1st Midterm Departmental Examinations Reviewer

A.Y. 2023 - 2024

Subject Code: ACCO 101

Course Subject: Financial Accounting and Reporting

1. It is the assumption that the business will continue to operate in the

foreseeable future. Hence, it is assumed that the business has neither the
intention nor the need to liquidate or to cease trading.
a) Materiality concept
b) Cost-matching principle
c) Going-concern Assumption
d) Conservatism

2. Which of the following group of accounts are closed in the Income Summary
at the end of the Accounting Cycle?
a) Service Revenue, Utilities Expense, Accumulated Depreciation
b) Depreciation Expense, Unearned Rent Income, Accounts Payable
c) Utilities Expense, Rent Revenue, Depreciation Expense
d) Cash, Accounts Payable, Owner’s CapitaL

3. Which of the following is the guiding principle or basis on why adjusting

entries are made?
a) The matching principle
b) Cost-benefit principle
c) Cash-basis principle
d) Faithful recognition principle

4. Statement 1: The term accounting and bookkeeping are identical.

Statement 2 : Recording of reversing entries are necessary and should be
made at the beginning of the accounting period.
Statement 3: All adjusting entries involve one entry to a balance sheet
account and another one to an income statement account.
a) True, False, False
b) False, False, True
c) True, True, False
d) False, True, True
5. There are no other changes in liabilities and capital of the business except for
the net income and withdrawals of the owner. If the net income is more than
all the drawings made by the business owner, how will the assets be affected?
a) Decreased in the amount of the net income minus owner’s drawings
b) Increased in the amount of the owner’s drawing minus net income
c) The data is incomplete to make a relevant conclusion
d) Increased in the amount of net income minus the owner’s drawings

6. Closing entries are made:

a) To bring the nominal accounts balance to zero
b) To bring the real accounts balance to zero
c) To bring the balance sheet accounts to zero and be rolled over in the next period
d) To bring all the accounts balance to zero to signal a new accounting period

7. The accountant of Shen Company made an erroneous entry of, Dr: Cash
Cr: Accounts Payable, after a collection of P1,000 from a credit customer.
What will be the effect of this erroneous entry on the company’s Cash,
Accounts Receivable, and Accounts Payable respectively?
a) Overstated, no effect, understated
b) No effect, overstated, overstated
c) No effect, understated, overstated
d) Understated, overstated, no effect

8. On June 1, 2023 Jenny Company started its operation and bought office
supplies in the amount of 10,000 pesos and made a journal entry to reflect
the said transaction. At the end of the month, Jenny found out that there are
still remaining office supplies in the amount of 3,000. She made an adjusting
entry to reflect this by debiting Office Supplies and crediting Supplies
Expense. By the given facts, what must have been the journal entry made by
Jenny on June 1, 2023?
a) Office Supplies 3,000
Supplies Expense 3,000
b) Supplies Expense 7,000
Office Supplies 7,000
c) Supplies Expense 10,000
Cash 10,000
d) Office Supplies 10,000
Cash 10,000
9. Katie Company sustained a net loss for the period. What is the closing entry
to reflect this?
a) Dr; Katie, Capital Cr; Income Summary
b) Dr; Income Summary Cr: Katie, Capital
c) Dr: Income Summary Cr: Cash
d) Dr: Katie, Drawing Cr; Income Summary

10. Adjusting Entries are generally made:

a) At the beginning of the accounting period
b) After reversing entries are made
c) After the closing entries are made.
d) At the end of the accounting period

11. Which of the following statements is/are true?

Statement 1: The asset section of the Balance Sheet presents only the net
amount of the Property, Plant, and Equipment after deducting its
corresponding depreciation.
Statement 2: The Statement of Changes in Equity contains real and nominal
accounts.
Statement 3: The Statement of Cash Flows using an indirect method starts the
computation of the investing activity section from the Net Income.
Statement 4: The Income Statement illustrates the company's accumulated
profits and losses from its inception.
a) Only Statement 1 is true
b) Only Statement 2 is true
c) Only Statement 3 is true
d) Only Statement 4 is true

(For Numbers 12-13)

Penelope Co. sold merchandise inventory to Ruth Company amounting to
P12,000 including the freight costs, P200. Terms: FOB Shipping Point, freight
prepaid, 3/10, n/eom.

12. What is the entry to record the sale?

a) Accounts Receivable 12,000
Freight Out 200
Sales 12,000
Cash 200

b) Accounts Receivable 11,800

 Freight Out 200
Sales 11,800
Cash 200
c) Accounts Receivable 12,000
Sales 12,000

d) Accounts Receivable 12,000

Sales 11,800
Cash 200

13. What is the entry to record the purchase of the inventory by Ruth Company?
a) Purchase 12,000
Accounts Payable 12,000

b) Purchase 12,000
Freight In 200
Accounts Payable 12,000
Cash 200

c) Purchases 11,800
Freight In 200
Accounts Payable 12,000

d) Purchases 11,800
Accounts Payable 11,800

For Numbers 14-15

Calista Company received a returned merchandise inventory from Acacia Co.
amounting to P10,000, the cost of the inventory is P7,000.

14. What is the entry to record the returned merchandise assuming the entity
uses a Periodic System?
a) Purchases Return and Allowances 10,000
Accounts Receivable 10,000

b) Sales Return and Allowances 10,000

Accounts Receivable 10,000

c) Purchases Return and Allowances 7,000

 Accounts Receivable 7,000

d) Sales Return and Allowances 7,000

Accounts Receivable 7,000

15. What is the entry to record the returned merchandise assuming the entity
uses a Perpetual System?

a) Sales 10,000
Purchase Return and Allowances 7,000
Merchandise Inventory 7,000
Accounts Receivable 10,000

b) Sales Return and Allowances 10,000

Cost of Goods Sold 7,000
Merchandise Inventory 10,000
Accounts Receivable 7,000

c) Sales Return and Allowances 10,000

Cost of Goods Sold 7,000
Accounts Receivable 10,000
Merchandise Inventory 7,000

d) Sales Return and Allowances 10,000

Accounts Receivable 10,000

16. Amelia Company purchased merchandise inventory from Aurora Company

amounting to P50,000 with terms of 10%, 20%, 2/10, and n/30. Which of the
following statements is true?
a) Amelia Company will avail of the trade discount if she pays the inventory within 10
days
b) Amelia Company will not avail of any discount if she does not pay within 10 days
c) Amelia Company will avail the cash discount if she pays the inventory after 10 days
d) Neither of the statements are true.

17. The following statements are true regarding the Special Journals, EXCEPT?
a) includes all transactions for a business
b) customized to fit the needs of each business
 c) made up of special columns labeled with account titles for accounts used in
frequently occurring transactions
d) include an “Other” or “Sundry” column that is used to hold accounts and amounts
for items that do not fit in columns

18. The owner used the inventories for his own use. This transaction will be
recorded in what type of journal?
a) Cash Disbursement Journal
b) Purchases Journal
c) Sales Journal
d) General Journal

19. Vera Company purchased an inventory on account from Abyss Company. This
transaction will be recorded in what type of journal?
a) Cash Disbursement Journal
b) Purchases Journal
c) Sales Journal
d) General Journal

20. Josefina Company sold merchandise Inventory to Azalea Co. This transaction
will be recorded in what type of journal?
a) Cash Receipt Journal
b) Purchases Journal
c) Sales Journal
d) General Journal

21. The net income for the period is added on what side of the income statement
and balance sheet column in the worksheet?
Income Statement Balance Sheet
a) Credit Debit
b) Debit Credit
c) Credit Credit
d) Debit Debit

22. In preparing a worksheet, which of the following accounts is not extended to

the balance sheet column?
a) Inventory, Equipment, and Allowance for Doubtful Accounts
b) Accounts Payable, Notes Payable, and Loan Payable
c) Sales, Cost of Goods Sold, Interest Expense, and Advertising Expense
d) Owner’s Capital and Drawing
23. Which of the following expressions is incorrect?
a) Gross profit – operating expenses = net income
b) Sales – cost of goods sold – operating expenses = net income
c) Net income + operating expenses = gross profit
d) Operating expenses – cost of goods sold = gross profit

24. In getting the cost of good for the year, purchases, freight in, sales returns,
and ending inventory are ____________ to the beginning inventory
respectively.
a) Added, Added, Deducted, Deducted
b) Deducted, Deducted, Added, Added
c) Added, Added, Added, Added
d) Added, Added, Ignore, Deducted

25. When a non-cash asset is contributed to the partnership, what is the amount
to be recorded in the partner capital account?
a) Cost
b) Carrying value at the date of the contribution
c) Fair Value at the date of the contribution
d) Assessed Valuation for property tax purposes

26. When two sole proprietors decide to form a partnership together they can
a) Use the old book of one of the sole proprietors only
b) Use a new book only
c) Either use the old book of one of the sole proprietors or a new book
d) Neither uses the old book of one of the sole proprietors nor a new book

27. Upon the formation of the partnership, if the partner's contributed capital is
greater than the total agreed capital or its capital interest there is a
a) Deficit Capital
b) Bonus from another partner (Bonus Method)
c) Withdrawal of the partner
d) Nothing

28. Which of the following statement is/are false?

Statement 1: The industrial partner should have a just and equitable share in
the losses of the partnership
Statement 2: Capitalist and Industrial partners should share in the
partnership's profit based on their agreement and in the absence of
agreement equally.
a) Statement 1
 b) Statement 2
c) Both Statements 1 and 2
d) None of the above

29. Which of the following statement is/are true?

Statement I: Salaries, Interest, and Bonuses are treated as expenses of a
partnership
Statement II: Bonus is allowed even if there is insufficient profit
a) Statement I
b) Neither of the statements
c) Beginning Capital
d) Ending Capital

30. A method of dividing profits that uses as a basis the amount of capital invested
and the time during which such capital is actually used by the firm.
a) Original Capital
b) Average Capital
c) Beginning Capital
d) Ending Capital

31. How much is Mingyu Company's total assets if it has a total owner's equity of
175,000 while its total liabilities amount only to a fifth of its total assets?
a) P175,000
b) P200,000
c) P218,750
d) P281,750

32. At the beginning of the year, Wonwoo company had total assets of 700,000
and total liabilities of 250,000. During the year its total assets increased to
900,000 and its total owner's equity increased by 80,000. How much are the
total liabilities?
a) P1,070,000
b) P820,000
c) P450,000
d) P370,000

33. Lovegood Company leases its office with an agreement that tenants will pay
rent in advance monthly or annually. However, not all the tenants were able
to make timely payments. The following information is obtained from
Lovegood’s balance sheet.
 2022 2023
Rent Receivable P295,000 P351,000
Unearned Rentals P743,000 P903,000

During 2023, Lovegood received payment of 2,000,000 from tenants. What

amount of rental revenue should Lovegood recognize for 2023?

a) P1,784,000
b) P1,896,000
c) P2,000,000
d) P2,216,000

34. Taylor Company received 150 days of 10% notes receivables from its client
on November 1, 2023, for the service rendered amounting to 430,000. How
much interest income should Taylor Company recognize on December 30,
2023? Use 360 days.
a) P7,166.67
b) P17,200
c) P17, 916
d) P43,000

35. At the beginning of the year, Luca Company had the following balances:

Office Equipment – P 290,000 Accumulated depreciation – P 34,800

On August 1, 2023, additional equipment was purchased with a total cost of

P 115,000. Office equipment is depreciated at 12% per year. The
depreciation for the year is
a) P34,800
b) P40,550
c) P48,600
d) P49,300

36. On December 31, 2023, Mina Company has the following information

● Prepaid Insurance has a beginning balance of 18,000. Mina Company

pays an annual insurance premium worth 72,000 on March 31, 2022
● On March 31, 2023, Mina Company paid its annual insurance premium
amounting to P84,000
 ● Mina Company received an advance rent payment of P60,000 on August
31, 2023

What is the entry to adjust the Prepaid Insurance?

a) Prepaid Insurance 81,000
Insurance Expense 81,000
b) Insurance Expense 81,000
Prepaid Insurance 81,000
c) Prepaid Insurance 39,000
Insurance Expense 39,000
d) Insurance Expense 39,000
Prepaid Insurance 39,000

37. Juana Co. had the following balances at the end of the period before
correcting the following errors:
Assets P1,364,800
Liabilities P654,300

● Recorded the purchased merchandise inventory on account as P7,456,

but the correct amount was P7,546.
● Sales on account were omitted, P35,980.
● The payment of the customer on his account was recorded twice,
P12,945.

What is the adjusted balance of the Assets and Equity?

a) Assets = P1,387,925; Equity = P733,535
b) Assets = P1,387,925; Equity = P764,480
c) Assets = P1,400,870; Equity = P764,480
d) Assets = P1,400,870; Equity = P733,535

38. Meg Company's statement of financial position for 2022 and 2023 revealed
that the total owner's equity as of that time was P435,000 and 467,000
respectively. The changes in the owner's equity were caused by an additional
investment of 80,000 by Meg, a withdrawal of 36,000, and net income during
the period. Identify the amount of net income/loss reported in the income
statement.
a) (P12,000)
b) P12,000
c) (P76,000)
d) P76,000
39. Upon reviewing its record, Jo Company obtained the following information

Cash P376,000
Office Equipment that has a
residual value of 30,000 and
12 years of useful life. P600,000
Inventory including goods
purchased in transit FOB
Destination worth 40,000 P200,000
Advance payment of rent
recorded using asset method P54,000
Notes Payable P239,000
Owner's Equity P679,000
Accounts Receivable is 150% of Cash

What is the total current assets shown on the balance sheet?

a) P590,000
b) P1,154,000
c) P1,194,000
d) P1,706,500

40. On May 20, 2023, Barbie Company purchased goods from Ken Company with
a list price of 450,000. Ken company allowed a 5% trade discount and
returned goods amounting to 30,000. Barbie Company paid P389,550 on the
last day of the discount period which is on May 31, 2023. Determine the credit
term given by Ken Company.
a) 8/10, n/30
b) 5/10, n/30
c) 2/10, n/30
d) 9/10, n/30

41. Mango Company purchased merchandise inventory with a list price of 550,000
on October 7. The seller gives a 20% and 10% trade discount and has credit
terms of 2/10, n/30. Mango Company paid half of the invoice price on October
16. What amount should Mango Company record as a discount?
a) P161,920
b) P7,920
c) P3,960
d) P0
For Number 42-43
Purchase merchandise on account, P89,600 inclusive of
June 1
VAT. Credit terms 2/10, n/30.
Returned merchandise bought on June 1 amounting to
June 5
P5,600 gross of VAT
June 11 Paid the supplier the amount due.

42. What will be the amount and effect of the June 5 transaction on the Input Tax
recorded on June 1?a
a) Increase; P600
b) Decrease; P600
c) Increase; P672
d) Decrease; P672

43. How much is the Purchase Discount and the Input VAT that will be recorded
on the journal entry on June 11?
a) Purchase Discount P1,680; Input VAT P201.6
b) Purchase Discount P1,680; Input VAT P180
c) Purchase Discount 1,500; Input VAT P180
d) Purchase Discount P0; Input VAT P0

44. The following data is available on the records of Margarette Co.:

Sales 158,600
Sales Return 1,540
Beginning Inventory ?
Purchases 35,705
Operating Expenses 13,050
Ending Inventory 10,305
Net Income 29,490
What is the balance of the Cost of Goods Sold?
a) P114,520
b) P42,540
c) P127,490
d) Cannot be determined due to insufficient information.

45. Luna Company has the following information:

Beginning Inventory 12,470
Ending Inventory 9,230
Purchase return and allowances 1,010
Sales 204,300
 *Assuming that the Gross Profit was 25% of the Sales.

What is the amount of the Gross Purchases?

a) P162,455
b) P149,985
c) P150,995
d) P153,225

46. The net income of Nicole Company was P1,548,030 before tax. It was
discovered that some adjustments were not considered in computing the net
income for the year. The following are to be included in the computation of
the net income: Rent Expenses should be decreased by 12,360; the ending
inventory should be increased by 2,490; the purchases should be increased by
34,800; there should be recognized depreciation amounting to P12,000.
Assume that the tax rate is 30%, what is the net income before tax?
a) P1,061,256
b) P1,491,360
c) P1,043,952
d) P1,516,080

47. Amelia, Penelope, and Calista formed a partnership and agreed to divide the
initial capital equally, even though Amelia contributed P230,000, Penelope
gave P190,000 in equipment, and Calista contributed P110,000 cash and
P100,000 in supplies. How much is the implied bonus to Penelope?
a) P10,000
b) P20,000
c) P210,000
d) P0

48. Josephina, Nicole, Scarlett, and Angela formed a partnership named Tea Tea
Partnership. Josephina contributed P70,000 cash and automobiles with a
book value of P40,000 and an appraised value of P50,000. Nicole contributed
P80,000 cash. Scarlett contributed Land worth P120,000 and P60,000 cash.
Angela contributed P20,000 cash. Building with a fair market value of
P150,000 and a mortgage of P30,000 assumed by the partnership. Their
agreed contribution is 2:3:3:2. What is the amount Angela must invest or
withdraw to meet the agreed contribution while assuming that Scarlett’s
contributed capital is equal to their agreed capital?
a) Invest P25,000
b) Invest P50,000
c) Withdraw P20,000
 d) Withdraw P50,000

49. Ruth, Abyss, and Lena are to form a partnership. Ruth will contribute cash of
P50,000 and his computer originally cost P60,000 but with a second-hand
value of P25,000. Abyss will contribute P80,000 cash. Lena, whose family sells
computers, will contribute P25,000 in cash and a brand new computer with a
printer that cost his family's computer dealership P50,000 but with a regular
selling price of P60,000. The three agree to share profits equally. Upon
formation, their initial capital balances are?
a) Ruth P110,000; Abyss P80,000; Lena P75,000
b) Ruth P110,000; Abyss P80,000; Lena P85,000
c) Ruth P75,000; Abyss P80,000; Lena P85,000
d) Ruth P75,000; Abyss P80,000; Lena P75,000

50. Juana and Azalea form a partnership. Juana invests P300,000 in cash for her
60% interest in the capital and profits of the business. Azalea contributes land
that has an original cost of 40,000 and a fair market value of P70,000, and a
building that has a taxable basis of P50,000 and a fair value of P90,000. The
building is subject to a P40,000 mortgage that the partner will assume. What
amount of cash should Azalea contribute?
a) P40,000
b) P80,000
c) P140,000
d) P180,000

51. Eca, Romi, and Andy are partners contributing P100,000, P50,000, and
services respectively. According to their agreement profits shall be divided in
the ratio of 5:4:1 respectively. There is no stipulation as to the sharing of
losses. The partnership sustained a net loss of P100,000. How much is the
share of each partner in the loss?
a) Eca – P50,000; Romi – P40,000; Andy – P10,000
b) Eca – P66,667; Romi – P33,333; Andy – 0
c) Eca – P55,556; Romi – P44,444; Andy – P0
d) Eca – P33,334; Romi – P33,333; Andy – P33,333

52. Gelo is considering two options for allocation of profits before entering the
partnership. Either he will receive a salary of 60,000 without any bonus or a
salary of 25,000 with a 25% bonus after salaries and bonus. Salaries of other
partners are equal to 125,000. What should be the minimum amount of net
income so that the two options are equal for Gelo?
a) P325,000
 b) P35,000
c) P220,000
d) P65,000

Use the following information for the next two question, 53 and 54:
Fred and Fran contributed 300,000 and 200,000 respectively to form a
partnership. It is stipulated that the profit sharing agreement should be as
followed:
a) Salary of 100,000 and 30,000 respectively;
b) Interest of 10% on their capital contribution;
c) Bonus of 25% to Fred after interest and bonus but before salary;
d) Any residual income(loss) should be divided in the ratio of 2:1
53. Determine the share of Fran if the partnership sustained a net income of
550,000 for the year.
a) P140,000
b) P410,000
c) P360,000
d) P280,000

54. Determine the share of Fred if the partnership sustained a net loss of 9,000.
(Parenthesis indicates a loss.)
a) (P4,000)
b) P3,000
c) (P3,000)
d) P4,000

55. Lanz, Joanna, and Cyril formed the LJC Partnership with their respective
contribution of 350,000; 100,000; 200,000. Their profit and loss sharing
agreement is as follows:
a) Lanz and Cyril should receive a salary of 20,000 and 30,000
respectively;
b) An interest of 15% on their capital contribution;
 c) A bonus of 10% to Cyril before salary, interest, and bonus;
d) Any residual income(loss) should be allocated on the ratio of 2:1:3
respectively.
It is further stipulated on their agreement that Joanna should receive at least
60,000 if there is a net income.
How much should Lanz, Capital be credited if LJC Partnership sustained an
income of 280,000?
a) P0
b) P107,333
c) P140,250
d) P96,300

Use the following information for the next two question, 56 and 57:
On January 1, 2023, Jaimie and Jean Miguel are partners who contributed
200,000 and 100,000 respectively to form the J&J Partnership. Jaimie
withdrew 20,000 from the business for his personal use on March 31, 2023.
And made an additional contribution of 70,000 on July 1, 2023. Jean Miguel
made an additional contribution of 60,000 on September 30,2023. Their profit
and loss sharing agreement was a follows:
a) Salary of 20,000 and 35,000 respectively;
b) Interest of 10% on their average capital;
c) Any residual income is divided according to the ratio of their capital
contribution
56. How much is Jamie’s share in the profit if the partnership sustained 98,000
net income?
a) P34,343
b) P51,667
c) P49,667
d) P57,333

57. With the same information as above. The only difference is that the partners
agreed that the interest should be based on the ending capital balance of the
partners. How much would be Jean Miguel’s share?
a) P49,667
b) P50,333
c) P61,230
d) P48,333
58. Taylor, Este, Alana and Danielle, are the partners of NBNC Partnership. Taylor
contributed 200,000. Este’s contribution is double the contribution of Taylor.
Meanwhile, Alana's contribution is equal to 75% of Este’s contribution.
Danielle contributed half of what Alana contributed.
a) P782,816
b) P378,998
c) P606,263
d) Given data are insufficient

59. Given the following accounts, what is the balance of Tina, Capital at the
financial statement?
Cash 90,000
Accounts Receivable 108,000
Machinery and Equipment 450,000
Allowance for Bad debts 29,000
Office Supplies 13,000
Accounts Payable 89,000
Accumulated Depreciation – Machinery 26,000
Notes Payable 21,000
Notes Receivable 15,000
a) P563,000

b) P511,000
c) P632,000
d) P324,698

60. LDR Comp. has an equipment with a book value of 620,500 and accumulated
depreciation of 229,500 as of December 31, 2023. The said equipment was
acquired by the company on January 1, 2021. If the company uses the
straight-line method of depreciation, what is the depreciation rate per year?
a) 6%
b) 7%
c) 8%
d) 9%
 Summary of Answers

1. C 31. C
2. C 32. D
3. A 33. B
4. B 34. A
5. D 35. B
6. A 36. B
7. B 37. C
8. C 38. A
9. A 39. B
10. D 40. C
11. B 41. D
12. D 42. B
13. C 43. C
14. B 44. A
15. C 45. C
16. D 46. D
17. A 47. B
18. D 48. C
19. B 49. C
20. A 50. B
21. B 51. C
22. C 52. A
23. D 53. A
24. D 54. D
25. C 55. D
26. C 56. D
27. B 57. B
28. C 58. C
29. B 59. B
30. B 60. D
 Summary of Answers – Explained

1. (C) Basis: 3.9 CFAS

2. (C)
3. (A)
4. (B)
5. (D)
6. (A)
7. (B)
8. (C)
9. (A)
10. (D)
11. (B)
12. (D)
13. (C)
14. (B)
15. (C)
16. (D)
17. (A)
18. (D)
19. (B)
20. (A)
21. (B)
22. (C)
23. (D)
24. (D)
25. (C)
26. (C)
27. (B)
28. (C) Statement 1: Industrial partners should not share in the losses unless otherwise
stipulated and they should receive a just and equitable share in the profit
Statement 2: In the absence of an agreement in their sharing of profits, the capitalist
partner should share profit based on their contribution.
29. (B)
30. (B)
31. (C) P218,750
 Assets Liabilities Equity
5 1 4
- =
5 5 5

Owner's Equity 175,000

÷ 4/5
Total Assets P218,750

32. (D) P370,000

Total Assets, Beg 700,000
Total Liabilities, Beg (250,000)
Total Owner's Equity, Beg 450,000
Increases in Owner's Equity 80,000
Total Owner's Equity, End 530,000

Total Assets, End 900,000

Total Owner's Equity, End (530,000)
Total Liabilities, End 370,000

33. (B) P1,896,000

Payment from Tenants P2,000,000
Add: Rent Receivable, 2023 351,000
Unearned Rentals, 2022 743,000
Less: Rent Receivable, 2022 (295,000)
Unearned Rentals, 2023 -903,000
Rent Revenue P1,896,000

34. (A) P7,166.67

 Notes Receivable P430,000
Interest Rate x 10%
Annual Interest 43,000
November - December (60 days) x 60/360
Interest Income for 2023 P7166.67

35. (B) P40,550

Additional Equipment Cost P115,000
x 12%
Annual Depreciation 13,800
x 5/12
Depreciation Expense (Aug 1 - Dec 31) 5,750
Office Equipment Depreciation (290,000 x 12%) 34,800
Depreciation for the year P40,550

36. (B) Insurance Expense 81,000

Prepaid Insurance 81,000

Expired Prepaid Insurance, Beginning P18,000

(84,000 x 9/12) 63,000
Insurance Expense P81,000

37. (C) Assets = P1,400,870; Equity = P764,480

Use the Accounting Equation (Asset = Liabilities + Equity) to get the balance of the Equity.
Asset Liabilities Equity

Unadjusted Balances 1,364,800 654,300 710,500

Transposition Error 90 90

Omitted Sales 35,980 35,980

Customer Payment -12,945 (Cash)

 +12,945 (AR)

Total P1,400,870 P654,390 P764,480

38. (A) (P12,000)

Owner's Equity, Ending P467,000
Add: Withdrawal 36,000
Less: Additional Investment (80,000)
Owner's Equity, Beginning (435,000)
Net Loss (P12,000)

39. (B) 1,154,000

Cash P376,000
Inventory (600,000 - 40,000) 560,000
Prepaid Rent 54,000
Accounts Receivable (376,000 x 150%) 564,000
Total Current Assets P1,554,000

40. (C) 2/10, n/30

List Price P450,000
100 - 5% Trade Discount 95%
Invoice Price 427500
Purchase Returns (30,000)
Payable to Ken's Co. 397,500
Cash Paid (389,550)
Cash Discount 7,950
Payable to Ken's Co. 397,500
Discount Rate 2%
 May 21 - May 31 = 10 days

41. (D) P0 - The trade discount is not recorded in the books and should be deducted
immediately from the list price, whereas the cash discount requires payment in full first.

42. (B) Decrease; P600

“VAT is included” - the amount given is equivalent to 112% or 1.12
Amount of the Merchandise Returned with VAT 5,600

Divide: Rate 112%

Amount of Merchandise Returned without VAT 5,000

Multiply: VAT Rate 12%

Input VAT on the Returned Merchandise P600

43. (C) Purchase Discount 1,500; Input VAT P180

Purchase Merchandise 89,600

Less: Returned Merchandise (5,600)

Total of Merchandise Purchase 84,000

Divide: Rate 112%

Amount of Merchandise Purchase without VAT 75,000

Multiply: Discount Rate 2%

Amount of Purchase Discount P1,500

Multiply: VAT Rate 12%

Input VAT decrease from the discount P180

44. (A) P114,520

 Net Income 29,490

Add: Operating Expenses 13,050

Gross Profit 42,540

Less: Sales 158,600

Less: Sales Return (1,540) (157,060)

Cost of Goods Sold P114,520

45. (C) P150,995

Sales 204,300

Multiply: Complement of Gross Profit Rate (100% - 25%) 75%

Cost of Goods Sold 153,225

Add: Ending Inventory 9,230

Cost of Goods Available for Sale 162,455

Less: Beginning Inventory (12,470)

Net Purchases 149,985

Add: Purchase Returns and Allowances 1,010

Gross Purchases P150,995

46. (D) P1,516,080

Net Income Before Tax, unadjusted 1,548,030

Add: Decrease in Rent Expense 12,360

Add: Increase in Ending Inventory 2,490

 Less: Increase in Purchases (34,800)

Less: Depreciation (12,000)

Net Income Before Tax, adjusted P1,516,080

47. (B) P20,000

Amelia contributed capital 230,000

Penelope contributed capital 190,000

Calista contributed capital 210,000

Total Contributed Capital 630,000

Divide: Number of partners 3

Agreed Capital for each partner 210,000

Less: Penelope contributed capital (190,000)

Implied Bonus to Penelope P20,000

48. (C) Withdraw P20,000

Scarlett Angela

Cash 60,000 20,000

Land 120,000

Building 150,000

Mortgage Payable (30,000)

Contributed Capital 180,000 140,000

Divide: Agreed Ratio 3/10

Total Agreed Capital 600,000

 Less: Agreed Capital of Angela (600,000 * 2/10) (120,000)

Angela must withdraw P20,000

49. (C) Ruth P75,000; Abyss P80,000; Lena P85,000

Ruth Abyss Lena

Cash 50,000 80,000 25,000

Computer 25,000 60,000

Contributed P75,000 P80,000 P85,000

Capital

50. (B) P80,000

Juana Azalea

Cash 300,000

Land 70,000

Building 90,000

Mortgage Payable (40,000)

Contributed Capital 300,000 120,000

Divide: Agreed Ratio 60%

Total Agreed Capital 500,000

Ageed Capital of Azalea (500,000 * 40%) (200,000)

Azalea must invest cash P80,000

 51. (C) Eca – 55,556; Romi – 44,444; Andy – 0
In case there is an agreement for sharing of profits but not to losses. Losses shall be
shared in the same ratio as the profit agreement. Provided that, an industrial partner
shall not have any share in the losses.
Eca: 5/9 x 100,000 = 55,556
Romi: 4/9 x 100,000 = 44,444

52. (A) P325,000

25,000 + B = 60,000
B = 35,000
The bonus should be 35,000
.25(NI – 35,000 - 150,000) = 35,000
.25NI – 46,250 = 35,000
.25NI = 81,250
.25 .25
Net Income = 325,000
For the bonus to be 35,000 the Net Income should be 325,000.

53. (A) P140,000

Fred Fran Total
Salary 100,000 30,000 130,000
Interest 30,000 20,000 50,000
Bonus 100,000 100,000
B= .25(550,000 –
50,000 – B)
Residual 180,000 90,000 270,000
2:1
Total 410,000 140,000 550,000

54. (D) P4,000

 Fred Fran Total
Salary 100,000 30,000 130,000
Interest 30,000 20,000 50,000
Residual (2:1) (126,000) (63,000) (189,000)
Total 4,000 (13,000) (9,000)

55. (D) P96,300

Lanz Joanna Cyril Total

Salary 20,000 30,000 50,000
Interest 97,500
350,000 x 15% 52,500
100,000 x 15% 15,000
200,000 x 15% 30,000
Bonus
280,000 x 10% 28,000 28,000
Residual
2:1:3 34,833 17,417 52,250 104,500
Sub -Total 107,333 32,417 140,250
Allocation to
give Joanna at
least 60,000

60,000 – 32,417 (11,033) 27,583 (16,550) -

= 27,583

27,583 x 2/5
27583 x 3/5
TOTAL 96,300 60,000 123,700 280,000

56. (D) P48,333

Jamie
 Jan 1 – March 31 200,000 x 3/12 50,000
April 1 – June 30 180,000 x 3/12 45,000
July 1 – Dec 31 250,000 x 6/12 125,000

Average Capital 220,000

Jean Miguel
Jan 1 – Sep 30 100,000 x 9/12 75,000
Oct 1 – Dec 31 160,000 x 3/12 40,000

Average Capital 115,000

Jaimie Jean Miguel Total
Salary 20,000 35,000 55,000
Interest 33,500
220,000 X 10% 22,000
115,000 X 10% 11,500
Residual 9,500
9,500 x 2/3 6,333
9,500 x 1/3 3,167
Total 48,333 49,667 98,000

57. (B) P51,667

Jaimie Jean Miguel Total
Salary 20,000 35,000 55,000
Interest 41,000
250,000 X 10% 25,000
160,000 X 10% 16,000
Residual 2,000
2,000 x 2/3 1,333
2,000 x 1/3 667
Total 46,333 51,667 98,000

58. (C) P606,263

Salaries 30,000+50,000 80,000
Interest 4,000+8,000+6,000+3,000 21,000
[2] Bonus 25,263
 [1] Residual Income 480,000
Total Income 606,263
[1] Taylor’s Share in Profit 91,000
Taylor’s Salary (39,000)
Taylor’s Interest (4,000)
Taylor’s share in residual income 48,000
Ratio x 10
Total Residual Income 480,000
[2] Este’s Share in Profit 129,263
Este’s Share in Residual Income 480,000 x 2/10 (96,000)
Este’s Share in Interest (8,000)
Este’s Bonus 25,263

Their profit allocation would look like this;

Taylor Este Alana Danielle Total

Salary 39,000 41,000 80,000
Interest
200,000 x 2% 4,000 21,000
400,000 x 2% 8,000
300,000 x 2% 6,000
150,000 x 2% 3,000
Bonus 25,263 25,263
5%(606,263 –
101,000)

Residual 480,000
480,000 x 1/10 48,000
480,000 x 2/10 96,000
480,000 x 3/10 144,000
480,000 x 4/10 192,000
Total 91,000 129,263 191,000 195,000 606,263

59. (B) P511,000

A=L+C
Assets;
 90,000
108,000
450,000
(29,000)
13,000)
(26,000)
15,000 621,000
Liabilities:
89,000
21,000 (110,000)
Capital: 511,000
60. (D) 9%
Depreciation per year (229,500 / 3) 76,500
divide:
Acquisition cost (620,500 + 229,500) 850,000
.09
x 100
9%