1. The Ryder’s Uptown Grill received a bill of P400 from the Erml Advertising Agency.

The owner, John Ryder, is postponing payment of the bill

until a later date. The effect on specific items in the basic accounting equation is
a. a decrease in Cash and an increase in Accounts Payable.
b. a decrease in Cash and an increase in J. Ryder, Capital.
c. an increase in Accounts Payable and a decrease in J. Ryder, Capital.
d. a decrease in Accounts Payable and an increase in J. Ryder, Capital.
2. James Company purchases P600 of equipment from Mundelein Inc. for cash. The effect on the components of the basic accounting equation of
James Company is
a. an increase in assets and liabilities. b. a decrease in assets and liabilities.
c. no change in total assets. d. an increase in assets and a decrease in liabilities.
3. All of the financial statements are for a period of time except the
a. income statement. b. owner's equity statement. c. balance sheet. d. statement of cash flows.
4. Creditors are:
a. people or organizations who owe money to a business. b. people or organizations to whom a business owes money.
c. stockholders of a business. d. customers of a business.
5. Financing that individuals or institutions have provided to a corporation is:
a. always classified as a liability.
b. classified as a liability when provided by creditors and as stockholders' equity when provided by owners.
c. always classified as equity.
d. classified as a stockholders' equity when provided by creditors and a liability when provided by owners.
6. An investor who is looking at a company’s financial statements cannot determine whether the:
a. company’s earnings are rising or falling. b. company pays a dividend.
c. company has positive cash flows d. company’s owners are financially sound.
7. Which of the following statements about organizational forms of a business is not correct?
a. In a sole proprietorship form of business or in a partnership form, the owner(s) are personally responsible for the debts of the business.
b. The partnership agreement states how profits are to be shared between partners and what happens when a new partner is to be admitted
or an existing partner is retiring.
c. A corporation is a separate entity from both a legal and accounting perspective.
d. The owners of a corporation are legally responsible for the corporation’s debts and taxes.
8. Expenses are reported on the:
a. income statement in the time period in which they are paid. b. income statement in the time period in which they are incurred.
c. balance sheet in the time period in which they are paid. d. balance sheet in the time period in which they are incurred.
9. The separate entity assumption assumes:
a. the financial reports of a business include only the results of that business’s activities.
b. assets equal liabilities plus stockholder’s equity.
c. revenues and expenses are reported in separate sections of a company’s income statement.
d. assets are reported in a separate financial statement from liabilities.
10. Use the information above to answer the following question. Suppose that liabilities increased by P60,000 and stockholders’ equity increased by
P25,000. What would be the change in Maxine’s assets?
a. P112,000 increase b. P85,000 increase c. P103,000 increase d. P35,000 increase
11. The Don't Bite Me Pest Control Company has 10,000 gallons of insecticide supplies on hand that cost P300,000; a bill from the vendor for
P100,000 of these supplies has not yet been paid. The company expects to earn P800,000 for its services when it uses the insecticide
supplies. The company’s balance sheet would include an asset, Supplies, in the amount of:
a. P10,000. b. P200,000. c. P300,000. d. P800,000.
12. In its December 31, 20x4, balance sheet, Karyl Co. reported accounts receivable of ₱100,000 before allowance for uncollectible accounts of
₱10,000. Credit sales during 20x5 were ₱611,000, and collections from customers, excluding recoveries, totaled ₱591,000. During 20x5, accounts
receivable of ₱45,000 were written off and ₱17,000 were recovered. Karyl estimated that ₱15,000 of the accounts receivable at December 31, 20x5,
were uncollectible. In its December 31, 20x5, balance sheet, what amount should Karyl report as accounts receivable before allowance for
uncollectible accounts?
a. 58,000 b. 67,000 c. 75,000 d. 82,000
13. Roth, Inc. received from a customer a one-year, ₱500,000 note bearing annual interest of 8%. After holding the note for six months, Roth
discounted the note at Regional Bank at an effective interest rate of 10%. What amount of cash did Roth receive from the bank?
a. 540,000 b. 523,810 c. 513,000 d. 495,238
14. On December 1, 2002, Bain Company received a ₱10,000, 60-day, 6 percent note from a customer. On December 31, 2002, the company
discounted the note at the bank. The bank's discount rate was 9 percent. How much were the proceeds received by Bain from the bank?
a. 10,024.25. b. 9,924.25. c. 9,700.00. d. 10,050.00.
15. Compute for the freight-in using the following information:
Beginning Inventory ..................................₱20,000
Purchases ......................................................41,000
Purchase Returns and Allowances .................3,000
Purchase Discounts ........................................4,000
Freight-In ...................................................................?
Cost of Goods Available for Sale ..........................55,000
Ending Inventory ........................................................?
Cost of Goods Sold ...............................................22,000
 a. 3,000 b. 4,000 c. 2,000 d. 1,000
16. Spiro Corp. uses the sum-of-the-years’ digits method to depreciate equipment purchased in January 20x1 for ₱20,000. The estimated residual
value of the equipment is ₱2,000 and the estimated useful life is four years. What should Spiro report as the asset’s carrying amount as of December
31, 20x3?
a. 1,800 b. 2,000 c. 3,800 d. 4,500
17. On July 1, 20x1, Ewell Corporation purchased factory equipment for ₱100,000. Residual value was estimated at ₱4,000. The equipment will be
depreciated over ten years using the double-declining-balance method. Counting the year of acquisition as one-half year, Ewell should record 20x2
depreciation expense of
a. 15,366 b. 16,000 c. 18,000 d. 19,200
18. On January 2, 20x0, Union Co. purchased a machine for ₱264,000 and depreciated it by the straight-line method using an estimated useful life of
eight years with no residual value. On January 2, 20x3, Union determined that the machine had a useful life of six years from the date of acquisition
and will have a residual value of ₱24,000. An accounting change was made in 20x3 to reflect the additional data. The accumulated depreciation for
this machine should have a balance at December 31, 20x3, of
a. 176,000 b. 160,000 c. 154,000 d. 146,000
19. The total credits in the statement of financial position columns of a worksheet amounted to P2,881,600 while the total debits in the income
statement columns is P987,200. If the total debits in the adjusted trial balance is P3,960,000, how much is the profit/(loss) for the period?
a. 90,200 b. 89,200 c. 87,200 d. 91,200
Use the following information for the next four questions:
On January 1, 20x1, DRACONIAN FEEBLE-MINDED Co. received P240,000 advance rent covering 3 years starting January 1, 20x1.
20. If DRACONIAN Co. uses the liability method, the 20x1 year-end adjusting entry will include a
a. debit to cash for P240,000 b. credit to unearned rent for P80,000
c. credit to unearned rent for P160,000 d. credit to rent income for P80,000
21. If DRACONIAN Co. uses the income method, the 20x1 year-end adjusting entry will include a
a. debit to rent income for P80,000 b. debit to unearned rent for P160,000
c. debit to rent income for P160,000 d. credit to unearned rent for P80,000
22. If DRACONIAN Co. uses the liability method, the 20x1 rent income is
a. 80,000 b. 160,000 c. 240,000 d. 60,000
23. If DRACONIAN Co. uses the income method, the 20x1 unearned rent is
a. 80,000 b. 160,000 c. 240,000 d. 60,000
Use the following information for the next two questions:
PERSPICUOUS CLEAR Co. paid a one-year insurance on October 1, 20x1 amounting to P80,000.
24. If PERSPICUOUS Co. uses the asset method, the 20x1 year-end adjusting entry will include a
a. debit to insurance expense for P60,000 b. debit to insurance expense for P20,000
c. debit to prepaid insurance for P20,000 d. credit to prepaid insurance for P60,000
25. If PERSPICUOUS Co. uses the expense method, the 20x1 year-end adjusting entry will include a
a. debit to insurance expense for P60,000 b. debit to insurance expense for P20,000
c. debit to prepaid insurance for P60,000 d. credit to prepaid insurance for P20,000
26. A company that estimates uncollectible accounts as 2% of ending accounts receivable has accounts receivable, net of allowances, in the amount
of P98,000 as of the beginning of the year. Assuming there was a 200% increase in accounts receivable as of the year-end, how much was the
provision for doubtful accounts recognized?
a. 1,920 b.6,000 c. 4,000 d. 2,000
27. What is the authoritative status of the Conceptual Framework?
a. It has the highest level of authority. In case of a conflict between the Conceptual Framework and a Standard or Interpretation, the
Conceptual Framework overrides the Standard or Interpretation.
b. If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the Conceptual Framework. In the absence of
a Standard or an Interpretation that specifically applies, the Conceptual Framework should be followed.
c. If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the Conceptual Framework. In the absence of
a Standard or an Interpretation that specifically applies to a transaction, management should consider the applicability of the
Conceptual Framework in developing and applying an accounting policy that will result in information that is relevant and
reliable.
d. The Conceptual Framework applies only when IASB develops new or revised Standards. An entity is never required to consider the
Conceptual Framework.
28. In addition to a statement of a financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, and
statement of cash flows, a complete set of financial statements must include
a. notes b. an auditor’s opinion c. net present value of expected future cash flows d. a ten-year summary of operations
29. What is the basic purpose of accounting?
a. To provide quantitative financial information about economic activities.
b. To provide all information that users need in making economic decisions.
c. To provide qualitative financial information about economic activities intended to be useful in making economic decisions.
d. To provide quantitative financial information about economic activities intended to be useful in making economic decisions.
30. The practice of accountancy in the Philippines is regulated under
a. R.A. 9892 b. R.A. 9298 c. R.A. 8992 d. RH bill
31. Which of the following errors may be revealed by a trial balance?
a. A debit to salaries expense was posted in the ledger as debit to insurance expense.
b. Expense already incurred was not recorded
c. The debit and credit posting of a credit sale were omitted
d. The credit posting of a payment of account payable was omitted
32. If an entity uses the income method of initial recording of income, the year-end adjusting entry involves
a. crediting an income account for the earned portion of the advance payment received
b. debiting a liability account for the earned portion of the advance payment received
c. debiting an income account for the earned portion of the advance payment received
d. crediting a liability account for the unearned portion of the advance payment received
32. What is the effect upon the total assets of a business when an account receivable has been collected?
a. increase total assets b. decrease total assets c. no change in total assets d. decrease of receivable only
33. The following is the condensed balance sheet of the partnership of Jo, Li and Bi who share profits and losses in
the ratio of 4:3:3.
Cash P 180,000 Accounts payable P 420,000
 Other assets 1,660,000 Bi, Loan 60,000
Jo, receivable 40,000 Jo, capital 620,000
Li, capital 400,000
Bi, capital 380,000
Total P1,880,000 Total P1,880,000
Assume that the asses and liabilities are fairly valued on the balance sheet and the partnership decides to admit Mac as a new partner, with a 20%
interest. No asset revaluation or bonus is to be recorded. How much Mac should contribute in cash or other assets?
a. P350,000 b. P355,000 c. P280,000 d. P284,000
34. The partnership of Gary, Jerome and Paul was formed on January 1,2008. The original investments were as follows: Gary – P80,000; Jerome –
P120,000 and Paul – P180,000. According to the partnership agreement, net income or loss will be divided among the respective partners as follows:
Salaries of P12,000 for Gary; P10,000 for Jerome; and P8,000 for Paul. Interest of 8% on the average capital balances during the year of Gary,
Jerome and Paul. Remainder divided equally. The net income of the partnership for the year ended December 31,2008 was P70,000. Gary invested an
additional P20,000 in the partnership on July 1,2008. Paul withdrew P30,000 from the partnership on October 1,2008. Gary, Jerome and Paul made
regular drawings against their shares of net income during 2008 for P10,000 each. What is the capital balances of Gary, Jerome and Paul, respectively
as of December 31,2008?
a. P112,333 – P132,733 – P164,934 b. P92,000 – P102,000 – P134,934
c. P102,333 – P122,733 – P154,934 d. P122,333 – P132,733 – P164,934
35. The partners Aiko, Bren, Cinia and Dior who share profits and losses at 30%, 30%, 20% and 20% respectively decided to liquidate. All
partnership assets are to be converted into cash. Prior to the liquidation, the condensed balance sheet is as follows:
Cash P 100,000 Liabilities P 750,000
Other assets 1,800,000 Bren,loan 60,000
Dior, loan 50,000
Aiko, capital 420,000
Bren, capital 315,000
Cinia, capital 205,000
Dior, capital 100,000
Total P1,900,000 Total P1,900,000
The non-cash assets realize P800,000. All the partners are solvent, and can contribute any additional cash to cover any deficiency. In the process of
liquidation, deficiency will occur and will require additional investment as follows:
a. Cinia at P75,000 b. Dior at P50,000 c. Dior and Cinia for P50,000 and P7,500 respectively d. None
36. On November 30,2008, BEE, CEE and DEE decided to liquidate BCD partnership. Their capital balances and profit and loss on this date are as
follows: BEE (40%) – P50,000; CEE (30%) – P60,000; and DEE (30%) – P20,000. The net income from January 1 to November 30,2008 is P44,000.
On November 30,2008, cash and liabilities are P40,000 and P90,000, respectively. For Bee to receive P55,200 in full settlement of his interest in the
firm, how much must be realized from the sale of the firm’s non-cash assets?
a. P233,000 b. P149,000 c. P255,000 d. P193,000
37. A partnership dissolution differs from a liquidation in that
a. payments are made to creditors before partners receive value.
b. periodic payments to partners are made when cash becomes available.
c. a partner withdraws from the business and the enterprise continues to function.
d. full payment is made to all outside creditors before remaining cash is distributed to partners in a final lump sum payment.
38. A simple partnership liquidation requires
a. periodic payments to creditors and partners determined by a safe payments schedule.
b. partnership assets to be converted into cash with full payment made to all outside creditors before remaining cash is distributed to
partners in a lump sum payment.
c. only creditors to be paid in an orderly manner.
d. periodic payments to partners as cash becomes available.
39. In a schedule of assumed loss absorptions
a. the partner with lowest loss absorption is eliminated last. b. it is necessary to have a cash distribution plan first.
c. the least vulnerable partner is eliminated first. d. the most vulnerable partner is eliminated first.
40. The legal characteristic of a partnership whereby each partner is an agent of the partnership and is able to bind the partnership to contracts within
the normal scope of the partnership business is known as:
a. unlimited liability b. partnership accounting c. a partnership contract d. mutual agency
41. Accountants refer to an economic event as a
a. purchase. b. sale. c. transaction. d. change in ownership.
42. The economic entity assumption requires that the activities
a. of different entities can be combined if all the entities are corporations.
b. must be reported to the Securities and Exchange Commission.
c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
d. of an entity be kept separate from the activities of its owner.
43. A business organized as a corporation
a. is not a separate legal entity in most states. b. requires that stockholders be personally liable for the debts of the business.
c. is owned by its stockholders. d. terminates when one of its original stockholders die
44. Deb Smith is the proprietor (owner) of Smitty's, a retailer of athletic apparel. When recording the financial transactions of Smitty's, Deb does not
record an entry for a car she purchased for personal use. Deb took out a personal loan to pay for the car. What accounting concept guides Deb's
behavior in this situation?
a. Pay back concept b. Economic entity assumption c. Cash basis concept d. Monetary unit assumption
45. A business that enjoys limited liability is a
a. proprietorship. b. partnership. c. corporation. d. sole proprietorship.
46. If total liabilities increased by P15,000 and owner’s equity increased by P5,000 during a period of time, then total assets must change by what
amount and direction during that same period?
a. P20,000 decrease b. P20,000 increase c. P25,000 increase d. P30,000 increase
47. Owner's equity is decreased by
a. assets. b. revenues. c. expenses. d. liabilities.
48. If total liabilities increased by P4,000, then
a. assets must have decreased by P4,000.
b. owner's equity must have increased by P4,000.
c. assets must have increased by P4,000, or owner's equity must have decreased by P4,000.
 d. assets and owner's equity each increased by P2,000
49. If an individual asset is increased, then
a. there must be an equal decrease in a specific liability. b. there must be an equal decrease in owner's equity.
c. there must be an equal decrease in another asset. d. none of these is possible.
50. If the owner's equity account increases from the beginning of the year to the end of the year, then
a. net income is less than owner drawings. b. a net loss is less than owner drawings.
c. additional owner investments are less than net losses. d. net income is greater than owner drawings.
51. Which of the following ratios would be least useful in determining a company's ability to pay its expenses and liabilities?
a. current ratio b. acid-test ratio c. price-earnings ratio d. times interest earned ratio
52. What effect will the issuance of common stock for cash at year-end have on the following ratios?
Return on Total Assets Debt-to-Equity Ratio
a. Increase Increase
b Increase Decrease
c. Decrease Increase
d. Decrease Decrease
53. The ratio of total cash, marketable securities, accounts receivable, and short-term notes to current liabilities is:
a. the debt-to-equity ratio. b. the current ratio. c. the acid-test ratio. d. working capital.
54 . A company has just converted a long-term note receivable into a short-term note receivable. The company's acid-test and current ratios are both
greater than 1. This transaction will:
a. increase the current ratio and decrease the acid-test ratio. b. increase the current ratio and increase the acid-test ratio.
c. decrease the current ratio and increase the acid-test ratio. d. decrease the current ratio and decrease the acid-test ratio.
55. Broca Corporation has a current ratio of 2.5. Which of the following transactions will increase Broca's current ratio?
a. .the purchase of inventory for cash. b. the collection of an account receivable.
c. the payment of an account payable. d. none of the above.
56 . Frame Company had P160,000 in sales on account last year. The beginning accounts receivable balance was P10,000 and the ending accounts
receivable balance was P16,000. The company's accounts receivable turnover was closest to:
a.12.31 b. 6.15 c. 16.00 d. 10.00
57. Graber Company had P130,000 in sales on account last year. The beginning accounts receivable balance was P18,000 and the ending accounts
receivable balance was P12,000. The company's average collection period was closest to:
a.33.69 days b. 42.12 days c. 84.23 days d. 50.54 days
58. Laware Corporation has provided the following data:
This Year Last Year
Accounts receivable .......... P118,000 P138,000
Inventory ........................... P180,000 P170,000
Sales on account ................ P714,000
Cost of goods sold ............. P447,000
The inventory turnover for this year is closest to:
a.2.55 b. 0.94 c. 2.48 d. 1.06
59. The times interest earned ratio of Whiting Company is 4.0. The interest expense for the year is P15,000, and the company's tax rate is 30%.
Whiting Company's after-tax net income must be:
a. P60,000 b. P42,000 c. P31,500 d. P16,500
60. Tines Commerce computes bad debt based on the allowance method. They determine their current year’s balance estimation to be a credit of
P45,000. The previous period had a credit balance in Allowance for Doubtful Accounts of P12,000. What should be the reported figure in the
adjusting entry for the current period?
a. P12,000 b. P45,000 c. P33,000 d. P57,000
61. Which of the following accounts is considered a temporary or nominal account?
a. Fees Earned Revenue b. Prepaid Advertising c. Unearned Service Revenue d. Prepaid Insurance
62. If a journal entry includes a debit or credit to the Cash account, it is most likely which of the following?
a. closing entry b. an adjusting entry c. an ordinary transaction entry d. outside of the accounting cycle
63. What accounts are used to recognize a retailer’s purchase from a manufacturer on credit?
a. accounts receivable, merchandise inventory b. accounts payable, merchandise inventory
c. accounts payable, cash d. sales, accounts receivable
64. If a customer purchases merchandise on credit and returns the defective merchandise before payment, what accounts would recognize this
transaction?
a. sales discount, cash b. sales returns and allowances, cash
c. accounts receivable, sales discount d. accounts receivable, sales returns and allowances
65. Which of the following accounts are used when recording a purchase?
a. cash, merchandise inventory b. accounts payable, merchandise inventory c. A or B d. cash, accounts payable
66. A retailer returns P400 worth of inventory to a manufacturer and receives a full refund. What accounts recognize this return before the retailer
remits payment to the manufacturer?
a. accounts payable, merchandise inventory b. accounts payable, cash
c. cash, merchandise inventory d. merchandise inventory, cost of goods sold
67. Which of the following is not a characteristic of FOB Destination?
a. The seller pays for shipping. b. The point of transfer is when the goods leave the seller’s place of business.
c. The seller owns goods in transit d. The point of transfer is when the goods arrive at the buyer’s place of business.
68. An unhappy customer just returned P50 of the items he purchased yesterday when he charged the goods to the company’s store credit card.
Which special journal would the company use to record this transaction?
a. sales journal b. purchases journal c. cash receipts journal d. cash disbursements journal e. general journal
69. Your company paid rent of P1,000 for the month with check number 1245. Which journal would the company use to record this?
a. sales journal b. purchases journal c. cash receipts journal d. cash disbursements journal e. general journal
70. On January 1, Incredible Infants sold goods to Babies Inc. for P1,540, terms 30 days, and received payment on January 18. Which journal would
the company use to record this transaction on the 18th?
a. sales journal b. purchases journal c. cash receipts journal d. cash disbursements journal e. general journal
71. You just posted a credit to Accounts Receivable. Which special journal did it come from?
a. sales journal b. purchases journal c. cash receipts journal d. cash disbursements journal e. general journal
72. Which of the following items are found on a book side of the bank reconciliation?
a. beginning bank balance b. outstanding checks c. interest income d. error made by bank
73. At what point does revenue recognition occur?
a. When the purchase order is received b. When the seller receives the money for the job
c. When the seller has met “performance” d. When the purchaser makes payment
74. If goods are shipped FOB destination, which of the following is true?
a. Title to the goods will transfer as soon as the goods are shipped. b. FOB indicates that a price reduction has been applied to the order.
c. The seller must pay the shipping. d. The seller and the buyer will each pay 50% of the cost.
75. On which financial statement would the merchandise inventory account appear?
a. balance sheet b. income statement c. both balance sheet and income statement d. neither balance sheet nor income statement
76. Which of the following describes features of a perpetual inventory system?
a. Technology is normally used to record inventory changes.
b. Merchandise bought is recorded as purchases.
c. An adjusting journal entry is required at year end, to match physical counts to the asset account.
d. Inventory is updated at the end of the period.
77. Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory
updating system?
a. balance sheet b. income statement c. neither statement d. both statements
78. An accelerated depreciation method that takes more expense in the first few years of the asset’s life is ________.
a. units-of-production depreciation b. double-declining-balance depreciation
c. accumulated depreciation d. straight-line depreciation
79. Which of the following is true regarding special issues in accounting for long-term assets?
a. An asset’s useful life can never be changed.
b. An asset’s salvage value can never be changed.
c. Depreciation expense calculations may need to be updated using new and more accurate estimates.
d. Asset values are never reduced in value due to physical deterioration.
80. An employee and employer cost-share health insurance. If the employee covers three-fourths of the cost and the employer covers the rest, what
would be the employee’s responsibility if the total premium was P825?
a. P618.75 b. P206.25 c. P412.50 d. P275
81. Your friend is considering incorporating and asks for advice. Which of the following is not a major concern?
a. colors for the logo b. which state in which to incorporate
c. number of shares of stock to authorize d. selection of the corporation name
82. The total amount of cash and other assets received by a corporation from the stockholders in exchange for the shares is ________.
a. always equal to par value b. referred to as retained earnings c. always below its stated value d. referred to as paid-in capital
83. A corporation issued 100 shares of P100 par value preferred stock for P150 per share. The resulting journal entry would include which of the
following?
a. a credit to common stock b. a credit to cash
c. a debit to paid-in capital in excess of preferred stock d. a debit to cash
84. Owner’s equity represents which of the following?
a. the amount of funding the company has from issuing bonds
b. the sum of the retained earnings and accounts receivable account balances
c. the total of retained earnings plus paid-in capital
d. the business owner’s/owners’ share of the company, also known as net worth or net assets
85. Mutual agency is defined as:
a. mutual agreement b. the right of all partners to represent the company’s normal business operations
c. a synonym for partnership d. a partnership between two partnerships
86. Which of the following is least likely to affect the retained earnings balance?
a. Conversion of preferred stock into common stock b. Stock splits c. Treasury stock transactions. d. Stock dividends.
87. The entry to record the issuance of common stock for fully paid stock subscriptions is
a. a memorandum entry b. Common Stock Subscribed Common Stock Additional Paid-In Capital
c. Common Stock Subscribed Subscriptions Receivable d. Common Stock Subscribed Common Stock
88. The issuance of shares of preferred stock to shareholders
a. increases preferred stock outstanding b. has no effect on preferred stock outstanding.
c. increases preferred stock authorized d. decreases preferred stock authorized.
89. How would a stock split affect each of the following?
Assets Total Stockholders' Equity Additional Paid-In Capital
a. Increase Increase No effect
b. No effect No effect No effect
c. No effect No effect Increase
d. Decrease Decrease Decrease
90. On July 31, 2004, Lakers Corporation purchased 500,000 shares of Celtic Corporation. On December 31, 2005, Lakers distributed 250,000 shares
of Celtic stock as a dividend to Lakers' stockholders. This is an example of a
a. liquidating dividend. b. investment dividend. c. property dividend. d. stock dividend.
92. Unlike a stock split, a stock dividend requires a formal journal entry in the financial accounting records because
a. stock dividends increase the relative book value of an individual's stock holdings.
b. stock dividends increase the stockholders' equity in the issuing firm.
c. stock dividends are payable on the date they are declared.
d. stock dividends represent a transfer from Retained Earnings to Capital Stock.
93. Harbottle Corporation was organized on January 3, 2005, with authorized capital of 100,000 shares of P10 par common stock. During 2005,
Harbottle had the following transactions affecting stockholders' equity:
• January 7--Issued 40,000 shares at P12 per share
• December 2--Purchased 6,000 shares of treasury stock at P13 per share
The cost method was used to record the treasury stock transaction. Harbottle's net income for 2005 is P300,000. What is the amount of stockholders'
equity at December 31, 2005?
a. P640,000 b. P702,000 c. P708,000 d. P720,000
94. Thorpe Corporation holds 10,000 shares of its P10 par common stock as treasury stock, which was purchased in 2004 at a cost of P120,000. On
December 10, 2005, Thorpe sold all 10,000 shares for P210,000. Assuming that Thorpe used the cost method of accounting for treasury stock, this
sale would result in a credit to
a. Paid-In Capital from Treasury Stock of P90,000. b. Paid-In Capital from Treasury Stock of P110,000.
c. Gain on Sale of Treasury Stock of P90,000. d. Retained Earnings of P90,000.
95. On July 1, Rainbow Corporation issued 2,000 shares of its P10 par common and 4,000 shares of its P10 par preferred stock for a lump sum of
P80,000. At this date, Rainbow's common stock was selling for P18 per share and the preferred stock for P13.50 per share. The amount of proceeds
allocated to Rainbow's preferred stock should be
a. P40,000. b. P48,000. c. P54,000. d. P60,000.
96. The costs incurred on jobs which are currently in production but are not yet complete would appear in
a. the materials control account. b. the finished goods control account.
c. the manufacturing overhead control account. d. the work-in-process control account.
97. Which of the following formulas determine cost of goods sold in a merchandising entity?
a. Beginning inventory + Purchases + Ending inventory = Cost of goods sold
b. Beginning inventory + Purchases - Ending inventory = Costs of goods sold
c. Beginning inventory - Purchases + Ending inventory = Cost of goods sold
d. Beginning inventory - Ending inventory - Purchases = Cost of goods sold
98. Which of the following formulas determine cost of goods sold in a manufacturing entity?
a. Beginning work-in-process inventory + Cost of goods manufactured - Ending work-in-process inventory = Cost of goods sold
b. Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory = Cost of goods sold
c. Cost of goods manufactured - Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold
d. Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold
99. The following information pertains to the Cannady Corporation:
Beginning work-in-process inventory P 50,000 Ending work-in-process inventory 48,000
Beginning finished goods inventory 180,000 Ending finished goods inventory 195,000
Cost of goods manufactured 1,220,000
What is cost of goods sold?
a. P1,235,000 b. P1,205,000 c. P1,218,000 d. P1,222,000
100. Answer the following questions using the information below:
Beginning finished goods, 1/1/20X3 P 90,000 Ending finished goods, 12/31/20X3 77,000
Cost of goods sold 270,000 Sales revenue 500,000
Operating expenses 155,000
What is cost of goods manufactured for 20X3?
a. P230,000 b. P257,000 c. P283,000 d. P355,000
101. What is gross margin for 20X3?
a. P283,000 b. P355,000 c. P230,000 d. P257,000
102. For last year, Wampum Enterprises reported revenues of P420,000, cost of goods sold of P108,000, cost of goods manufactured of P101,000,
and total operating costs of P70,000. Gross margin for last year was:
a. P319,000 b. P312,000 c. P249,000 d. P242,000
103. For last year, Lewisburn Manufacturing reported the following:
Revenue P420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000
104. What was Lewisburn's cost of goods sold?
a. P103,000 b. P152,000 c. P268,000 d. P317,000
105. The net profit of a firm was shown as P2 000 and it was later discovered that Discount received were under cast by P200 and purchases were
understated by P150. The corrected net profit was
a. P1 800 b. P1 850 c. P1 950 d. P2 050
106. A bank reconciliation statement is prepared to determine
a. the true bank balance of a business b. how much a business owes its creditors
c. the true profit earned by a business d. how much an owner withdraws from the business
107. An imprest petty cash fund would least likely be used to pay for which of the following items?
a. Minor office supplies b. Monthly interest expense c. Stamps for small mailings d. Small contributions to a local charity
108. Which of the following items would not normally appear on bank reconciliations?
a. Balance per bank b. List of deposits in transit c. Outstanding deposits d. Outstanding checks
109. Midas Co. had a cost of goods sold for the quarter of P210,000.
Additional data are as follows:
Finished goods, beginning P38,000
Finished goods, ending 41,000
Factory overhead 63,000
Direct labor cost 58,000
No work in process inventories
What is the direct materials usage?
a. P86,000 b. P88,000 c. P90,000 d. P92,000
110. The following information was taken from Kim Company’s accounting records for the year ended December 31, 2009.
Increase in raw materials inventory P 15,000
Decrease in finished goods inventory 35,000
Raw materials purchased 430,000
Direct manufacturing labor 200,000
Factory overhead 300,000
Freight-out 45,000
There was no work in process beginning or end of the year. Kim’s 2009 cost of goods sold is:
a. P950,000 b. P975,000 c. 965,000 d. P995,000