1. Which among the following equation best exemplifies the Propriety Theory of Accounting?

a. Asset = Liabilities + Capital

b. Asset - Liabilities = Capital
c. Asset - Liabilities - Preffered Equity = Common Equity
d. Asset + Liability = Capital

2. Inflation is ignored in accounting due to

a. Monetary unit assumption
b. Going concern assumption
c. Periodicity assumption
d. Economic entity assumption

3. Which is an example of Expense Recogntion Principle of Associating Cause and Effect?

a. Depreciation
b. Allocation of Insurance Cost
c. Sales Commission
d. Officers Salaries

4. S1. Consistency means that information is measured and reported in similar fashion across entities.
S2. Comparability means that information is measured and reported in similar fashion across point in time.
a. True, True
b. True, False
c. False, True
d. False, False

5. Adjusting entries affect

a. One nominal account and one real account
b. Two nominal accounts
c. Two real accounts
d. No particular combination of nominal and real accounts

6. An adjusting entry should never include

a. A debit to revenue and a credit to liability
b. A debit to expense and a credit to revenue
c. A debit to liability and a credit to revenue
d. A debit to expense and a credit to liability

7. If an expense have been incurred but not yet recorded, the adjusting entry would involve
a. A liability and a revenue
b. An expense and an asset
c. An asset and a revenue
d. A liability and an asset

8. An entity is a resort located in Batangas. The entity collects cash when guest make a reservation. During
December 2018, the entity collected P600, 000 of cash and recorded the receipt by recognizing unearned
revenue. The entity had earned one-third of this amount and the two-thirds will be earned during January 2019.
What is the impact of the adjusting entry?
a. 400, 000 increase in equity
b. 200, 000 decrease in liability
c. 600, 000 increase in asset
d. 200, 000 decrease in equity

9. State the proper order of partnership liquidation.

i. Outside creditors
ii. Owner's interest
iii. Inside creditors

a. i, iii and ii
b. i, ii and iii
c. ii, i and iii
d. iii, i and ii

10. The rule indicating priority of partner's loan over partner's capital is supported by an established legal
doctrine.
a. Realization of assets
b. Settlement of affairs
c. Right of offset
d. Elimination of deficiency

11. Make the statement false: Partner capital balances before realization should be after closing the following
account:
a. Partner's investment
b. Partnership goodwill account
c. Receivable from partners
d. Payable to partners

12. AA and BB are partners with capital balances of P30, 000 and P40, 000 and sharing profits and losses 40%
and 60%, respectively. If CC is admitted as partner paying P20, 000 in exchange for 50% of AA's equity. The
entry in the partnership books should be as follows:
a. AA, Capital 15, 000
CC, Capital 15, 000
b. Cash 20, 000
CC, Capital 20, 000
c. AA, Capital 20, 000
Goodwill 5, 000
CC, Capital 25, 000
d. Cash 20, 000
AA, Capital 5, 000
CC, Capital 15, 000

13. The capital accounts of the partnership of A, B and C are presented below with their respective profit and
loss ratios:
A P 278, 000 (1/2)
B 418, 000 (1/3)
C 192, 000 (1/6)

D was admitted to the partnership when he purchased directly, for P264, 000, and a proportionate interest A
and B in the net assets and profits of the partnership. As a result, D acquired a one-fifth interest in the net
assers and profits of the firm.
Assuming no asset revaluation is to be recorded, what is the combined gain realized by A and B upon the sale
of a portion of their interests in the partnership to D?
a. P 0
b. P86, 400
c. P122, 800
d. P164, 000
14. A and B are partners with the profit and loss ration of 75:25 and capital balances of P100, 000 and P50,
000, respectively. C is to be admitted into the partnership by purchasing a 20% interest in the capital, profits
and losses for P60, 000. Assuming that no asset revaluation is to be made, the capital balances of A and B after
the admission of C are

a. A, P80, 000 and B, P40 ,000

b. A, P120, 000 and B, P60, 000
c. A, P112, 000 and B, P38, 000
d. A, P100, 000 and B, P50, 000

15. On January 1, 2019, AA and BB agreed to form a partnership. The following are their assets and liabilities:
ACCOUNTS AA BB
Cash P34, 000 P19, 000
Accounts Receivable 22, 000 12, 000
Inventories 76, 000 91, 000
Machinery 120, 000 110, 000
Accounts Payable 54, 000 36, 000
Notes Payable 35, 000 15, 000

AA decided to pay-off his notes payable from his personal assets. It was also agreed that BB's inventories were
overstated by P6, 000 and AA's machinery was over depreciated by P5, 000. BB is to invest/withdraw cash in
order to receive a capital credit that is 20% more than AA's total net investment in the partnership.

How much cash will be presented in the partnership's statement of financial position?
a. P90, 600
b. P112, 600
c. P102, 600
d. P121, 600

16. AB Partnership began operations on June 1, 2019. On that date, A and B have capital credits of P35, 000
and P48, 000, respectively. The partnership has the following profit-sharing plan:

i. 10% interest on partners' capital balances at the end of the year

ii. P12, 000 and P15, 000 annual salaries for A nad B, respectively
iii. Remaining profit will be divided to B and A on a 2:3 ratio, respectively

During the year, A invested P30, 000 worth of merchandise and withdrew P8, 000 cash while Chris invested
P24, 000 cash. The partnership earned a profit P53, 275 during the year.

How much is A's capital balance at the end of 2019?

a. P84, 475
b. P88, 965
c. P85, 325
d. P82, 725

17. AA and BB are partners who have the agreement to share profit and loss in the following manner:
AA BB
Annual Salaries P52, 200 P51, 800
Interest on Average Balances 5% 10%
Bonus (Based on net income after S and I) 10%
Remainder 50% 50%
During the year ended December 31, 2018, the partnership generated a profit of P115, 000 before any
deductions. AA's and BB's average capital balances for the year are P120, 000 and P60, 000, respectively.
Income is distributed to the partners only as far as it is available.

How much is the total ahare of BB in the net income for the year ended 2018?
a. P57, 300
b. P57, 700
c. P57, 500
d. P59, 133

18. Thaddeus decided to withdraw from his partnership with Eury and Mnemo. Before his withdrawal,
Thaddeus' capital balance was P58, 000 while Eury's was P64, 000 and Mnemo's was P77, 000. Also, the
partnership's total assets amounted to P450, 000, but the partners agreed that the fixed asset was under
depreciated P15, 000. Thaddeus, Eury and Mnemo share profits and losses in the ratio of 2:4:4, respectively. If
Thaddeus receive P53, 200, what will be the combined capital balance of the remaining partners after
Thaddeus'withdrawal?
a. P182, 800
b. P160, 800
c. P197, 800
d. P130, 800

19. G and M, having capital balances of P140, 000 and P75, 000, respectively, decided to admit J into their
partnership. J is to invest sufficient amount in order to have a 25% interest in the partnership. If G and M share
profit in a proportion of 3:1, respectively, and M's capital balance after J's investment is P84, 500. How much
was invested by J?
a. P121, 000
b. P121, 250
c. P167, 750
d. P 84, 000

20. In XY Partnership, X and Y had a capital ration of 3:1 and profit and loas ratio of 2:1, respectively
The Bonus Method was used to record Z's admittance as new partner. What ratio would be used to allocate, X
and Y, the excess of Z's contribution over the amount credited to Z's capital?
a. X and Y new relative capital ratio
b. X and Y old profit and loss ratio
c. X and Y new relative profit and loss ratio
d. X and Y old capital ratio

21. In the abscence of agreement of distribution of profits, partnership law provides that industrial partner shall
receive just equitable share. In the abscence of sharing profits, how shall capital partners share in the
partnership profits?
a. It will be based on the end of the year capital ratio
b. It will be based on the loss agreement ratiom
c. It will be based on the original capital contribution
d. It will be based on the drawing ratio

For numbers 22, 23 and 24

Summary of Satement of Financial Position accounts balances of DEF Partnership are indicated below. F, E
and D share in profit and loss ratio of 2:3:5, respectively.
Cash: P100, 000; Accounts Receivable: P125, 000; Inventory: P200, 000; Land: P800, 000; Building, net: P1,
500, 000; Accounts Payable: P250, 000; Long-term Debt: P450, 000; D, Capital: P810, 000; E, Capital: P729,
000; F, Capital: P486, 000

The partners agree to admit G for a one-fifth interest. The fair value of the land is appraised at P900, 000 and
the market value of the inventory of P250, 000. The assets are to be revalued prior the admission of G.

22. By how much will the capital accounts of D, E and F increase due to revaluation of assets?
a. P60, 000, P54, 000 and 36, 000 respectively
b. P75, 000, P45, 000 and 30, 000, respectively
c. P36, 000, P54, 000 and P60, 000, respectively
d. The capital accounts will increase by P50, 000 each

23. How much should G have to invest in the partnership to acquire one-fifth interest?
a. P534, 750
b. P543, 750
c. P547, 350
d. P553, 740

24. Suppose G, instead, paid P450, 000 to the old partners for 20% of each of their respective capital to acquire
one-fifth interest, (1) how much will be F Capital after G's admission? And (2) how much cash will E received
in exchange for her sold asset?
a. (1)P412, 800; (2)P159, 300
b. (1)P412, 800; (2)P139, 500
c. (1)P428, 100; (2)P195, 300
d. (1)P482, 010; (2)P153, 900

25. Future CPAs Company has an ending inventory of P60, 000. It has a sales of P120, 000 and beginning
inventory of P40, 000. Cost of sales is 60% of sales. Purchases are:
a. P60, 000
b. P72, 000
c. P92, 000
d. P132, 000

26. "Magiging CPA Acco Company" sold 100, 000 units of their products. Its total sales amounted to P2, 500,
000. For each unit of their product, they earned a P10 gross profit. If their net profit is 30% of gross profit, how
much is their operating expenses?
a. P250, 000
b. P300, 000
c. P700, 000
d. P750, 000

27. In connection with number 26, how much is their net profit after tax assuming the tax rate is 30%?
a. P210, 000
b. P225, 000
c. P525, 000
d. None of the choices

28. The COGS and CGM of Papasa Acco Partnership are P80, 000 and P87, 500, respectively. If the FG,
Ending is 75% more than the FG, Beginning, how much is the Cost of Goods Available for Sale?
a. P97, 500
b. P102, 700
c. P127, 500
d. Cannot be determined with the given information

29. In relation with number 28, how much is the value of total goods put into process?
a. P78, 500
b. P102, 500
c. P112, 300
d. Cannot be determined with the given information

30. In relation with number 28, what is the amount of FG, Ending?
a. P12, 000
b. P17, 500
c. P35, 000
d. P 42, 500

Use the following information for items 31 and 32:

The JPI partnership shows the following profit and loss ratios and capital balances:
J 60% P 252, 000
P 30% P 126, 000
I 10% P 42, 000

The partners decide to sell to A 20% percent of their respective capital and profit and loss interest for a total
payment of P90, 000. A will pay the money directly to the other partners.

31. If the partners agree that unrecognized goodwill is to be recorded prior to the sale of A, what are the capital
balances of J, P and I after A's admission, respectively?
a. P198, 000; P99, 000; P33, 000
b. P201, 600; P100, 800; P33, 600
c. P216, 000; P108, 000; P36, 000
d. P255, 600; P127, 800; P42, 600

32. If the partners agree that the bonus method is used, what are the capital balances of J, P, I and A after A's
admission to the partnership?
a. P198, 000; P99, 000; P33, 000; P90, 000
b. P200, 600; P100, 080; P33, 600; P84, 000
c. P201, 000; P108, 000; P36, 000; P90, 000
d. P201, 600; P100, 800; P33, 600; P84, 000

Use the following information for items 33, 34, 35 and 36:
AB Partnership Capital Balance Profit and Loss Ratio
A P 250, 000 60%
B 200, 000 40%

C is to invest P120, 000 cash into the partnership. She will have a one-fourth interest and 25% share at profit.
A and B will share the remaining profit of 75% in a ratio of 60:40.

33. What will be included in journal entry if the revaluation of asset approach will be used?
a. A debit of P22, 500 to Goodwill
b. A credit of P90, 000 to Inventory
c. A debit of P54, 000 to B, Capital
d. A credit of P120, 000 to Land

34. What amount and percentage will be used in order to get the Total Resulting Capital of the partnership?
a. P120, 000 and 25%
b. P120, 000 and 75%
c. P450, 000 and 25%
d. P450, 000 and 75%

35. What amount will be the bonus to old partners using the Bonus Method?
a. P 0
b. P12, 500
c. P21, 000
d. P22, 500

36. What amount will be recognized if the Goodwill Revaluation/Recognition will be used?
a. P 0
b. P30, 000
c. P90, 000
d. Cannot be determined

37. A and B are partners with capital balances of P200, 000 and P100, 000 respectively. They share profits and
losses equally. C decided to purchase one-fifth of their respective interest paying P90, 000. What will be
included in the journal entry?
a. A debit of P60, 000 to A, Capital
b. A debit of P30, 000 to B, Capital
c. A credit of P30, 000 to Goodwill
d. A credit of P60, 000 to C, Capital

38. AB Company is an entity selling condominium units. C is an agent of AB Company. Each condominium
unit is P400, 000. The gross margin ratio is 30%. For every condominium unit sold, the agent is entitled to a
10% commission. 15 out of 50 units sold was sold by C. The operating expense of the entity is P3, 400, 000
excluding the commission expense of C. What is the percentage of the net profit if the sales will be the basis?
a. 5%
b. 10%
c. 13%
d. 15%

39. In relation with number 38, what is the amount of cost of sale?
a. P10, 000, 000
b. P14, 000, 000
c. P 20, 000, 000
d. None of the above

40. On May 2, 2019 the capital balances and profit and loss ratio of A and B, partners of AB partnership, are
shown below:
Partner A
Capital Balance P150, 000
P&L Ratio 70%

Partner B
Capital Balance P50, 000
P&L Ratio 30%

On this date, they agree to admit C as a partner for a 25% percent interest in capital upon her investment of
P80, 000. B, A and C are to share profits in the ratio of 3:5:2. Subsequently, D joins the partnership by
investing P75, 000 for one-fifth interest in profits and capital. The former partners continue sharing profits in
their original ratio. Assuming the goodwil method is used in recording the admission of new partners, the
capital balances of A, B, C and Din the new partnership are:
a. P178, 000, P62, 000, P80, 000, P80, 000
b. P178, 000, P62, 000, P80, 000, P75, 000
c. P168, 000, P56, 000, P76, 000, P75, 000
d. P150, 000, P50, 000, P80, 000, P75, 000

41. G, L and M were partners with capital balances on January 2, 2019 of P100, 000, P150, 000 and P200, 000,
respectively. Their profit and loss ratio is 5:3:2. On July 1, 2019, G retires from the partnership. On the date of
retirement, the partnership net income is P140, 000 and the partners agreed that inventories are to be revalued
at P70, 000 from its original cost of P50, 000. The partners agreed further to pay G P195, 000 in settlement of
his interest. What are the capital balances of L and M after the retirement of G?
a. P220, 000 and P226, 000
b. P207, 000 and P238, 000
c. P198, 000 and P232, 000
d. P189, 000 and P226, 000

42. Moira wishes to purchase one-fourth interest in the partnership of IB, TT and Z. The three partners agree to
sell to Moira one-fourth of their respective capital and profit and loss interests im exchange for a total payment
of P40, 000. Before Moira's admission, the capital balances of IB, TT and Z are P80, 000, P40, 000 and P20,
000. Their profit and loss ratio are 6:3:1, respectively. All asseta and liablities are fairly valued and no bonus is
to be recorded upon the admission of Moira. Immediately after Moira's admission, what should be the capital
balances of IB, TT and Z, respectively?
a. P60, 000; P30, 000; P15, 000
b. P92, 000; P46, 000; P22, 000
c. P69, 000; P34, 500; P16, 500
d. P77, 000; P38, 500; P19, 500

43. E and J share profits and losses in the ratio of 3:7. The capital balances of E and J are P40, 000 and P60,
000, respectively. C is to be admitted into the partnership for twenty percent interest in the capital of the firm.
If assets are revalued and the capital balances of E and J after recording the admission of C are P52, 000 and
P88, 000, respectively, the cash paid by C is:
a. P10, 000
b. P15, 000
c. P20, 000
d. P35, 000

44. Calum and Lukas are partners sharing profit and losses in the ratio of 6:4, respectively. On January 2, the
partners decided to admit Brandon as a new partner upon his investment of P16, 000. On this date, the interest
in the partnership of Calum and Lukas are P23, 000 and P18, 600, respectively. Assuming that the new partner
is given a one-third interest in the firm and the asset are revalued. The capital balances of the partners after
admission of Brandon are:
a. P23, 000; P18, 600; P16, 000
b. P23, 000; P18, 600; P20, 800
c. P23, 240; P18, 760; P16, 000
d. P23, 500; P18, 600; P16, 000

45. S1. Under NI before S, I and B, bonus is not treated as an expense of the partnership.
S2. Under NI before S and I but after B, the bonus is treated as an expense.
a. True, True
b. True, False
c. False, True
d. False, False
46. A and R are partners. A and R receive annual salary of P30, 000 each. A and R also receive P7, 000 and P3,
200 as interest in their capital balances. The net income is P190, 200. If A is entitled for a 20% Bonus (NI
before S, I and B) and the remaining profits will be divided equally, how much will be debited to A, Capital in
order to get his capital balance at the end of the year?
a. P0
b. P38, 040
c. P112, 850
d. P116, 020

47. On January 2, 2018, LR partnership begins its operations. L and R investments are P80, 000 and P40, 000,
respectively. According to the partnership, L will be allowed a monthly salary of P8, 000 with P4, 000 assigned
to R and the partners will be allowed with interest equal to 10% of the capital balance as of the first day of the
year. L, being the managing partner, will be allowed a bonus of ten percent of the net income after bonus. The
remainder will be divided on the basis of the beginning capital for the first year and equally for the second
year. Also, each partner is allowed to withdraw up to P4, 000 a year. Partnership's operation resulted in a net
loss of P6, 000 in 2018 and a profit of P22, 000 in 2019. Each partner withdraws the maximum amount each
year. What is the capital balance of L in the beginning of 2019?
a. P34, 000
b. P54, 000
c. P72, 000
d. P73, 900

48. In connection with number 47, how much is the capital balance of R before deducting her withdrawals in
the year 2018?
a. P34, 000
b. P38, 000
c. P72, 000
d. P76, 000

49. In connection with number 47, how much did R, Capital increase/decrease as a result of the distribution of
profits during 2019?
a. P4, 000 decrease
b. P 37, 900 increase
c. P15, 900 decrease
d. P67, 300 increase

50. In connection with number 47, what is the capital balance of L by the end of 2019?
a. P72, 000
b. P73, 900
c. P105, 900
d. P113, 900

"Honest zero is better than a cheated hundred!"