QUALIFYING EXAMS REVIEWER (with answers)

TERM 3 AY 2011-2012

I.
Multiple Choice
1. The following are expenses whose payment can be taken out of the petty cash fund,
except:
a. Purchase of store supplies
b. Salary of the petty custodian
c. Payment for the bus fares of field employees
d. Restaurant bill for the entertainment of a client
2. S1:
In the preparation of the safe payments schedule, an assumption such as all
unsold noncash assets will be considered as still salable regardless of the circumstance
is made is an invalid one.
S2:
The incorporators of a corporation must meet the 25%-25% rule mandated by
law. If the total authorized capital of the corporation is Php 1,500,000, the incorporators
must have subscribed to Php 375,000 and have paid at least Php 93,750.
a.
b.
c.
d.

Only statement 1 is true.

Only statement 2 is true.
Both statements are true.
Both statements are false.

3. An appropriation of retained earnings:

a. Has no effect on total retained earnings
b. Is reported by an entry appropriating retained earnings
c. Reduces retained earnings available for the dividend declaration
d. All of the above
4. A decrease in net assets arising from peripheral or incidental transactions is called a(n)
a. capital expenditure.
b. cost.
c. loss.
d. expense.

5. Upon formation of a partnership, each partners initial investment of assets should be

recorded at their:
a. Book values
b. Cost
c. Market values

d. Appraised values
6. Rent received in advance was credited to a nominal account as part of the adjusting
entries. Assuming no particular adjustment was made, total liability is ____.
a. Overstated
b. Understated
c. Not Affected
d. Increased
7. In determining the cost of goods sold:
a. Purchase discounts are deducted from net purchases
b. Freight-out is added to net purchases
c. Purchase returns and allowances are deducted from net purchases
d. Freight-in is added to net purchases
8. The accounting principle of matching is best demonstrated by
a. not recognizing any expense unless some revenue is realized.
b. associating effort (expense) with accomplishment (revenue).
c. recognizing prepaid rent received as revenue.
d. establishing an Appropriation for Contingencies account For a small hardware store,
the funds allocated for petty cash purposes can be allowed to be a minimum of
P95,000.
9. S1:
Carly, Justin, and Selena formed a partnership in 2011. After operating for one
year, they decided to liquidate the partnership. All of the partners are sure to receive an
amount equal to their initial investment assuming everyone contributed the same
amount.
S2:
Batas Pambansa 68 provides that a corporation is an artificial being created by
operation of law, having the right of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence.
a. Only statement 1 is true.
b. Only statement 2 is true.
c. Both statements are true.
d. Both statements are false.

10. Fitzgerald received P5,000 after his partnership liquidated. According to his record, he
had P15,000 capital balance while his partner, Hemingway had P45,000. His records
further show that the profit-loss sharing ratio was the same as the capital investment
ratio. How much was the loss on sale of assets?
a. Cannot be computed
b. P10,000
c. P40,000
d. P55,000

11. In the stockholders equity section, Common Stock Dividends Distributable is reported as
a(n):
a. Addition to Trade and Accounts Payable
b. Addition to Share Premium
c. Deduction from Accumulated Profits
d. Addition to Share Capital
12. Copernicus and Galileo had a partnership, in which Galileo will receive monthly salary of
P30,000 and 35% bonus on profits in compensation for being an industrial partner. At the
end of year 2012, the business had a loss. How much Galileo should be paid?
a. None, because the partnership had a loss
b. None, because he is just an industrial partner
c. Both bonus and salary
d. Salary only
13. The by-laws of a corporation contain provisions for the internal administration of the
corporation. The by-laws should be filed within one month from the date of issuance of
the certificate of incorporation. The by-laws normally include the following:
The date, place and manner of calling the annual stockholders meeting;
The manner of conducting meetings;
The circumstances which may permit the calling of special meetings of the
stockholders;
The manner of voting and the use of proxies;
The manner of electing the directors;
The term of office of the directors;
The authority and duties of the directors;
The birth place of the directors;
The manner of selecting the corporate officers;
The procedures for amending the articles of incorporation and by-laws.
Given the above, the comment applicable would be:
a. Only one of the above is included in the by-laws.
b. At least one but not all of the above must be included in the by-laws.
c. All except one must be included in the by-laws.
d. All of the above must be included in the by-laws.
14. A corporations stockholders must elect a Corporate Secretary and a Treasurer. Without
distinction of duty, the aforementioned officers must maintain a complete record of
__________ and maintain the __________ of the corporation.
1.
Journals and Ledgers;
2.
Minutes of stockholders meetings;
3.
Minutes of Board meetings;
4.
Stock and transfer book.
5.
Facebook.
Given the above, the only comment must be:
a. Only one of the above must be maintained.
b. At least one but not all of the above must be maintained.
c. All except one must be maintained.

d.

All of the above must be maintained.

15. Match the terms in Column A to their definitions/situations in Column B.

A
Dissolution

Lump-sum Liquidation
Right of offset

Insolvent partner

Capital deficiency

a.
b.
c.
d.

B
1. The partners personal assets are
neither sufficient to meet his
personal liabilities nor sufficient to
make the necessary contributions
to
the
partnership
upon
liquidation.
2. Partner B decided to withdraw
from ABC & Co. due to old age.
3. A liquidation method whereby all
assets are converted into cash, all
liabilities are paid, and all profits
or losses are charged to the
partners followed by a single
liquidating distribution to the
partners.
4. Partner Xs capital account
balance became negative due to
the distribution of the loss on
realization of assets during the
process of liquidation.
5. This refers to the legal right to
apply part or the entire amount
owing to a partner on a loan
balance against a deficiency in his
capital account resulting from
losses in the process of
liquidation.

2, 3, 5, 1, 4
2, 3, 4, 1, 5
2, 3, 5, 4, 1
2, 3, 1, 4, 5

16. S1:
If the maturity date of your discounted note is not within the current calendar
period, an adjusting entry must be made consisting of a credit to Interest Expense and
debit to Discount on Notes Payable.
S2:

All deferrals and accruals are reversed at the start of the accounting period.

a.
b.
c.
d.

Only statement 1 is true.

Only statement 2 is true.
Both statements are true.
Both statements are false.

17. In locating errors in the Trial Balance, the course of action for Transplacement Errors or
Slide Errors is to:
a. Find the difference of the totals then divide it by 9 and this will give you the amount
by which the number was transplaced
b. Find the difference of the totals then divide it by 9 and this will give you the
number that was transplaced
c. Look for an account where when the first two digits are transposed
d. Just refoot the balances
18. S1:
S2:
a.
b.
c.
d.

The account income summary is a capital account.

The accrual basis of accounting is based primarily on revenue realization and
consistency.

Only statement 1 is true.

Only statement 2 is true.
Both statements are true.
Both statements are false.

19. The ledger of JFK Corporation shows Ordinary Share Capital, Ordinary Treasury
Shares, and no Preference Share Capital. For this company, the formula for computing book value per share is:
a. Total paid-in capital and accumulated profits divided by the number of ordinary and
preference shares issued
b. Ordinary Share Capital divided by the number of issued ordinary shares
c. Total shareholders equity divided by the number of issued and outstanding
ordinary shares
d. Total shareholders equity divided by the number of issued ordinary shares

20. A credit sale of P750 is made on June 13, terms 2/10, n/30. A return of P50 is granted on
June 16. The amount to be credited on June 23 is:
a. P700
b. P686
c. P685
d. P650
21. Unrecorded Merchandise Inventory, Beginning will cause the current years net income
and total assets to be _________ and _________, respectively.
a. overstated; understated
b. overstated; same
c. understated; overstated
d. understated; same

22. The failure to record a purchase of merchandise on account even though the goods are
properly included in the physical inventory results in:
a. an overstatement of assets and net income.
b. an understatement of assets and net income.
c. an understatement of cost of goods sold and liabilities and an overstatement of
assets.
d. an understatement of liabilities and an overstatement of owners' equity.
23. Capital balances in the MEM partnership are Mary, Capital P60,000, Ellen, Capital
P50,000 and Mills, Capital P40,000, and income ratios are 5:3:2, respectively. The
MEMO partnership is formed by admitting Oleg to the firm with a cash investment of
P60,000 for a 25% capital interest. The bonus to be credited to Mills Capital in admitting
Oleg is:
a. P10,000
b. P7,500
c. P3,750
d. P1,500
24. E.T., Inc. sells 100 shares of P5 par value treasury stock at P13 per share. If the cost of
acquiring the shares was P10 per share, the entry for the sale should include credits to:
a. Ordinary Treasury Shares P1,000 and Ordinary Treasury Share Premium P300
b. Ordinary Treasury Shares P500 and Ordinary Treasury Share Premium P800
c. Ordinary Treasury Shares P1,000 and Retained Earnings P300
d. Ordinary Treasury Shares P500 and Ordinary Treasury Share Premium P800

25. The voucher systems main goal is:

a. for the internal control of cash disbursements
b. to make sure that employees do not spend the companys cash resources
c. for ease of payment
d. to keep cash intact in the bank
26. S1:
Upon reissuance of a treasury shares, share premium from original issuance is
first exhausted if reissuance price is below acquisition cost.
S2:
The first step in the accounting cycle is the journalizing of transactions and
selected other events.
a.
b.
c.
d.

Only statement 1 is true.

Only statement 2 is true.
Both statements are true.
Both statements are false.

27. Pooh Company is currently engaged in a litigation case. Their lawyer thinks that they will
lose the case and Pooh would have to pay P1,000,000. However, it is estimated that the
most likely outcome would be that Pooh would have to pay P1,500,000. The accountant

showed the probable loss in the books as P1,500,000. Which generally accepted
accounting principle is being applied in the situation above?
a. Accrual
b. Materiality
c. Time period
d. Conservatism
28. Handel, Liszt, and Paganini had a partnership, which unfortunately has to dissolve as
Handel will be leaving to continue his career as a maestro. Upon the dissolution, Liszt
and Paganini agreed to pay Handel P158,000, which was P30,000 more than the capital
balance of Handel just before the dissolution. Liszt and Paganini then recorded this
transaction by allocating P30,000 bonus to each partner based on original P/L ratio of
2:5:3. This transaction is wrong because:
a. Paying bonus to Handel is prohibited.
b. Bonus must be allocated to the remaining partners only.
c. The remaining partners, instead of Handel received the bonus.
d. None of the above
29. Lenin and Stalin were partners of a war factory in which they had the same capital ratio.
Their business weakened after the World War II, and in 1952 they had to close it down
due to heavy losses. At that time the partnership had advances made to Lenin, while
Stalin had advances to the partnership. The partners have been dividing profits and
losses equally among them, so their capital balances were just the same all the time.
Upon liquidation, Lenin receives cash ______ Stalin due to the advances made to/from
the partnership.
a. Less than
b. More than
c. Equal to that of
d. Cannot be determined
30. Dumbledore and Snape had a universal partnership of profits which sold various sweets.
One day, Snape sold 1,000 boxes of skull candy to Lord Voldemort, his private customer.
Should Snape share the profit from selling 1,000 boxes of skull candy with Dumbledore?
a. Yes, because Dumbledore and Snape are partners.
b. Yes, because Snape made profits by selling skull candies.
c. No, because Dumbledore do not personally know Lord Voldemort.
d. No, because the transaction was Snapes private transaction.

II.

Problem Solving

For nos. 1 and 2

Shall Company was incorporated during 2011 and had the following events:
K and J contributes cash for payment of all their subscriptions for P30,000 and
P15,000 respectively.
E, D and C subscribed 20,000 shares, 20,000 shares and 10,000 shares
respectively
Shall Company plans to issue the shares at P20 par value.
Shall Company will not issue any share premium for any stock transaction
The planned authorized capital is P5,000,000.
1. If total subscriptions are targeted to be at least the minimum legal amount, how
much subscription should K further get for the approval of this capital structure?
2. How much cash should they further collect in order for this capital structure to be
approved?
3. Assets in the beginning of the period amounted to P655,000 while liabilities totaled
P433,000. During the year, there was an additional investment amounting to P33,000. At
year end, assets were reported to be P567,000 and owners equity was P255,000.
How much was the net income (loss) for the period?
4. The partnership of Georgina and George consists of: Total Assets-P850,000; Cash per
ledger is just equal to pay the P275,000 current liabilities; non-current liabilities-P55,000;
and P&L Ratio (also their capital balance) of 70:30 respectively. Anne is to be admitted
and will be able to invest P250,000 cash for 25% interest.
How much is the capital credit of Anne?

5. X, Y and Z, the partners of WeeWoo Company agree that partners may increase or
decrease their capital balance through additional investments and permanent
withdrawals. Z, one of the partners had a capital balance of P72,000 on January 1 and
made additional investment of P12,000 each on March 1, July 1 and August 1 of the
current year. He also made withdrawals in anticipation of profits amounting P3,500 per
month on the first day of every month starting February 1.
If interest based on average capital is 12%, how much interest on capital is to be
given to Z at year-end?
6. Spiderman was one day sitting in his room thinking about what business he can venture
into. Then he thought of converting his sticky strings into glue. However he had no
money yet to make a factory. Suddenly, Batman called him and asked for a drink. While
having a drink, Spiderman learned that Batman has entered into a business that makes
aluminum baseball bats, which he complained for very low profitability. Spiderman
suggested converting his factory into a glue-making factory, which Batman agreed.
The balance sheet of Batmans current business is shown below:
ASSETS
Cash
Accounts receivable
Allowance for doubtful accounts
Inventory
Supplies
Factory machines
Accumulated depreciation
Automobile
Accumulated depreciation
TOTAL ASSETS

P 200,000
525,000
(25,000)
700,000
50,000
2,000,000
(400,000)
850,000
(300,000)
P 3,600,000

LIABILITIES AND OWNERS EQUITY

LIABILITIES
Accounts payable
Short-term notes payable
Accrued expenses
Long-term bank loans
TOTAL LIABILITIES

P 350,000
500,000
60,000
600,000
P 1,510,000

OWNERS EQUITY
Siomai, capital
TOTAL LIABILITIES AND OWNERS EQUITY

P 2,090,000
P3,600,000

Batmans assets and liabilities are all in fair value. Spiderman agreed to invest cash equal to 5%
of partnership capitalization. Batmans investment in the partnership will be his net assets.
Since the glue will be made from Spidermans strings, Batman agreed to pay him a monthly
salary of P80,000 for the effort and for the raw materials. In addition, since Spiderman is making
the business possible, Batman has further agreed to provide 75% of the profit generated from

the sale of the glue up to P2,500,000. The remaining profit will be divided to the partners
according to their capital ratios.
For the first three months of operation, the partnership was able to earn whooping P3,500,000
in profits.
What is the amount of profit allocated to Batman?

7. On January 1, 2011, Thyme Company purchased a machine for P502,000. Additional

costs incurred to bring the asset to its location and prepare for its intended use were:
shipping-P4,000; installation-P4,000; and testing-P2,000. Annual repairs and
maintenance costs of the machine amount to 30,000. It has an estimated salvage value
of P32,000 and is to be depreciated P5,000 monthly.
What is the estimated useful life of the machine?
8. The net income of Hudson Company on December 31, 2011 is P535,645 before any
adjustments were considered. At yearend, several items came up which may further
affect the net income.
Utilities bills, P20,000
Sales invoice collected for the last quarter, P39,500
Monthly salaries to be paid for the last quarter of the period, P50,000
Subscription to a news chronicle for 24 months starting on June, P24,000
Yearly depreciation for the delivery van bought on April, P35,000
Doubtful accounts expense is 6% of the accounts receivable during the
last quarter. The recorded allowance for doubtful accounts amounted to
P4,250.
How much is the adjusted net income?
9.

Nom Nom Corp. had the following information after its first year of operation:
An appropriation for building expansion this year P530,000
700,000 P1 par value shares were issued and outstanding
Total sales for the year were P1,502,000 and total expenses were P1,293,000
Total share premiums acquired from stock transactions amounted to P92,000
How much is the book value per share?

10. The unadjusted cash balance per book and per bank are P56,789 and P98,765
respectively. Deposit in transit and outstanding checks are P1,234 and P4,321
respectively.
How much is the adjusted cash balance?
11. On February 1, Hachiko, who offers dog grooming services, has an Accounts Receivable
amounted to P30,000. All services were rendered on credit. During the month, the
company collected P19,000 from clients. At the end of May, Accounts Receivable totaled
P31,000. Expenses during January amounted to P10,000, which is half the amount
expensed during February..
What is the net income of Hachiko for the month of February?

12. The following data are extracted from the shareholders equity of SEN Company:
12/31/10
12/31/11

Share capital P100 par

P5,000,000
P5,100,000
Additional paid-in capital
2,500,000
3,000,000
Retained earnings
5,000,000
?
During 2011, the company declared and paid cash dividends of P400,000 and
also declared and issued a stock dividend. There were no additional issues of shares
during 2011. The net income for 2011 was P500,000.
What is the retained earnings for December 31, 2011?
13. The shareholders equity section of RAV Company revealed the following information on
December 31, 2011:
Preference share capital, P100 par
P2,300,000
Share premium-preference share
805,000
Ordinary share capital, P10 par
5,250,000
Share premium-ordinary share
2,750,000
Subscribed ordinary share capital
50,000
Retained earnings
1,900,000
Notes payable
4,000,000
Subscriptions receivable-ordinary share
400,000
How much is the legal capital?
14. Long Co. had 100,000 shares issued and outstanding at January 1, 2011. During 2011,
Long took the following actions:
March 15
Declared a 2-for-1 stock split, when the fair value of the stock was P80
per share
Dec. 15
Declared a P5 per share cash dividend
In Longs statement of changes in equity for 2011, what amount should Long
report as dividends?
15. MM is trying to decide whether to accept salary of P40,000 or a salary of P25,000 plus a
bonus of 10% of net income after salaries and bonus as a means of allocating profit
among the partners. Salaries traceable to the other partners are estimated to be
P100,000. Assume no other partners will receive bonus.
What amount of income would be necessary so that MM would consider the
choices equal?
16. The following information came from the cash books and bank statement of Uzumaki
Trading:
Total cash receipts during December
P150,000.00
Total bank credits for deposits in December
140,750.00
Undeposited collections as of November
13,500.00
Compute the amount of undeposited collections as of December 31
17. Bicolano, from Makati, purchased merchandise for P45,000 terms 2/15, n/30 from
Makatiboy, who is based in Bicol, FOB Makati, collect. Freight cost totaled P800.
What amount of Accounts Receivable will Bicolano debit?

18. At the beginning of February, owners equity is four times as total liabilities, which is in
turn 20% of assets. Assets amounted to P300,000 at the beginning of the month. During
the month, revenues amounted to P75,000 while expenses amounted to P30,000.
What is the owners equity at the end of February?
19. Maid Cafe Company had 4,000 ordinary shares of P400 par value outstanding and
1,000 preference shares of P1,000 par value outstanding. The current market price of
the ordinary share is P1,000 and total equity amounts to P4,200,000. The preference
shares have no dividends in arrears.
What is the book value per ordinary share?
20. On March 1, 2012, the capital of Binky Tires Tailoring was P320,000. It increased to
P850,000 on March 31 of the same year. During the month, Binky paid utilities of her
business out of her own account, amounting to P50,000. She also withdrew cash
amounting to P120,000.
What was Binkys net income (loss) during the month?
21. The following data are taken from the records of Usui Merchandising Co.
Payments to merchandise suppliers
P500,000
Accounts payable, January 1, 2012
75,250
Accounts payable, December 31, 2012
80,750
Increase in the balance of merchandise inventory
70,000
Compute the amount of cost of sales of merchandise in 2012.
22. Hinata purchased merchandise inventory from Sakura, P300,000 less 9-5, terms 3/10
n/30. Hinata made a partial payment of P50,000. After discovering some defective
merchandise, Hinata issued a debit memo to Sakura worth P30,000.
If Hinata intends to pay fully within the discount period, how much cash must be
paid by Hinata to fully settle the account?

23. The balance sheet for Misaki and Suzuna Partnership on July 1, 2012 before liquidation
is as follows
Assets
Liabilities & Capital
Cash
P10,000
Liabilities
P20,000
Other Assets 70,000
Misaki, capital (60%)
35,500
Suzuna, capital (40%)
24,500
Total Assets P80,000
Total Liabilities & Capital
P80,000
In July, assets with a book value of P23,000 are sold for P19,000, creditors are paid in
full and P9,000 is paid to the partners.

How much should Suzuna receive in July?

24. Papillion Company had the following classes of share capital outstanding as of
December 31, 2012:
Ordinary share capital P10 par value
P3,000,000
8% Preference share capital P50 par value,
Cumulative and fully participating
2,000,000
Preference dividends have been in arrears for 2010 and 2011. On December 31, 2012, a
total cash dividend of P1,200,000 was declared.
How much cash dividends are payable to the ordinary shareholders?
25. Ichigo invested the following in the partnership: Cash-P20,000; Accounts ReceivableP70,000; Allowance for Bad Debts-P8,000; Merchandise Inventory-P97,500; Furniture
and Fixtures-P200,000; Accumulated Depreciation-P40,000. The fair values of the
furniture and fixtures and the merchandise inventory are P85,000 and P130,000
respectively. Rukia is the other partner who agreed to invest P115,000 for a 1/4 interest
in the partnership. It is further agreed upon that Ichigo will make additional cash
investment or cash withdrawal so that his capital will represent a 3/4 interest in the
partnership.
How much cash will Ichigo additionally invest (withdraw)?
26. Jiraiya has 2 kinds of machines (Machinery type A was acquired on January 1, 2010
while Machinery type B was acquired on March 1, 2012.) Due to technical problems,
Jiraiya sold 50% of Machinery type B on July 1, 2012. Other properties belonging to
Jiraiya were land and building. The land was acquired on April 15, 2009 while the
building was acquired on October 1, 2012. All of the plant assets have a useful life of 10
years. Acquisition costs for Machinery type A was P72,500, Machinery type B-P150,000,
Land-P620,000 and Building-P575,000.
Compute the depreciation expense for the year 2012.

27. The capital accounts of Bleach Company have the following balances as of December
31, 2012:
12% nonparticipating, noncumulative preference
share capital, par value of P100, 10,000 shares
P1,000,000
10% fully participating, cumulative preference share
Capital, par value of P100, 25,000 shares
2,500,000
Ordinary share capital, par value of P100, 75,000 shares
7,500,000
The company plans to declare cash dividends. It has not paid a cash or a stock dividend
before. There has been no change in the capital balance since ABC started operations
five years ago. The company had the following reported income (loss) for the five years
of business:
2007
(P1,500,000)
2008
( 1,000,000)
2009
(
500,000)

2010
1,750,000
2011
6,250,000
If the maximum amount available for dividend on December 31, 2012 is declared
and paid, how much would be distributed to the ordinary shareholders?
28. AXZ Corporation has the following balances:
Ordinary Share Capital
Share Premium
Par Value

January 1
P 2,450,000
250,000
50

April 17
P 2,658,250
304,145
50

The only transaction related to share issuance between the said dates was a stock
dividend declaration.
What percentage of stock dividend was declared?
29. Please refer to Number 28.
How many shares were distributed?
30. Please refer to Number 28.
How much was the market value of the shared during declaration?

III.

Financial Statements Preparation (Stockholders Equity)

Prepare the Statement of Changes in Shareholders Equity of MOD1
CORPORATION for the year ended December 31, 2012 using the given data:

January 1, 2012 Balances

9% Preference Share Cumulative and Participating
, P25
par value
Ordinary Shares, P15 par value (6,800 were reacquired)
Preference Share Premium
Ordinary Share Premium
Treasury Share Premium
Accumulated Profits- Total
Free
Appropriated for Plant Expansion

P 1,950,000

November

3,465,000
315,000
725,000
8,625
P 6,788,400
5,400,000
1,300,000

Transactions for the year- January 2- October 31

Issuance of preference shares- 141,000
P3, 946,587
Subscribed preference shares- 53,000
1,849,897
Subscriptions Receivable- Preference
575,000
Issuance of Ordinary Shares 378,000
6,128,796
Subscribed Ordinary Shares- 92,300
2,238,623
Subscriptions Receivable- Ordinary
702,080
10/31 Reissuance of 1,300 Treasury Shares
7,150
7 In relation to the subscribed ordinary shares mentioned above, 2,500 shares
subscribed by X were declared delinquent. Receivable from Highest Bidder was
debited for 2,500 as a result of advertising costs. In the end, the corporation
reacquired the delinquent shares.
Subscriptions Receivable X- P65,000
9 Declared a 10% Share dividend for all outstanding shares as of November 15,
2012. Market Values: Preference: P32 Ordinary: P19
23 Sold 7,000 Treasury shares for P18
December
15 Reacquired 2,000 treasury shares for P17 each
20 Declared cash dividends. P2,500,000 was made available for distribution.
Dividends were not declared for 2 years
31 Net Income for the period 9,450,000
31 Appropriation for Plant Expansion 2,was reversed.

ANSWER KEY
Multiple Choice
1.
2.
3.
4.
5.
6.

B
C
D
C
C
B

16. D
17. B
18. D
19. C
20. A
21. B

7. D
8. B
9. B
10. C
11. D
12. D
13. C
14. C
15. A
1. Authorized capital
Multiply:
Subscription required
Subscribed by C,D,E
Subscribed and paid
Additional Subscription needed

22. D
23. D
24. A
25. A
26. D
27. D
28. B
29. A
30. D
P5,000,000.00
25%
P1,250,000.00
( 1,000,000.00)
(
45,000.00)
P 205,000.00

2. Subscription required
Multiply:
Required payment
Paid
Additional payment
3. Owners Equity, End
Less: Owners Equity, beginning
Additional Investment

P1,250,000.00
25%
P 312,500.00
(
45,000.00)
P 267,500.00
P 255,000.00
P 222,000.00
33,000.00

Net Income

255,000.00
P

____0.00

4. Total Assets
Liabilities (P275,000+P55,000)
Partners Equity before admission of Anne
Annes Contribution
Total contributed capital after admission of Anne
Multiply: Annes interest
Capital Credit to Anne

P 850,000.00
( 330,000.00)
P 520,000.00
250,000.00
P 770,000.00
25%
P 192,500.00

5. January 1
February 1
March 1
April 1
May 1
June 1
July 1
August 1
September 1
October 1
November 1
December 1
Total
Divide:
Average Capital

72,000.00
72,000.00
84,000.00
84,000.00
84,000.00
84,000.00
96,000.00
108,000.00
108,000.00
108,000.00
108,000.00
108,000.00
P 1,116,000.00
12
P 93,000.00

Multiply: Interest Rate

Interest on Capital

12%
_11,160.00

6.
95%

5%

Batman

Spiderman

Salary of Spiderman (80,000

* 3)

Total

240,000.
00

240,000.
00

Profit shares up to
P2,500,000 profit level
(25:75)

625,000
.00

1,875,000.
00

2,500,000.
00

Remaining profit [(3,500,000

- 2,740,000) * Cap ratio]

722,000
.00

38,000.
00

760,000.
00

1,347,000
.00

2,153,000.
00

3,500,000.
00

Total distribution

7. Purchase Price
Shipping costs
Installation
Testing
Total Cost
Salvage Value
Depreciable Cost
Divide: Annual Depreciation
Useful Life (years)
8.

P 502,000.00
4,000.00
4,000.00
2,000.00
P 512,000.00
(
32,000.00)
P 480,000.00
60,000.00
_
_______8

Note: the collections represent unrecorded receivables. The entry for correction should
be debit accounts receivable and then credit sales (+ income 39,500). Since the balance
for the accounts receivable increased, the provision/doubtful accounts expense should
also increase by its respective rate (6%, 2370)
9. Share capital
Net income (P1,502,000-P1,293,000)
Share premium
Total shareholders equity
Divide: Outstanding shares
Book Value per Share

10. Unadjusted cash balance

Deposits in Transit
Outstanding Checks
Adjusted Cash Balance

11. Accounts Receivable, End

Collections
Accounts Receivable, Beginning
Service Income
Expenses
Net Income

12. Retained Earnings

Net income
Cash dividend
Stock dividend (P100,000+P500,000)
Retained earnings, end

P5,000,000.00
500,000.00
( 400,000.00)
( 600,000.00)
P_4,500,000.00

13. Preference share capital

Ordinary share capital
Subscribed ordinary share capital
Total legal capital

P2,300,000.00
5,250,000.00
50,000.00
P7,600,000.00

14. Shares issued on January 1

Multiply: Share split on March 15
Total shares outstanding
Multiply: cash dividend per share
Total Dividends

10,000
2
20,000
5.00
P 100,000.00

15. Bonus Required (P40,000-P25,000)

Divide: Bonus Rate
Net Profit after Bonus and Salaries
Salaries (P25,000+P100,000)
Bonus
Net Profit before Bonus and Salaries

16. Total cash receipts-Dec

Undeposited collections-Nov

700,000.00
209,000.00
92,000.00
P 1,001,000.00
700,000
P
1.43

(
P

(
P
(
P

98,765.00
1,234.00
4,321.00)
95,678.00
31,000.00
19,000.00
30,000.00)
20,000.00
20,000.00)
____0.00

15,000.00
10%
P 150,000.00
125,000.00
15,000.00
P 290,000.00
P 150,000.00
13,500.00

Total bank credits-Dec

Undeposited Collections-Dec

( 140,750.00)
P 22,750.00

17. P0. Bicolano is the buyer.

18. Assets, beginning
Liabilities, beginning (P300,000x20%)
Owners Equity, beginning
Net Income (P75,000-P30,000)
Owners Equity, end

P 300,000.00
(
60,000.00)
P 240,000.00
45,000.00
P 285,000.00

19. Total Equity

Preference shareholders equity
Ordinary shareholders equity
Divide: outstanding ordinary shares
Book Value per Ordinary Share

P 4,200,000.00
( 1,000,000.00)
P 3,200,000.00
4,000
P
800.00

20. Capital, end

Binky, drawing
Capital, beginning
Additional Investment
Net Income

P 850,000.00
120,000.00
( 320,000.00)
(
50,000.00)
P 600,000.00

21. Accounts Payable, end

Payments to merchandise suppliers
Accounts Payable, beginning
Purchases
Increase in inventory
Cost of Sales

22. Net Invoice Price (P300,000x91%x95%)

Debit Memo
Partial Payment
Balance
Cash Discount [(P259,350-30,000)x3%)]
Cash to be paid

P 259,350.00
(
30,000.00)
(
50,000.00)
P 179,350.00
(
6,880.50)
P 172,469.50

23.
Capital
Loss on Realization
Additional Loss (if assets are not
Sold)
Cash Distribution

Misaki (60%)
P35,500.00
( 2,400.00)

Suzuna (40%)
P24,500.00
( 1,600.00)

( 28,200.00)
P 4,900.00

( 18,800.00)
P 4,100.00

80,750.00
500,000.00
(
75,250.00)
P 505,500.00
(
70,000.00)
P 435,500.00

24. Dividends declared

Preference dividends (8%xP2,000,000x3)
Ordinary dividends (8%xP3,000,000)
Balance
Multiply:
To Ordinary shares

P1,200,000.00
( 480,000.00)
( 240,000.00)
P 480,000.00
3/5
P 288,000.00

Ordinary dividends (8%xP3,000,000)

Total
25. Total Equity [P115,000/(1/4)]
Multiply:
Required Capital
Less: Investments of Ichigo
Cash
Accounts Receivable
Merchandise Inventory
Furniture and Fixtures
Bad Debts
Additional Investment

240,000.00
P 528,000.00
P 460,000.00
2/3
P 345,000.00
P 20,000.00
70,000.00
85,000.00
130,000.00
( 8,000.00)

26. Machinery type A Depreciation(P72,500/10)

Machinery type B Depreciation
[(P150,000x50%)/10x(10/12)]
[(P150,000x50%)/10x(4/12)]
Building Depreciation [P575,000/10x (3/12)]
Depreciation Expense
27. Total income
Total loss
Retained Earnings- maximum dividend
Dividend 12% preference (12%xP1,000,000)
Dividend 10% preference (10%xP2,500,000x5)
Dividend ordinary (10%xP7,500,000)
Balance for participation
Multiply:
Allocation to ordinary shares
Dividend ordinary (10%xP7,500,000)
Total Dividend for ordinary shares

( 297,000.00)
P 48,000.00
P

7,250.00

6,250.00
2.500.00
14,375.00
30,375.00

P 8,000,000.00
( 3,000,000.00)
P 5,000,000.00
(
120,000.00)
( 1,250,000.00)
(
750,000.00)
P 2,880,000.00
7,500,000/10,000,000
P 2,160,000.00
750,000.00
P 2,910,000.00

28 30.
No. Of Shares After Stock Dividends
No. Of Shares Before Stock
Dividends
No. of Shares Issued
No. of Shares Issued
No. Of Shares Before Stock
Dividends
Percentage of Stock Dividend
Increase in Ordinary Share Capital
Increase in Share Premium
Total Increase
No. of Shares Issued

53,165.00
(49,000.00)
4,165.00
4,165.00
49,000.00
0.085
P 208,250.00
54,145.00
P 262,395.00
4,165.00

MV on Date of Declaration

Financial Statement Preparation

63