POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

College of Accountancy and Finance

Financial Accounting and Reporting 1 and 2
Special Qualifying Examination

NAME: _____________________________________ SECTION: ____________ DATE: May 5, 2019

General Instructions: Faith is the confidence that what we hope for will happen; it gives us assurance about things we
cannot see. Have faith and always bear in your mind that you can answer everything to the best that you can. You must
shade the scannable answer sheet properly. For the Modified True or False (MTF) questions, please choose A if the
statement is correct. If the statement is incorrect, then choose the best answer to replace the underlined word(s) to
make the statement correct. Always observe HONESTY during the examination. GODBLESS!

THEORIES (1 pt. each)

1. An entity’s life can be meaningfully subdivided into equal time periods for reporting purposes.
A. Entity concept B. Going concern C. Accrual basis D. Periodicity

2. Income = (Revenue + Gains) – (Expenses + Losses)

A. True B. False

3. Which error will result in an out of balance trial balance?

A. A debit entry was posted to the credit side of the correct ledger account.
B. A transaction was not recorded
C. A journal entry was not posted
D. A journal entry has overstated debit and credit amounts.

4. The entry to record expired insurance is omitted. This theory causes

A. an increase in liabilities D. liabilities to be overstated
B. expenses to be overstated E. assets to be overstated
C. liabilities to be understated

5. Failure to record depreciation at year-end will result in an

A. overstatement of total assets. C. understatement of total liabilities.
B. overstatement of total liabilities. D. understatement of profit.

6. (MTF) Adjusting entries are useful in apportioning costs among two or more accounting periods.
A. True B. Closing entries C. Reversing entries D. Mixed entries

7. Which of the following generally is considered a limitation of the Statement of Financial Position?
A. The Statement of Financial position reflects the current value of a business.
B. The Statement of Financial position reflects the instability of peso.
C. Statement of Financial position formats and classification do not vary to reflect industry
differences.
D. Due to measurement problems, some enterprise resources and obligations are not reported in the
Balance Sheet.

8. 2Moons Company prepares a worksheet to facilitate the preparation of its financial statements. The
company’s operations for the year 2018 resulted in profit, if before considering profit
A. the total debit exceed total credit in the income statement columns.
B. the total debits are equal to total credits in the income statement columns.
C. the total debits exceed total credits in the statement of financial position columns.
D. the total debits are equal to total credits in the statement of financial position columns.

9. Statement 1: Sales Returns and Allowances is described as a contra-revenue account.

Statement 2: Ending merchandise inventory is included in the calculation of cost of goods available for
sale.
Statement 3: Under the periodic inventory system, the Purchases account is used to accumulate all
purchases of merchandise for resale.
A. Only one statement is correct. C. All of the statements are correct.
B. Two of the statements are correct. D. All of the statements are incorrect.

10. Which of the following terms does not mean the same as the others?
A. Bottom line B. Gross profit C. Operating profit D. Profit from operations
A.Y. 2018-2019 Special Qualifying Examination 2019 1-NAB
11. Accounts receivable is a credit column in the
A. cash disbursement journal C. purchases journal
B. cash receipts journal D. sales journal

12. To be a partner, a member has to contribute money, property or industry to the partnership. This makes the
partnership agreement
A. Bilateral B. Nominate C. Onerous D. Preparatory

13. “A partnership may be established for charity.” This statement is:

A. True C. Half true and half false.
B. False D. All of the above.

14. “One of the partners in a proposed partnership is a billionaire. The partners may stipulate in the articles of
co-partnership that this billionaire partner be exempted from sharing in the profits of the partnership.” This
statement is:
A. True C. Half true and half false.
B. False D. All of the above.

15. The following are options available for determining the partner’s share of profit, except:
A. Capital contributions
B. Capital contribution and service to the partnership
C. Loans to the partnership
D. Stated fraction or ratio

16. In a partnership, partner’s salaries are considered as:

A. A liability. C. An allocation of profits and losses.
B. A loss. D. An expense of the business.

17. Statement 1: Any salary allowances stipulated in the partnership agreement are considered only if profit is
sufficient to cover such allowances.
Statement 2: An industrial partner is exempt from sharing in partnership losses.
Statement 3: In a general partnership, a majority of the partners should be general partners who are liable
to the extent of their personal property.
A. Only one statement is correct. C. All of the statements are correct.
B. Two of the statements are correct. D. All of the statements are incorrect.

18. Which of the following is true when a new partner is admitted to the partnership through asset revaluation
method:
A. When the amount credited to the new partner is greater than his actual contribution, there is a bonus
to the new partner.
B. When the amount credited to the new partner is less than his actual contribution, there is a bonus to
the new partner.
C. The assets of the partnership are revalued after the admission of the new partner.
D. The sum of the adjusted capital of the old partners plus the amount invested by the new partner is
equal to the total contributed capital.

19. A partnership may be dissolved either (choose the incorrect one):

A. by admission of a new partner C. by the insolvency of an existing partner
B. by retirement of an old partner D. by death of a partner

20. When a partner retires or withdraws from a partnership, any increase or decrease in the value of the assets
and liabilities is credited to the partners in accordance with their
A. original capital ratio C. beginning capital balances
B. ending capital balances D. P/L sharing ratio

21. Statement 1: The final distribution of cash to partner shall be made based on their profit or loss sharing
agreement.
Statement 2: The right of offset is exercised when a partner’s capital account reports a credit balance and
he has at the same time loan to the partnership.
Statement 3: Liquidation expenses which are incurred to facilitate that immediate realization of non-cash
asset affect cash but not the capital.
Statement 4: After the distribution of cash to partners in a partnership liquidation, the business would
have zero assets, liabilities and owner’s equity.

A.Y. 2018-2019 Special Qualifying Examination 2019 2-NAB

 Statement 5: Marshalling of assets is the order of partner’s rights against the partnership’s assets and the
personal assets of the individual partners.
A. One of the statements is incorrect. D. Four of the statements are incorrect.
B. Two of the statements are incorrect. E. All of the statements are incorrect.
C. Three of the statements are incorrect.

22. The order of partnership liquidation process is

A. sell assets, pay liabilities, disburse cash to partners.
B. disburse cash to partners, pay liabilities, sell assets.
C. pay liabilities, sell assets, disburse cash to partners.
D. sell assets, disburse cash to partners, pay liabilities.

23. In the final liquidation transaction, the remaining cash is distributed to the partners. The partners share in
the cash according to their
A. withdrawals B. profit or loss ratio C. cash balance D. capital balance

24. (MTF) Remaining unsold assets must be treated as a complete loss, assuming that nothing is realized on
them.
A. True B. complete gain C. asset allocation D. absorption capacity

25. In the preparation of the schedule of safe payments to partners, cash withheld for future liquidation
expenses and unrecorded liabilities that may be discovered is treated as
A. liabilities B. possible loss C. loss on realization D. operating expenses

26. (MTF) Delectus selecti is the selection of a person satisfactory to oneself for a position (as of partner)
involving trust and confidence in the other’s character, capacities or responsibility.
A. True B. Delectus personae C. Delectus habitus D. Habemus papam

27. An ordinary share

A. is an equity instrument that is subordinate to all other classes of equity instruments.
B. is a financial instrument or other contract that may entitle its holder to ordinary shares.
C. is a financial instrument that gives the holder the right to purchase ordinary shares.
D. is any contract that gives rise to both a financial asset of one entity and a financial liability or equity
instrument of another entity.

28. When a business is organized as a corporation, which of the following is true?

A. Fluctuations in the market value of outstanding share capital do not affect the amount of
shareholders’ equity shown in the balance sheet.
B. Shareholders do not have to pay personal income taxes on dividends received because the
corporation is subject to income tax on earnings.
C. Stockholders are liable for the debts of the business in proportion to their percentage of ownership
of share capital.
D. Each shareholder has the right to bind the corporation contracts and to make other managerial
decisions.

29. When accounting for two or more classes of securities issued in a single “package” transaction, the value
of each class may be determined in all of the following except by
A. assigning the known market value to one class and the remainder of the selling price to the other
security.
B. allocating the selling price to each class based upon the individual relative market value of each
class.
C. arbitrarily assigning a value to each class if the market value of only one class is known.
D. arbitrarily assigning a value to each class if no market value are known.

30. The ledger of Canton Inc. shows ordinary share, ordinary treasury share and no preference share. For this
company, the formula for computing the book value per share is
A. Total paid-in capital and retained earnings divided by the number of ordinary shares issued.
B. Total shareholders’ equity divided by number of ordinary shares outstanding.
C. Total shareholders’ equity divided by number of ordinary shares issued.
D. Ordinary share outstanding divided by number of ordinary share issued.

31. A company declared a cash dividend on its ordinary shares in December 2017, payable in January 2018.
Retained earnings would
A. increase on the date of declaration. C. not be affected on the date of payment.

A.Y. 2018-2019 Special Qualifying Examination 2019 3-NAB

 B. not be affected on the date of declaration. D. decrease on the date of payment.

32. Which of the following is an appropriate numerator for the computation of basic earnings per share?
A. Profit – total dividends declared on cumulative preference shares
B. Profit with no deductions for cumulative preference shares, whether declared or not.
C. Profit – total dividends declared during the period for non-cumulative preference shares.
D. Profit – annual dividends for non-cumulative preference shares, whether or not declared.

33. Assuming that the issuing company has only one class of share capital, a transfer from retained earnings to
contributed capital equal to the fair value of the shares issued is ordinarily a characteristics of
A. either a bonus issue or share split. C. a share split but not a bonus issue.
B. neither a bonus issue nor share split. D. a bonus issue but no a share split.

34. Gain or losses on the purchase and resale of treasury shares are reflected in
A. contributed capital.
B. contributed capital accounts and retained earnings accounts.
C. profit or loss, contributed capital, and retained earnings accounts.
D. profit or loss and other comprehensive income.

35. At the date of the financial statements, ordinary shares issued would exceed ordinary shares outstanding as
a result of
A. declaration of share split. C. declaration of bonus issue.
B. purchase of treasury shares. D. payment in full of subscribed shares.

PROBLEMS (1.625pts)

36. On January 1, 2019, the assets were P40,000 and liabilities were P10,000. During the year 2019, total
assets increased by P10,000 and the liabilities increased by P3,000. How much was the net increase in capital
during 2019?
A. P37,000 B. P7,000 C. P30,000 D. P23,000

37. The trial balance prepared at December 31 did not balance. Debit total was P159,250 and credit total was
P153,200. In determining the cause of the difference, you discovered the following errors: a credit to Cash of
P650 was not posted; a P2,000 credit to be made to Sales account was credited to the Accounts Receivable
account instead; the Wages Payable account balance of P9,300 was listed in the trial balance as P3,900. What
is the correct trial balance total?
A. P160,650 B. P160,600 C. P159,250 D. P153,200

38. On December 31, 2018, Utilities expense for the year was reported in the statement of comprehensive
income is P117,000. The statement of financial position as of December 31, 2017 reported accrued utilities
expense of P9,000. Total payments of utilities during 2018 were P108,000. The company appropriately made a
reversing entry for the utilities at January 1, 2018. The correct adjusting entry at December 31, 2018 was
A. Utilities expense 9,000 C. Utilities expense 18,000
Utilities payable 9,000 Utilities payable 18,000
C. Utilities payable 9,000 D. Utilities payable 18,000
Utilities expense 9,000 Utilities expense 18,000

39. Mexico Company sells service contracts for personal computers. The service contracts are for one-year,
two-year or three-year period. All sales are for cash and all receipts are credited to Unearned Service Contracts
Revenue. This account had a balance of P144,000 at December 31, 2017 before year-end adjustment.
Service contract costs are charged as incurred to the Service Contract Expense account, which had a
balance of P36,000 at December 31, 2017. Service contracts still outstanding at December 31, 2017 expire as
follows: during 2018- P30,000; during 2019- P45,000 and during 2020- P20,000. What amount should be
reported as Unearned Service Revenue in Mexico Company’s December 31, 2017 statement of financial
position?
A. P49,000 B. P59,000 C. P95,000 D. P108,000

40. At the end of March 2019, the first quarter of operations, the following selected data were taken from the
financial records of Venezuela Company:
First Quarter profit P 39,750
Total Assets as of March 31, 2019 189,700
Total liabilities as of March 31, 2019 20,200
In preparing the financial statements, the following adjustments were overlooked:
 Supplies used during the first quarter, P 1,750

A.Y. 2018-2019 Special Qualifying Examination 2019 4-NAB

  Unbilled fees earned at March 31, 2019, P 2,900
 Depreciation of equipment for the quarter, P 2,500
 Accrued salaries at March 31, 2019, P 1,500
How much is the adjusted balance of the capital account?
A. P166,650 B. P169,500 C. P206,400 D. P209,250

41. A buyer received an invoice for P60,000, inclusive of 12% VAT dated November 2. If the terms are 2/10,
n/30 and the buyer paid the invoice within the discount period, what amount will the seller receive?
A. P58,656 B. P53,571 C. P52,500 D. P58,800

42. The Cash Receipts Journal of the Peru Company shows the following accounts and account balances:
 Sales P 125,000
 Accounts receivable 65,000
 Sundry accounts (credit) 1,802,650
 Sales discount ?
If sales discount is 4% of sales balance, how much is the cash balance per cash receipts journal?
A. P1,737,650 B. P1,987,650 C. P 1,992,650 D. P 1,857,650

43. On December 31, 2018, Brazil and Bolivia formed a partnership, agreeing to share for profits and losses in
the ratio of 2:3 respectively. Brazil invested a parcel of land that cost him P25,000. Bolivia invested P30,000
cash. The land was sold for P50,000 on the same date, three hours after formation of the partnership. How
much should be the capital balance of Brazil right after the formation?
A. P25,000 B. P30,000 C. P50,000 D. P60,000

44. On March 1, 2019, Aruba and Argentina formed a partnership with each contributing the following assets:
Aruba Argentina
Cash 300,000.00 700,000.00
Machinery and
equipment 250,000.00 750,000.00
Building - 2,250,000.00
Furniture and fixtures 100,000.00 -
The building is subject to mortgage loan of P800,000, which is to be assumed by the partnership agreement
provides that Aruba and Argentina share profits and losses 30% and 70% respectively. On March 1, 2019, the
balance in Argentina’s capital account should be
A. P3,700,000 B. P3,140,000 C. P3,050,000 D. P2,900,000

45. The partnership agreement of Spain, France and UK provides for the year-end allocation of net income in
the following order:
 First, Spain is to receive 10% of net income up to P200,000 and 20% over P200,000.
 Second, France and UK each are to receive 5% of the remaining income over P300,000.
 The balance of income is to be allocated equally among the three partners.
The partnership’s 2018 net income was P500,000 before any allocations to partners. What amount should be
allocated to Spain?
A. P202,000 B. P206,000 C. P216,000 D. P220,000

46. Ireland and Finland formed a partnership in 2018 and made the following investments and capital
withdrawals during the year:
Ireland Finland
Investment Withdrawal Investment Withdrawal
s s s s
March 1 P30,000 P20,000
June 1 P10,000 P10,000
August 1 20,000 2,000
December 1 5,000
The partnership’s profit and loss agreement provides for a salary of which P30,000 was paid to each partner
for 2018. Ireland is to receive a bonus of 10% on net income after salaries and bonus. The partners are also to
receive interest of 8% on average annual capital balances affected by both investments and drawings. Any
remaining profits are to be allocated equally among the partners. Assuming net income of P60,000 before
salaries and bonus, determine how the income would be allocated among the partners:
A. Ireland - P31,138; Finland - P28,862 C. Ireland - P30,633; Finland - P29,367
B. Ireland - P33,537; Finland - P26,463 D. Ireland - P30,684; Finland - P29,316

A.Y. 2018-2019 Special Qualifying Examination 2019 5-NAB

47. Greece and Italy share profits after the provision of annual salary allowances of P14,400 and P13,200,
respectively in the ratio of 6:4. However, if partnership’s income is insufficient to provide for said allowances
in full amount, the net income shall be divided equally between the partners. In 2018, the following errors
were discovered: Depreciation for 2018 is understated by P2,100 and the inventory on December 31 is
overstated by P11,400. The partnership net income for 2018 was reported to be P19,500. The capital accounts
of the partners should be increased (decreased) by
A. Greece - P(6,540); Italy - P(6,540) C. Greece - P3,000; Italy - P3,000
B. Greece - P(6,960); Italy - P6,540 D. Greece - P(6,750); Italy - P(6,750)

48. Germany contributed P24,000 and Belarus contributed P48,000 to form a partnership, and they agreed to
share profits in the ratio of their original capital contributions. During the first year of operations, they made a
profit of P16,290; Germany withdrew P5,050 and Belarus P8,000. At the start of the following year, they
agreed to admit Malta into the partnership. He was to receive a one-fourth interest in the capital and profits
upon payment of P30,000 to Germany and Belarus, whose capital accounts were to be reduced by transfer to
Malta’s capital account of amounts sufficient to bring them back to their original capital ratio. How should the
P30,000 paid by Malta be divided between Germany and Belarus?
A. Germany - P9,825; Belarus - P20,175 C. Germany - P10,000; Belarus - P20,000
B. Germany - P15,000; Belarus - P15,000 D. Germany - P9,300; Belarus - P20,700

49. Denmark and Romania are partners with capital balances of P60,000 and P20,000, respectively. Profits and
losses are divided in the ratio of 60:40. Denmark and Romania decided to form a new partnership with
Moldova, who invested land value at P15,000 for a 20% interest in the new partnership. Moldova’s cost of the
land was P12,000. The partnership elected to use bonus method to record the admission of Moldova into the
partnership. Moldova’s capital account should be credited for
A. P12,000 B. P15,000 C. P16,000 D. P19,000

50. In the HL partnership, Hungary’s capital is P140,000 and Latvia’s is P40,000 and they share income in a
3:1 ratio, respectively. They decide to admit Monaco to the partnership. Hungary and Latvia agree that some
of the inventory is obsolete. The inventory account is decreased before Monaco is admitted. Monaco invests
P40,000 for a 1/5 interest. What is the amount of inventory written down?
A. P20,000 B. P15,000 C. P10,000 D. P4,000

51. Using the data in no. 50, Monaco invests P40,000 for a one-fifth interest in the total capital of P220,000.
The journal entry to record the admission into the partnership will include:
A. A credit to Monaco, capital for P40,000. C. A debit to Hungary, capital for P3,000.
B. A credit to Cash for P40,000. D. A credit to Latvia, capital for P1,000.

52. The partner’s capital (income-sharing ratio in parentheses) of Algeria, Angola, Botswana and Benin LLP
on May 31, 2018, were as follows:
Algeria (20%) P 60,000
Angola (20%) 80,000
Botswana (20%) 70,000
Benin (40%) 40,000
Total partner's capital P250,000
On May 31, 2018, with the consent of Algeria, Angola and Benin:
 Botswana retired from the partnership and was paid P50,000 cash in full settlement of his interest.
 Cameroon was admitted to the partnership with a P20,000 cash investment for a 10% interest in the net
assets of Algeria, Angola and Benin.
The capital account to be credited to Cameroon is
A. P27,000 B. P25,000 C. P22,000 D. P20,000

53. Nigeria, Ethiopia and Egypt are partners with capital balances of P350,000, P250,000 and P350,000 and
sharing profits 30%, 20% and 50%, respectively. Partners agree to dissolve the business and upon liquidation,
all of partnership assets are sold and sufficient cash is realized to pay all the claims except one for P50,000.
Egypt is personally insolvent, but the other partners are able to meet any indebtedness to the firm. Determine
the amount that Nigeria will absorb on the remaining claim against the partnership.
A. P40,000 B. P30,000 C. P15,000 D. P25,000

54. As of Dec. 31, 2018, the books of 3M Partnership showed capital balances of Malawi- P40,000; Mali-
P25,000; Madagascar- P5,000. The partner’s profits and losses ratio was 3:2:1, respectively. The partners
decided to dissolved and liquidate. They sold all non-cash assets for P37,000 cash. After settlement of all
liabilities amounting to P12,000, they still have P28,000 cash left for distribution. The loss on realization of
the non-cash asset was:

A.Y. 2018-2019 Special Qualifying Examination 2019 6-NAB

 A. P45,000 B. P42,000 C. P40,000 D. P28,000

55. Gabon, Gambia and Congo are in the process of liquidating their partnership and their account balances as
of October 1, 2018 are as follows: Cash- P30,000; Non-cash assets – P70,000; Gambia, Loan- P14,000;
Gabon, capital- P10,000; Gambia, capital- P35,000; Congo, capital- P41,000. The profit and loss sharing ratio
has been 4:3:3 between Gabon, Gambia and Congo, respectively. Assuming that the partnership realized
P30,000 from the sale of non-cash assets and that any deficiency is uncollectible, Gambia must receive
A. P49,000 B. P37,000 C. P34,000 D. P19,000

56. Using data in # 55, for Gabon to receive P12,000, the non-cash assets must be sold for
A. P75,000 B. P30,000 C. P12,000 D. P10,000

57. China, India and Indonesia, partners in Jewelry Store, decided to liquidate their partnership on March 31,
2018. At this time, the partnership had cash of P315,000, non-cash assets of P2,100,000. The partners’ capital
balances, loan balances and P/L percentages are as follows:
China India Indonesia
Capital P360,000 P285,000 P390,000
Loan (debit) (45,000) (60,000)
P/L ratio 50% 25% 25%
The transactions for the months of April, May and June are summarized below:
April May June
Proceeds from realization of non-cash assets:
April – BV sold – 70% P1,360,000
May – BV sold – 20% 350,000
June – balance 180,000
Payment of liabilities 840,000 300,000 Paid balance
Liquidation expenses 10,000 12,000 15,000
Payment to partners 160,000 340,000 All cash left
In the month of June, the cash available to partners amounted to:
A. P183,000 B. P198,000 C. P165,000 D. P180,000

58. The condensed balance sheet of Pakistan, Bangladesh and Japan partnership as of December 31, 2018
follows:
Cash P28,000 Liabilities P48,000
Other assets 265,000 Pakistan, capital 95,000
Bangladesh, capital 80,000
Japan, capital 70,000
Income and loss ratio is 50:25:25 respectively. The partners voted to dissolve the partnership and liquidate by
selling assets in installments. P70,000 was realized on the first cash sale of other assets which has a book value
of P150,000. After settlement with creditors, all cash available was distributed to partners. How much cash
was received by Japan?
A. P10,500 B. P20,000 C. P21,250 D. P32,500

59. The following balance sheet is for the partnership of Philippines, Vietnam & Turkey, with the
corresponding profit and loss sharing ratio:
Cash P40,000 Liabilities P60,000
Other assets 210,000 Philippines, loan 8,000
Philippines, capital (40%) 40,000
Vietnam, capital (40%) 72,000
Turkey, capital (20%) 70,000
If the firm is dissolved and liquidated by selling assets in installments, the first sale of non-cash assets having a
carrying amount of P90,000 realizes P50,000, and cash of P17,000 after settlement with creditors is
distributed, how much will partner Vietnam receive?
A. P13,333 B. P8,000 C. P6,667 D. P-0-

60. Iran, Thailand and Myanmar are partners in ITM Partnership and share profits and losses 5:3:2,
respectively. The partners have agreed to liquidate the partnership. Prior to liquidation, the partnership balance
sheet shows the following book values:
Cash P25,200 Other liabilities P184,800
Non-cash assets 297,600 Notes payable to Myanmar 38,400
Iran, capital 72,000
Thailand, capital (12,000)

A.Y. 2018-2019 Special Qualifying Examination 2019 7-NAB

 Myanmar, capital 39,600
Liquidation expenses of P16,800 are paid. Non-cash assets with a book value of P240,000 are sold for
P216,000. How much cash should Myanmar receive?
A. P74,571 B. P46,458 C. P39,600 D. P37,600

61. On April 1, 2019, South Korea Corporation, a newly formed company, had the following shares issued and
outstanding.
Ordinary share, P20 par (20,000 shares originally issued for P60 per share)
Preference share, P50 par (6,000 shares originally issued for P100 per share)
On April 1, 2019, South Korea Company should report Ordinary Share Capital / Preference Share Capital /
and Share Premium, respectively of
A. P400,000/P300,000/P1,100,000 C. P400,000/P600,000/P800,000
B. P1,200,000/P300,000/P300,000 D. P1,200,000/P600,000/P0

62. The shareholder’s equity of Iraq Company revealed the following on June 30, 2018:
Preference Share, P100 par value P230,000
Share Premium – Preference 80,500
Ordinary Share, P15 par value 525,000
Share Premium – Ordinary 275,000
Subscribed Ordinary Share 5,000
Retained Earnings 190,000
Notes Payable 400,000
Subscription Receivable – Ordinary 40,000
How much is the legal capital of the company?
A. P755,000 B. P760,000 C. P1,115,000 D. P1,305,000

63. On July 1, 2018, Afghanistan Corp. issued 2,000 shares of its P10 par ordinary and 4,000 shares of its P10
par preference for lump-sum of P80,000. At this date, Afghanistan’s ordinary share was selling at P18 per
share and the preference share for P13.50 per share. The amount of proceeds allocated to ordinary share
should be
A. P60,000 B. P54,000 C. P48,000 D. P32,000

Data for item nos. 64 and 65

The shareholders’ equity of Saudi Arabia Corporation showed the following data on December 31, 2017:
12% Preference Share Capital, P30 par, 135,000 shares issued and outstanding 4,050,000
Ordinary Share Capital, P50 par, 180,000 shares issued and outstanding 9,000,000
Share premium- preference 1,080,000
Share premium- ordinary 3,240,000
Retained earnings 1,395,000
The 2018 transactions of the company affecting its equity are summarized chronologically as follows:
1. Issued 27,000 preference shares at P40.
2. Issued 94,500 ordinary shares at P70.
3. Retired 5,400 preference shares at P45.
4. Purchased 13,500 ordinary shares at P80.
5. Split ordinary share two for one (par value reduced to P25).
6. Reissued 13,500 treasury shares at P50.
7. Shareholders donated to the company 9,000 ordinary shares when shares had market price of P52. One
half of these shares were subsequently issued for P54.
8. Dividends were paid at the end of the calendar year on the ordinary shares at P2 per share and on the
preference shares at the preference rate.
9. Profit for the year was P2,520,000.
64. What is the balance of the Ordinary Share Capital?
A. P13,500,000 B. P13,725,000 C. P13,968,000 D. P15,615,000

65. What is the balance of the Shareholders’ Equity on December 31, 2018?
A. P26,922,400 B. P26,940,240 C. P26,949,240 D. P26,958,960

66. The shareholders’ equity section of Uzbekistan Co. as of Dec. 31, 2018, contained the following accounts:
Ordinary share, 25,000 shares authorized, 10,000 shares outstanding P30,000
Capital contributed in excess of par 40,000
Retained earnings 80,000
Uzbekistan’s board of directors declared a 10% bonus issue on April 1, 2019, when the market value of the
share was P7 per share. Accordingly, 1,000 new shares were issued. Uzbekistan’s entire share has a par value

A.Y. 2018-2019 Special Qualifying Examination 2019 8-NAB

of P3. Assuming Uzbekistan sustained a net loss of P12,000 for the quarter ended March 31, 2019, what
amount shall be reported as retained earnings on April 1, 2019?
A. P73,000 B. P68,000 C. P64,000 D. P61,000

67. The following selected accounts were taken from the Dec. 31, 2018, trial balance of Malaysia Corporation:
Subscribed share capital P 1,250,000
Treasury shares, 600 shares at cost 90,000
Unissued share capital 6,000,000
Share premium 180,000
Appropriation for plant expansion 500,000
Retained earnings 1,200,000
Authorized share capital - 100,000 shares 10,000,000
Subscriptions receivable 320,000
The minutes of the meeting of the board of directors reveal that on December 31, 2018, the company’s board
declared a 10% cash dividend payable to shareholders and subscribers of record on December 20, 2018. The
dividend check are to be distributed on January 10, 2019. Kota Kinabalu, the company’s accountant, has not
recorded this dividend declaration. What is the amount of unrecorded dividend payable?
A. P519,000 B. P516,000 C. P487,000 D. P394,000

68. he stockholders’ equity of Nepal Company on Dec. 31, 2016 consists of the following accounts:
Preference share capital, 10%, cumulative, P100 par P 5,000,000
Ordinary share capital, P100 par 20,000,000
Subscribed ordinary shares, net of Subscription receivable of
P4,000,000 (100,000 shares) 6,000,000
Treasury ordinary shares at cost (50,000 shares) 4,000,000
Share premium 10,000,000
Retained earnings 8,000,000
Preference dividends have not been paid for three years and have a liquidation value of P110. The book value
of ordinary share is
A. P210 B. P168 C. P166 D. P152

69. Yemen Corporation, a calendar-year company, had sufficient amount or retained earnings in 2018 as a
basis for dividends of P100,000 on April 1, 2018, and issued promissory notes to its shareholders in lieu of
cash. The notes, which were dated April 1, 2019, and a 10% interest rate. How should Yemen amount for the
scrip dividend and related interest?
A. Debit Retained Earnings for P110,000 on April 1, 2018.
B. Debit Retained Earnings for P110,000 on March 1, 2019.
C. Debit Retained Earnings for P100,000 on April 1, 2018 and debit Interest Expense for P10,000 on
March 31, 2019.
D. Debit Retained Earnings for P100,000 on April 1, 2018 and debit Interest Expense for P7,500 on
December 31, 2018.

70. Sri Lanka Company had the following ordinary share activities in 2018:
January 1 500,000 ordinary shares outstanding
March 1 Issued new 60,000 ordinary shares
June 1 Ordinary share was split 2-for-1
November 1 Reacquired 48,000 ordinary shares
Sri Lanka Company had 100,000 shares of P20 par, 10% cumulative and convertible preference share
outstanding throughout 2018. Each preference share is convertible into one ordinary share. During the year
2018, the company reported profit of P2,930,000. What is the basic earnings per share?
A. P2.68 B. P2.55 C. P2.50 D. P5.33

71. At December 31, 2017 and 2018, Syria Company had outstanding 4,000 shares of P100 par value 12%
cumulative, fully participating preference share and 20,000 of P10 par value ordinary share. At December 31,
2017, dividends in arrears on the preference share were P24,000. Cash dividends declared in 2018 totaled
P108,000. What are the amount of dividend per share on the preference and ordinary shares, respectively?
A. P20.00 and P1.40 C. P18.00 and P1.40
B. P20.00 and P1.80 D. P18.00 and P1.80

Data for item nos. 72 and 73

Cambodia Corporation has two classes of ordinary shares outstanding: 9%, P20 par preference share and P70
par ordinary share. During the fiscal year ending December 31, 2018, the company had the following equity
transactions in chronological order:
No. of shares Price per share

A.Y. 2018-2019 Special Qualifying Examination 2019 9-NAB

 Issue of preference shares 10,000 P28
Issue of ordinary shares 35,000 70
Reacquisition and retirement of preference 2,000 30
Purchase of ordinary treasury shares 5,000 80
Share split 2-for-1
Reissue of ordinary treasury shares 5,000 52
Balances of the accounts in the shareholders’ equity section of the December 31, 2017 statement of financial
position were:
Preference share capital (50,000 shares) P 1,000,000
Ordinary share capital (100,000 shares) 7,000,000
Share premium – preference 400,000
Share premium – ordinary 1,200,000
Accumulated profits 550,000
Total shareholders’ equity P10,150,000
72. After considering the given transactions, how much is the total shareholders’ equity at December 31,
2018?
A. P12,480,000 B. P12,680,000 C. P12,600,000 D. P10,150,000

73. What is the total cost of the remaining treasury shares?

A. P0 B. P200,000 C. P260,000 D. P400,000

74. At the end of 2017, Jordan Company has 18,000 shares of P20 par ordinary shares that were all issued at
an average price of P24 per share. The retained earnings balance on this date is P550,000. During 2018, the
company entered into the following transactions:
January 16 Issued 13,000 ordinary shares at P25 each.
March 21 Exchanged 12,000 ordinary shares for an equipment. On this date, the ordinary share is selling
at P27. There is no established fair market value for the equipment acquired.
May 7 Reacquired 5,000 of its own ordinary shares at P26.
July 1 Accepted subscriptions for 10,000 ordinary shares at P28. The contract called for 20% down
payment.
August 20 Sold 4,000 treasury shares at P29 each.
December 1 Collected the balance due on July 1 subscriptions and issued the corresponding certificates.
Profit for the year 2018 was P640,000. No dividends were declared during the year. What is Jordan’s total
shareholders’ equity at December 31, 2018?
A. P2,375,000 B. P2,537,000 C. P2,735,000 D. P1,895,000

75. Singapore Company provided the following information for the year ended December 31, 2018:
Profit 2,000,000 Total assets 14,950,000
Share capital 5,600,000 Share premium 2,400,000
Dividends declared 1,200,000 Prior period adjustment for 2017
overdepreciation 500,000
The debt to equity ratio is 30% at December 31, 2018. What was the retained earnings balance on January
1, 2018?
A. P3,200,000 B. P2,200,000 C. P2,165,000 D. P1,165,000

- END OF EXAMINATION -
Be blessed! 

Believe in yourself, take on your challenges, and dig deep within yourself to conquer fears.
Never let anyone bring you down. You got to keep going.

It’s never too late to start over. If you weren’t happy with yesterday, try something beginning today. Don’t stay
stuck. Do better. May you remember 2 Timothy 2:15 “Do your best to present yourself to God as one approved, a
worker who has no need to be ashamed, and correctly handles the word of truth.” Do your best, ask for guidance
and trust Him, and everything that you do will not be in vain!

Concentrate === Pray === Achieve

/NABergonia2019

A.Y. 2018-2019 Special Qualifying Examination 2019 10-NAB