The general journal entry made by
Wisconsin Rentals will include a:
a. Debit to Accounts Payable.
b. Debit to Accounts Receivable.
c. Credit to Cash.
d. Credit to Accounts Payable.
e. Credit to Wisconsin Rentals, Capital.

____ 12. If Tim Jones, the owner of Jones Hardware proprietorship, uses cash of the business to purchase a
family automobile, the business should record this use of cash with an entry to:
a. Debit Salary Expense and credit Cash.
b. Debit Tim Jones, Salary and credit Cash.
c. Debit Cash and credit Tim Jones, Withdrawals.
d. Debit Tim Jones, Withdrawals and credit Cash.
e. Debit Automobiles and credit Cash.

____ 13. Zed Bennett opened an art gallery and as a dealer completed these transactions: Started the
gallery, Artery, by investing P40,000 cash and equipment valued at P18,000. Purchased P70 of
office supplies on credit. Paid P1,200 cash for the receptionist's salary. Sold a painting for an artist
and collected a P4,500 cash commission on the sale. Completed an art appraisal and billed the
client P200. What was the balance of the cash account after these transactions were posted?
 a. P12,230.
b. P12,430.
c. P43,300.
d. P43,430.
e. P61,430.

____ 14. An accountant has debited an account for P3,500 and credited a liability account for P2,000. Which
of the following would be an incorrect way to complete the recording of this transaction?
a. Credit another asset account for P1,500.
b. Credit another liability account for P1,500.
c. Credit an expense account for P1,500.
d. Credit the owner's capital account for P1,500.
e. Debit another asset account for P1,500.

____ 15. Inge Industries received P3,000 from a customer for services rendered and not previously recorded.
Inge's general journal entry to record this transaction will be:
a. Debit Services Revenue, credit Accounts Receivable.
b. Debit Cash, credit Accounts Payable.
c. Debit Cash, credit Accounts Receivable.
d. Debit Cash, credit Services Revenue.
e. Debit Accounts Payable, credit Services Revenue.

____ 16. Adjusting entries:

a. Affect only income statement accounts.
b. Affect only balance sheet accounts.
c. Affect both income statement and balance sheet accounts.
d. Affect only cash flow statement accounts.
e. Affect only equity accounts.

____ 17. Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are
all examples of:
a. Items that require contra accounts.
b. Items that require adjusting entries.
c. Asset and equity.
d. Asset accounts.
e. Income statement accounts.

____ 18. If a company failed to make the end-of-period adjustment to remove from the Unearned
Management Fees account the amount of management fees that were earned, this omission would
cause:
a. An overstatement of net income.
b. An overstatement of assets.
c. An overstatement of liabilities.
d. An overstatement of equity.
e. An understatement of liabilities.
____ 19. The total amount of depreciation recorded against an asset or group of assets during the entire time
the asset or assets have been owned:
a. Is referred to as depreciation expense.
b. Is referred to as accumulated depreciation.
c. Is shown on the income statement of the final period.
d. Is only recorded when the asset is disposed of.
e. Is referred to as an accrued asset.

____ 20. On January 1 a company purchased a five-year insurance policy for P1,800 with coverage starting
immediately. If the purchase was recorded in the Prepaid Insurance account, and the company
records adjustments only at year-end, the adjusting entry at the end of the first year is:
a. Debit Prepaid Insurance, P1,800; credit Cash, P1,800.
b. Debit Prepaid Insurance, P1,440; credit Insurance Expense, P1,440.
c. Debit Prepaid Insurance, P360; credit Insurance Expense, P360.
d. Debit Insurance Expense, P360; credit Prepaid Insurance, P360.
e. Debit Insurance Expense, P360; credit Prepaid Insurance, P1,440.

____ 21. On May 1, Giltus Advertising Company received P1,500 from Julie Bee for advertising services to
be completed April 30 of the following year. The Cash receipt was recorded as unearned fees and
at yearend on December 31, P1,000 of the fees had been earned. The adjusting entry on
December 31 would include:
a. A debit to Unearned Fees for P500.
b. A credit to Unearned Fees for P500.
c. A credit to Earned Fees for P1,000.
d. A debit to Earned Fees for P1,000.
e. A debit to Earned Fees for P500.

____ 22. A company purchased a new truck at a cost of P42,000 on July 1. The truck is estimated to have a
useful life of 6 years and a salvage value of P3,000. The company uses the straight-line method of
depreciation. How much depreciation expense will be recorded for the truck during the first year
ended December 31?
a. P3,250.
b. P3,500.
c. P4,000.
d. P6,500.
e. P7,000.

____ 23. What is the proper adjusting entry at December 31, the end of the accounting period, if the balance
in the prepaid insurance account is P7,750 before adjustment, and the unexpired amount per
analysis of policies is, P3,250?
a. Debit Insurance Expense, P3,250; credit Prepaid Insurance, P3,250.
b. Debit Insurance Expense, P4,500; credit Prepaid Insurance, P4,500.
c. Debit Prepaid Insurance, P4,500; credit Insurance Expense, P4,500.
d. Debit Insurance Expense, P7,750; credit Prepaid Insurance, P7,750.
e. Debit Cash, P7,750; Credit Prepaid Insurance, P7,750.
____ 24. A company purchased new computers at a cost of P14,000 on September 30. The computers are
estimated to have a useful life of 4 years and a salvage value of P2,000. The company uses the
straight-line method of depreciation. How much depreciation expense will be recorded for the
computers for the first year ended December 31?
a. P250
b. P750
c. P875
d. P1,000
e. P3,000

____ 25. On December 1, Miller Company borrowed P300,000, at 8% annual interest, from the Nomo Bank.
Miller has 60 days before the first payment is required. What is the adjusting entry that Miller would
need to make on December 31, the calendar year-end?
a. Debit Interest Payable, P2,000; credit Interest Expense, P2,000.
b. Debit Interest Expense, P2,000; credit Interest Payable, P2,000.
c. Debit Interest Expense, P2,000; credit Cash, P2,000.
d. Debit Interest Expense, P4,000; credit Interest Payable, P4,000.
e. Debit Interest Expense, P24,000; credit Interest Payable, P24,000.

____ 26. Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry
to record earning of unearned revenue is:
a. Increase an expense; increase a liability.
b. Increase an asset; increase revenue.
c. Decrease a liability; increase revenue.
d. Increase an expense; decrease an asset.
e. Increase an expense; decrease a liability.

____ 27. On January 1, Alco Company purchases manufacturing equipment costing P95,000 that is
expected to have a five-year life and an estimated salvage value of P5,000. Alco uses the straight-
line depreciation method to allocate costs. The adjusting entry needed on December 31 is:
a. Debit Depreciation Expense, P9,000; credit Accumulated Depreciation, P9,000.
b. Debit Depreciation Expense, P18,000; credit Accumulated Depreciation, P18,000.
c. Debit Depreciation Expense, P90,000; credit Accumulated Depreciation, P90,000.
d. Debit Depreciation Expense, P18,000; credit Equipment, P18,000.
e. Debit Depreciation Expense, P9,000; credit Equipment, P9,000.

____ 28. Which of the following steps in the accounting cycle are listed in logical order?
a. Post the reversing entries, prepare the financial statements and then take a trial
balance.
b. Prepare the closing entries, prepare the adjusting entries and then prepare the
financial statements.
c. Prepare an unadjusted trial balance, prepare the adjusting entries and then
prepare the financial statements.
d. Post the closing entries, take a post-closing trial balance and then prepare
financial statements
____ 29. A debit balance in the income summary account represents
a. Net income c. Net loss
b. A drawing account d. None of the above.

____ 30. The Unadjusted Trial Balance columns of a work sheet total P84,000. The Adjustments columns
contain entries for the following:
Office supplies used during the period, P1,200.
Expiration of prepaid rent, P700.
Accrued salaries expense, P500.
Depreciation expense, P800.
Accrued service fees receivable, P400.
The Adjusted Trial Balance columns total is:
a. P80,400. c. P85,700.
b. P84,000. d. P85,900.

____ 31. The following information is available for the Travis Travel Agency. After these closing entries what
will be the balance in the Jay Travis, Capital account?
Total revenues P125,000
Total expenses 60,000
Jay Travis, Capital 80,000
Jay Travis, Withdrawals 15,000
a. P65,000. c. P130,000.
b. P80,000. d. P145,000.

____ 32. The J. Godfrey, Capital account has a credit balance of P17,000 before closing entries are made. If
total revenues for the period are P55,200, total expenses are P39,800, and withdrawals are P9,000,
what is the ending balance in the J. Godfrey, Capital account after all closing entries are made?
a. P8,000. c. P23,400.
b. P15,400. d. P17,000.

____ 33. Production cost information is needed to assist with all of the following EXCEPT.
a. Setting selling prices. c. Determining overhead.
b. Controlling production costs. d. Determining the net income or loss

____ 34. Ara Company incurred the following costs and expense during the current year:
Raw materials purchases P4,000,000
Direct labor 1,500,000
Indirect labor – factory 800,000
Factory repairs and maintenance 200,000
Taxes on factory building 100,000
Depreciation – factory building 300,000
Taxes on salesroom and general office 150,000
Depreciation – sales equipment 50,000
Advertising 400,000
Sales salaries 500,000
 Office salaries 700,000
Utilities (60% applicable to factory) 500,000
Beginning Ending
Raw materials P300,000 P450,000
Work in process 400,000 350,000
Finished goods 500,000 700,000
The cost of goods manufactured
a. P6,900,000. c. P7,100,000.
b. P7,200,000. d. P7,300,000.

____ 35. A firm had beginning finished goods inventory of P20,000; its cost of goods manufactured was
P75,000; its gross margin was P80,000; and its sales were P140,000. The ending finished goods
inventory was:
a. P60,000 c. P95,000
b. P40,000 d. P35,000

____ 36. Which of the following are basic inventories for a manufacturer?
a. indirect materials, goods in process, and raw materials
b. finished goods, raw materials, and direct materials
c. raw materials, goods in process, and finished goods
d. raw materials, factory overhead, and direct labor

____ 37. A typical indirect labor cost for a manufacturer is:

a. sales office salaries c. sales commissions
b. freight out d. materials handling

____ 38. The term "conversion costs" refers to:

a. costs that are associated with marketing, shipping, warehousing, and billing
activities
b. the sum of direct labor costs and all factory overhead costs
c. the sum of direct materials costs and direct labor costs
d. manufacturing costs incurred to produce units of output
e. all costs associated with manufacturing other than direct labor costs and direct
materials costs

____ 39. Which of the following would not be an element of factory overhead?
a. salary of a marketing manager
b. amortization on the maintenance equipment
c. salary of the plant supervisor
d. property taxes on the plant buildings

____ 40. The entry to record the purchase on account of merchandise for resale under the periodic inventory
system includes
a. debiting Purchases and crediting Cash
b. debiting Purchases and crediting Account Payable
 c. debiting Merchandise Inventory and crediting Cash
d. debiting Merchandise Inventory and crediting Accounts Payable

____ 41. A credit memorandum for P1,680 (sales price of merchandise, P1,500; VAT, P180) was issued to a
customer for goods returned that had ben sold on account. To enter this transaction properly,
a. Accounts Receivable would be credited for P180.
b. Accounts Receivable would be credited for P1,500.
c. Accounts Receivable would be credited for P1,680.
d. Accounts Receivable would not be credited.

____ 42. Silver Lining Feeds based in Cagayan de Oro city trades specialty feed for race horses, fighting
cocks, aquarium fish, zoo animals generally considered pets. On September 13, 2019, Silver Lining
Feeds purchased on account specialty feeds with a total amount payable of P634,000. A
wholesaler operating in the region bought on account all of the available feeds on Sept. 25, 2019 for
P970,000. with 5/10 term. The cash was received within the discount period. Silver Lining Feeds
paid the value added tax due by month end not minding the actual deadline. The correct entry to
record the receipt of cash on Sept. 25 is
a. Cash P970,000
Accounts Receivable P970,000
b. Cash P916,650
Sales Discount 48,500
Output Tax 4,850
Accounts Receivable P970,000
c. Cash P921,500
Accounts Receivable P921,500
d. Cash P915,680
Sales Discount 48,500
Output Tax 5,820
Accounts Receivable P970,000

____ 43. In preparing a worksheet, the amounts for the Trial Balance columns are copied from the
a. General journal c. General ledger
b. Sales and purchases journal d. Current chart of account

____ 44. The Income Statement and Balance Sheet columns below are from the work sheet of the Mandle
Company for the year ended December 31, 2018.

Mandle Company
Work Sheet (partial)
For the year ended December 31, 2018
Income Statement Balance Sheet
Account Title Debit Credit Debit Credit
Cash 24,000
Accounts Receivable 12,500
Merchandise Inventory 8,000
Store Supplies 550
 Office Supplies 1,200
Prepaid Insurance 750
Store Equipment 33,000
Accumulated Depreciation¾Store 19,000
Equipment
Office Equipment 9,000
Accumulated Depreciation¾Office 5,000
Equipment
Accounts Payable 9,900
Salaries Payable 200
Long-Term Notes Payable 18,000
H. Mandle, Capital 45,300
H. Mandle, Drawing 16,000
Income Summary 8,500 8,000
Sales 31,000
Sales Returns and Allowances 250
Purchases 13,500
Purchases Returns and Allowances 350
Purchases Discounts 200
Sales Salary Expense (selling) 4,600
Office Salary Expense (general) 3,500
Store Supplies Expense (selling) 150
Office Supplies Expense (general) 200
Insurance Expense (general) 400
Depreciation Expense¾Store Equipment
(selling) 400
Depreciation Expense¾Office Equipment
(general) 450 ______ _______ ______
31,950 39,550 105,000 97,400
Net Income 7,600 ______ _______ 7,600
39,550 39,550 105,000 105,000

Which of the following statements regarding closing entries of Mandle Company is incorrect?
a. The merchandise inventory beginning that was closed at the end of the period is
P8,500.
b. The merchandise inventory end is recorded to a credit to Income Summary of
P8,000.
c. The net increase to H. Mandle, Capital is P8,400.
d. H. Mandle, Drawing of P16,000 is close to capital account .

____ 45. A trader reports opening inventory at P122,800, Purchases for the year at P824,700, and closing
inventory at P154,200. During the year goods costing P24,800 were lost, others costing P12,500
had been removed for own use by the proprietor, and some costing P10,000 were gifted to charity.
What is the cost of sales?
a. P783,300 c. P746,000
b. P770,800 d. P758,500
____ 46. A retail trader fixes his sale price by adding 25% to the cost of every item purchased. He provides
you with the information relating to 2005 as stated below:
Beginning inventory P284,400
Purchases 842,800
Sales 985,500
What is the ending inventory?
a. P388,075. c. P305,950.
b. P338,800. d. P246,375.

____ 47. Which of the following statements about periodic inventory system is correct?
a. It determines the inventory on hand only at the end of the accounting period.
b. It provides an easy means to determine inventory on hand.
c. It records the cost of sales on the date the sale is made.
d. it keeps a record showing the inventory on hand at all times.

____ 48. A business registered for Value Added Tax has to maintain a VAT account, crediting it with the
"output tax" and debiting it with the "input tax" If the business has total purchases of P500,000 and
sales of P850,000. The entry to record the remittance of VAT to the BIR is
a. Debit: Output Tax, P102,000; Credit: Input Tax P60,000 and Cash P42,000
b. Debit: Input Tax, P102,000; Credit: Output Tax P60,000 and Cash P42,000
c. Debit: VAT Payable, P42,000 and Credit: Cash in Bank, P42,000
d. Debit: Cash in Bank, P42,000 and Credit: VAT Payable, P42,000

____ 49. Which of the following statements about closing entries is NOT correct?
a. When preparing closing entries under periodic inventory system, Sales and
Purchase Returns and Allowances are both closed in the same entry
b. Both transportation in and transportation out are closed by crediting the account
c. When closing entries are made under perpetual system, cost of sales will be
closed with the other temporary accounts with debit balances
d. Under the periodic inventory system, the Merchandise Inventory account will not
appear in the closing entries made at the end of the period.

____ 50. A purchase was made for P200 on account with credit terms of 2/10, n/30. The purchase was
recorded using the net-price method. If payment is made 25 days later, the entry to record the
payment will be to
a. Debit Accounts Payable for P200 and credit Cash for P200.
b. Debit Accounts Payable for P204, credit Purchase Discounts Lost for P4, and
credit Cash for P200
c. Debit Accounts Payable for P196, debit Purchase Discounts Lost for P4, and
credit Cash for P200
d. Debit Purchases for P196, debit Purchase Discounts Lost for P4, and credit Cash
for P200

____ 51. An invoice in the amount of P916 is subject to a trade discount of 10% and credit terms on 3/10,
n/30. If the invoice is not paid within the discount period, the amount that would be paid to satisfy
the invoice would be
 a. P 824.40 c. P 981.27
b. P 888.52 d. P 916.00

____ 52. An entity has the following accounting information for the year:
Sales 400,000
Purchases 90,000
Opening inventory 30,000
Sales returns 80,000
Purchase returns 70,000
Transportation in 40,000
Transportation out 10,000
Salaries 9,000
Other revenues 4,000
General expenses 7,000
General profit 250,000
What is the amount of profit for the year?
a. 48,000 c. 228,000
b. 188,000 d. 198,000

____ 53. The cost of goods available for sale is allocated between
a. beginning inventory and ending inventory
b. beginning inventory and cost of goods on hand
c. ending inventory and cost of goods sold
d. beginning inventory and cost of goods sold

____ 54. The following data belongs to Care Company:

•Accounts receivable on December 31, 2016: P60,000
•Accounts receivable on December 31, 2017: P40,000
•Net credit sales during the year 2017: P200,000
Based on the above information, the net cash collected from customers by Care Co during the year
2017 is
a. P180,000 c. P240,000
b. P220,000 d. P260,000

____ 55. For a corporation, who declares dividends?

a. the president of the corporation c. a vote by the shareholders
b. the chief accountant d. the board of directors

____ 56. Grace invested P100,000 in a corporation that the Wall Street Journal said was “going to be the
next Microsoft”. However, the company squandered its opportunities and went broke in the first
year, making her investment a total loss. How would you characterized Grace’s situation?
A. She may lose the P100,000 and additionally, her personal assets are at risk.
B. She can sue the corporation and get her money back
C. She may lose the P100,000, but her personal assets are not at risk.
D. She can sue the government and get her money back.
____ 57. A corporation whose ownership is only to selective people is a(n)
a. Close Corporation c. Private Corporation
b. Open Corporation d. Public Corporation

____ 58. Which of the following is incorrect regarding the two methods of accounting for share capital?
A. Journal entries using Journal Entry Method upon authorization of stocks is the same with journal
entries using Memorandum Method.
B. The total share holders’ equity is equal using memorandum method and journal entry method.
C. Unissued ordinary shares is credited upon issuance of stocks certificates of ordinary shares
using journal entry method.
D. Upon subscription of shares there will be the same entry using both journal entry method and
memorandum method.

____ 59. Forever-Single Incorporated was incorporated on October 2, 2015. The following transactions
incurred during 2015:
a. Authorized to issue 20,000 15% Preference Shares at Php100 par and 100,000 Ordinary Shares
at Php10 par.
b. Issued 50,000 ordinary shares at Php50 for cash.
c. Issued 3,000 preference shares in exchange for Land costing Php300,000 with fair market value
of Php450,000.
d. Received subscription from various investors of 20,000 ordinary shares at Php75.
e. 30% of subscribed shares were paid with cash.
f. Issued 1,000 ordinary shares for the legal costs incurred worth Php50,000.
g. Reacquired 6,000 previously issued ordinary shares at Php80.
h. 50% 0f the subscribed shares were paid in full.
i. 4,000 treasury shares were reissued at Php100.

The Total Stockholder’s Equity is

a. P4,420,000 c. P810,000
b. P3,870,000 d. P3,770,000

____ 60. The articles of incorporation differ from the by-laws in that the articles of incorporation are
a. The rules of action adopted by a corporation for its internal government
b. Adopted before or after incorporation
c. A condition precedent in the acquisition by a corporation of a juridical personality
d. Approved by the shareholders if adopted after the incorporation

____ 61. Corporation begins to have corporate existence and juridical personality
a. From the moment of the execution of the Articles of Incorporation
b. From the moment of the execution of the Constitution and by-laws
c. From the moment of the execution of the Treasure’s Affidavit
d. From the date of the issuance of the certificate of incorporation by the SEC under
its official seal.

____ 62. M Company’s records included the following shareholders’ equity accounts:
 Preference share capital, par value, P15, authorized 200,000 shares, P2,550,000; Share premium-
preference, P150,000; Ordinary share capital, no par, P50 stated value, 100,000 shares authorized,
P3,000,000.
In M’s statement of shareholders’ equity, the number of issued and outstanding shares for each
class of shares is
Ordinary Preference
a. 60,000 170,000 c. 60,000 180,000
b. 63,000 170,000 d. 63,000 180,000

____ 63. On February 1, authorized common stock was sold on a subscription basis at a price in excess of
par value, and 20 percent of the subscription price was collected. On May 1, the remaining 80
percent of the subscription price was collected. Additional Paid-In Capital would increase on
February 1 May 1
a. No Yes c. Yes No
b. No No d. Yes Yes

____ 64. The Southern company issued 5,000 shares of its P10 par value common stock. These shares
were issued at a price of P25 per share. The correct journal entry to record this transaction is
a. Cash P125,000 Dr; Ordinary Shares P125,000 Cr.
b. Cash P50,000 Dr; Ordinary Shares P50,000 Cr.
c. Ordinary Shares P50,000 Dr; Additional paid-in capital - common stock P75,000
Dr; Cash P125,000 Cr.
d. Cash P125,000 Dr; Ordinary Shares P50,000 Cr; Additional paid-in capital -
common stock P75,000 Cr.

____ 65. The stockholder’s equity section of Peter Corporation’s balance sheet at December 31, 20X2,
was as follows:
Ordinary shares (P10 par value, authorized 1,000,000 shares, issued and outstanding 900,000
shares) P 9,000,000
Share premium 2,700,000
Retained earnings 1,300,000
On January 2, 20X3, Peter purchased and retired 100,000 shares of its stock for P1,800,000.
Immediately after retirement of these 100,000 shares, the balances in the share premium and
retained earnings accounts should be
Share premium Retained earnings
a. P 900,000 P1,300,000 c. P1,900,000 P1,300,000
b. P1,400,000 P 800,000 d. P2,400,000 P 800,000

____ 66. When shares without par value are sold, the excess proceeds over stated value shall be credited to
a. Income c. Share capital
b. Retained earnings d. Share premium

____ 67. Document that evidences the formation of a corporation

a. Articles of Co-Partnership c. Articles of Incorporation
b. Articles of Undertaking d. Memorandum of Agreement
____ 68. A subsidiary ledger is
a. A listing of the components of account balances
b. A back-up system to protect against record destruction.
c. A listing of all account balances just before closing entries are prepared.
d. A listing of accounts of a subsidiary company.

____ 69. Transactions are posted to the

a. book of original entry c. facebook
b. book of final entry d. log book

____ 70. An asset cost P33,000. It has an expected useful life of 5 years and an expected salvage value of
P3,000. Depreciation expense for the first year of the asset’s life using the straight-line method is
a. P6,000 c. P10,000
b. P6,600 d. P13,200

____ 71. Which of the following is not part of the recording process?
a. Analysing transactions c. Entering transactions in a journal
b. Preparing a trial balance d. Posting transactions

____ 72. “Limited life" means

a. A partnership may be dissolved as the result of any change in the ownership.
b. A partnership may be dissolved if the location of the business is changed.
c. A partnership is limited to the amount of revenue it can earn.
d. A partnership is limited in the amount of debit it is liable for in the course of the
business

____ 73. An advantage of the partnership as a form of business organization would be

a. Partners do not pay income taxes on their share in partnership income.
b. A partnership is bound by the act of the partners.
c. A partnership is created by the mere agreements of the partners.
d. A partnership may be terminated by the death or withdrawal of a partner.

____ 74. How many of the following statements is/are false?

1. A partnership is easier to organize than a corporation.
2. A corporation is easier to dissolve than a partnership.
3. A partnership is less expensive to organize than a corporation.
4. A corporation has more legal requirements than a partnership.
5. A limited partner cannot invest his skill, knowledge, and industry in a partnership.
a. One
b. Two
c. Three
d. Four
e. None of these
____ 75. When two or more individuals engage in an enterprise as co-owners, the organization is known as a
a. Single proprietorship c. Partnership
b. Corporation d. Closed corporation

____ 76. Bernstein invests office equipment with a fair market value of P62,000, delivery equipment with a
fair market value of P75,000, and cash of P30,000. He owes P27,000, represented by a note on the
delivery equipment. The amount of Bernsteins’ capital would be
a. P 30,000. c. P140,000.
b. P167,000. d. P137,000.

____ 77. On April 30, 2016 Godofredo, Grace and Gopaldas formed a partnership by combining their
separate business proprietorships. Godofredo contributed cash of P75,000. Grace contributed
property with a P54,000 carrying amount, a P60,000 original cost and P120,000 fair value. The
partnership accepted responsibility for the P52,500 mortgage attached to the property. Gopaldas
contributed equipment with a P45,000 carrying amount, a P112,500 original cost, and P82,500 fair
value. The partnership agreement specifies that profits and losses are to be shared equally but is
silent regarding capital contributions.
What is the capital balance of Godofredo after partnership formation?
a. P75,000 c. P67,500
b. P120,000 d. P82,500

____ 78. The partnership agreement of A and B provides the interest at 10% per year is to be credited to
each partner on the basis of weighted average capital balances. A summary of A’s Capital account
for the year ended Dec. 31, 2018 follows: Balance, Jan. 1 P420,000; Additional investment on July
1, P120,000; and withdrew on August 1 for P45,000.
What amount of interest should be credited to A’s capital account for 2018?
a. P45,750 c. P49,500
b. P46,125 d. P51,750

____ 79. A partner who does not take active part in running the partnership affairs but he is a general
partner, and a partner not known as a partner but actively participate in running the partnership
affairs, respectively are known as
a. Secret Partner and Silent Partner
b. Silent Partner and Dormant Partner
c. Silent Partner and Secret Partner
d. Secret Partner and Dormant Partner

____ 80. Which of the following best describes the nature of salary and interest allowances in a partnership
profit and loss sharing agreement?
a. A means of determining reasonable monthly withdrawals by each partner
b. The amount upon which each partner will have to pay personal income tax
c. A means of distributing profit in relation to services rendered and capital invested
by partners
d. Expenses of business that should be deducted from revenue in determining profit
____ 81. Partners Lim and Tan share profits in a 2:1 ratio, respectively. Each partner received an annual
salary allowance of P60,000. If the salaries are recorded in the amounts as a partnership expense
rather than treated as a division of net income, the total amount allocated to each partner for
salaries and net income would be
a. Less than for both Lim and Tan c. Unchanged for both Limn and Tan
b. More for Lim and less for Tan d. More of Tan and less for Lim

____ 82. The partnership agreement of A and B provides the interest at 10% per year is to be credited to
each partner on the basis of weighted average capital balances. A summary of A’s Capital account
for the year ended Dec. 31, 2018 follows:
Balance, Jan. 1 P420,000; Additional investment on July 1, P120,000; and withdrew on August 1
for P45,000.
What amount of interest should be credited to A’s capital account for 2018
a. P45,750 c. P49,500
b. P46,125 d. P51,750

____ 83. The partnership agreement of Axel, Berg & Cobb provides for the year-end allocation of net
income in the following order:
• First, Axel is to receive 10% of net income up to P100,000 and 20% over P100,000.
• Second, Berg and Cobb each are to receive 5% of the remaining income over P150,000.
• The balance of income is to be allocated equally among the three partners.
The partnership’s 2003 net income was P250,000 before any allocations to partners. What amount
should be allocated to Axel?
a. 101,000 c. 108,000
b. 103,000 d. 110,000

____ 84. Which of the following are considered enhancing qualitative characteristics? I. Comparability, II.
Verifiability, III. Materiality, IV. Understandability
a. I only c. I and II
b. I, II and IV d. I, II, III and IV

____ 85. A business sells goods to a customer who promises to pay for the purchase price next year. The
business records the sale this year, when the transaction has occurred, rather than waiting until
next year when the sale price is collected. This is an application of which of the following accounting
principles?
a. Accrual basis c. Credit principle
b. Stable monetary unit d. Utang concept

____ 86. The accounting concept that requires financial statement information to be supported by
independent, unbiased evidence other than someone's belief or opinion is:
a. Business entity assumption.
b. Monetary unit assumption.
c. Going-concern assumption.
d. Time-period assumption.
e. Objectivity.
____ 87. The question of when revenue should be recognized on the income statement (according to GAAP)
is addressed by the:
a. Revenue recognition principle.
b. Going-concern assumption.
c. Objectivity principle.
d. Business entity assumption.
e. Cost principle.

____ 88. If a parcel of land that was originally purchased for P85,000 is offered for sale at P150,000, is
assessed for tax purposes at P95,000, is recognized by its purchasers as easily being worth
P140,000, and is sold for P137,000, the land account transaction amount to handle the sale of the
land in the seller's books is:
a. P85,000 increase.
b. P85,000 decrease.
c. P137,000 increase.
d. P137,000 decrease.
e. P140,000 decrease.

____ 89. Assets, liabilities, and equity accounts are not closed; these accounts are called:
a. Nominal accounts.
b. Temporary accounts.
c. Permanent accounts.
d. Contra accounts.
e. Accrued accounts.

____ 90. The recurring steps performed each reporting period, starting with analyzing and recording
transactions in the journal and continuing through the post-closing trial balance, is referred to as
the:
a. Accounting period.
b. Operating cycle.
c. Accounting cycle.
d. Closing cycle.
e. Natural business year.

____ 91. A classified balance sheet differs from an unclassified balance sheet in that
a. an unclassified balance sheet is never used by large companies.
b. a classified balance sheet normally includes only three subgroups.
c. a classified balance sheet presents information in a manner that makes it easier
to calculate a company's current ratio.
d. a classified balance sheet will include more accounts than an unclassified balance
sheet for the same company on the same date.
e. a classified balance sheet cannot be provided to outside parties.
____ 92. A columnar working paper used to prepare a company's unadjusted trial balance, adjusting entries,
adjusted trial balance, and financial statements, and which is an optional tool in the accounting
process is a(n) :
a. Adjusted trial balance.
b. Work sheet.
c. Post-closing trial balance.
d. Unadjusted trial balance.
e. General ledger.

____ 93. A company shows a P600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of
the work sheet. The Adjustments columns show expired insurance of P200. This adjusting entry
results in:
a. P200 decrease in net income.
b. P200 increase in net income.
c. P200 difference between the debit and credit columns of the Unadjusted Trial
Balance.
d. P200 of prepaid insurance.
e. An error in the financial statements.

____ 94. Statements that show the effects of proposed transactions as if the transactions had already
occurred are called:
a. Pro forma statements.
b. Professional statements.
c. Simplified statements.
d. Temporary statements.
e. Interim statements.

____ 95. The Income Summary account is used:

a. To adjust and update asset and liability accounts.
b. To close the revenue and expense accounts.
c. To determine the appropriate withdrawal amount.
d. To replace the income statement under certain circumstances.
e. To replace the capital account in some businesses.

____ 96. After preparing and posting the closing entries to close revenues (and gains) and expenses (and
losses), the income summary account has a debit balance of P33,000. The entry to close the
income summary account will include:
a. a debit of P33,000 to owner withdrawals.
b. a credit of P33,000 to owner withdrawals.
c. a debit of P33,000 to income summary.
d. a debit of P33,000 to owner capital.
e. a credit of P33,000 to owner capital.

____ 97. Reversing entries:

a. are necessary when journal entries have been incorrectly recorded.
b. are a required step in the accounting cycle.
 c. will often result in abnormal account balances in some accounts.
d. are required only if the company uses accounting software to record journal
entries.
e. must be made before preparing the post-closing trial balance.

____ 98. These users need accounting information in order to regulate businesses that are within the scope
of their legal authority.
a. Employees
b. Creditors
c. Auditors
d. Government regulatory bodies or agencies

____ 99. It is the branch of accounting that involves the careful analysis of economic events and other
variables to understand their impact on decisions.
a. Accounting education c. Accounting research
b. Cost accounting d. Tax accounting

____100. It involves the provision of information for use by internal users.

a. Management accounting c. Financial accounting
b. Cost accounting d. Tax accounting