Junior Philippine Institute of Accountants

College of Business Administration

University of the East - Caloocan

Qualifying Exam Reviewer 2017

Basic Accounting

1.) Which of the following items has no effect on owners equity?

a. Expense c. Purchase of land

b. Owners Withdrawal d. Revenue

Answer: C

2.) The asset created by a business when it makes a sale on account is

termed__________

a. Accounts payable c. Prepaid Expense

b. Accounts receivable d. Unearned Revenue

Answer: B

3.) What is the law regulating the practice of accountancy in the Philippines?

a. R.A. No. 9289 c. R.A. No. 9928

b. R.A. No. 9198 d. R.A. No. 9298

Answer: D

4.) All of the following describe accounting, except

a. A service activity
b. An information system
c. An exact science rather than an art
d. A universal language of business

Answer: C

5.) The overall objective of accounting is

a. To provide the information that the managers of an entity need to control the
operations
b. To provide information that the creditors can use in deciding whether to make
additional loans
c. To measure the periodic income of the entity
d. To provide quantitative financial information about an entity that is useful in making
economic decision

Answer: D

6.) These users require information on risk and return on investment

a. Creditors
b. Investors
c. Lenders
d. Customers

Answer: B

7.) Equipment with an estimated market value of P60 000is offered for sale at P90 000.
The equipment is acquired for P30 000 in cash and a note payable of P50 000 due in 30
days. The amount used in buyers accounting records to record acquisition is
__________

a. P 80 000 c. P 90 000
b. P 60 000 d. P30 000

Answer: A

8.) Using accrual accounting, revenue is recorded and reported only______________

a. If cash is received after the services are rendered

b. when cash is received at the time services are rendered
c. when the services are rendered without regard to when cash is received
d. when cash is received without regard to when the services are rendered

Answer: C

9.) On January 1, 2016, Potter Company bought a building for P2,750,000 to serve as
the Companys office. It was estimated that the said building will be useful for 20 years.
After the end of its useful life, the building can still be sold for P250,000. What is the
amount of depreciation expense that should be recognized by Potter Company on
December 31, 2016?

a. P 100,000
b. P 125,000
c. P 150, 000
d. P 175, 000

Answer: B
10.) Which of the following entries records the receipt of a utility bill from the water
company?

a. debit Accounts Payable, credit Cash

b. debit Accounts Payable, credit Utilities Payable
c. debit Utilities Expense, credit Accounts Payable
d. debit Utilities Payable, credit Accounts Receivable

Answer: C

11.) The process of posting is mostly associated with_________

a. Financial Statements c. Source documents

b. General Ledger d. Worksheet

12.) An item retailing for P 100,000, subject to a trade discount of 25% is paid for within
the discount period on terms 2/10, n/30. What is the amount of payment made?

a. P 73,500 c. P 75,000
b. P 74,000 d. P 100,000

Answer: A

13.) As of December 31, Ravenclaw Merchandising Companys records show the

following amounts:
Purchases P 1,250,000
Purchase discount 25, 000
Purchase returns 140,000

If Ravenclaw Companys beginning inventory amounted to P 375,000, the Companys

total Cost of Goods Available for sale is________________

a. P 710,000
b. P 1,085,000
c. P 1,460,000
d. P 1,250,000

Answer: C

14.) A post-closing trial balance is prepared before

a. Preparing financial statements

b. Reversing the accounts
c. Adjusting and closing the books
d. Preparing a worksheet
Answer: B

15.) The unearned rent account has a balance of P 36,000. If P 4,000 of the P 36,000 is
unearned at the end of the accounting period, the amount of the adjusting entry is

a. P 4,000
b. P 40,000
c. P 32,000
d. P 36,000

Answer: C

16.) Treasury stock is classified as a(n)

a. stockholders equity account

b. contra-asset
c. asset
d. contra-stockholders equity account

Answer: D

17.) Liquidation of partnership usually means that

a. Assets are sold

b. Liabilities are paid
c. Remaining Cash is distributed to the partners
d. All of the above

Answer: D

18.) Erica and Mica formed a partnership on January 1, 2016 by investing P 50,000
each into EM Coffee Shop. On June 30, 2016, Mica invested an additional 50,000 into
the business If they agreed to divide profit based on initial capital investment, how will
they divide the P 120,000 profit they earned in 2016.

a. P 60,000 to Erica and P60,000 to Mica

b. P 40,000 to Erica and P80,000 to Mica
c. P 80,000 to Erica and P40,000 to Mica
d. P 100,000 to Erica and P20,000 to Mica

Answer: A

19.) Erica and Mica formed a partnership on January 1, 2016 by investing P 50,000
each into EM Coffee Shop. On June 30, 2016, Mica invested an additional 50,000 into
the business If they agreed to divide profit based on ending capital investment, how will
they divide the P 120,000 profit they earned in 2016.

a. P 60,000 to Erica and P60,000 to Mica

b. P 40,000 to Erica and P80,000 to Mica
c. P 80,000 to Erica and P40,000 to Mica
d. P 100,000 to Erica and P20,000 to Mica

Answer: B

20.) If the partner withdraws from the partnership before the end of the accounting
period, updating of the partnership books is

a. Required
b. Optional
c. Not necessary
d. None of the above

Answer: A

21.) The following are kinds of partners except one, choose the exception:

a. Capitalist partner
b. Capitalist-secret partner
c. Industrial-managing partner
d. Limited-industrial partner

Answer: D

22.) Blossom, Bubbles and Buttercup formed a partnership to which Blossom

contributed a parcel of land with an acquisition cost of P 25,000. Bubbles contributed P
50,000 cash and Buttercup P 75,000 cash. The land has a fair value of P 50,000 at the
formation date. The total capital credit of the partnership should be

a. P 150,000 c. P 175,000
b. P 125,000 d. P 145,000

Answer: C

23.) Gumball and Darwin agreed to form a partnership from which Gumball will
contribute P 300,000. If Darwins contributions is 1/3 of the total agreed capitalization,
how much is the partnerships net assets after the formation using the bonus method?

a. P 500,000 c. P 450,000
b. P 350,000 d. P 900,00
Answer: C

24.) This allowance for profit distribution is granted only if there is profit

a. Bonus c. Salary
b. Interest d. All of the above

Answer: A

Use the following information for questions 25 and 26:

At December 31, Haha and Hehe are partners with capital balances of P 40,000 and
P20,000, and they share profits and losses in the ratio of 2:1, respectively. On this date
Hihi invests P 17,000 in cash for a one-fifth interest in the capital and profit of the new
partnership.

25.) Assuming asset revaluation will be recorded, how much is the balance of Hehes
capital after Hihi is admitted into the partnership?

a. P 45,333
b. P 22,667
c. P 17,000
d. P 8,000

Answer: B

26.) Assuming bonus method is used and there is no increase in net assets is
recognized, what would be the total capital of the partnership after the admission by
investment of Hihi?

a. P 85,000
b. P 60,000
c. P 61,600
d.P 77,000

Answer: D

27.) If the amount invested by the incoming partner is equal to the interest he acquires,
then there is

a. No bonus nor asset revaluation

b. Positive asset revaluation
c. Bonus to the old partners
D. Bonus to the new partners

Answer: A
28.) The total number of shares the corporate charter permits the corporation to issue is
called

a. outstanding stock
b. issued stock
c. authorized stock
d. ordinary shares capital

Answer: C

29.) If shares of stock are sold for less than their par value, the difference is called

a. discount
b. earnings
c. a gain
d. a premium

Answer: A

Use the following data for number 30-32

As of December 31, 2016, the balances of the shareholders equity of Herbie Auto
Inc. are shown below:
Ordinary Share Capital, P6 par
(30,000 shares authorized, 13 000 shares issued) _________

Premium-Ordinary Share Capital P 17,000

Treasury Stock-Ordinary Share Capital

(2,000 shares at P6 per share) _________

Preference Share Capital, 5%, P12 par

(16,000 shares authorized; 5,000 shares issued) _________

Premium-Preference Share Capital P 6,000

Preference Share Capital-Subscribed (2,000 shares) _________

30.) The amount of Ordinary Share Capital using the above data is:

a. P 180,000
b. P 78,000
c. P 60,000
 d. P 360,000

Answer: B

31.) The amount of Preference Share Capital using the above data is:

a. P 60,000
b. P192,000
c. P 180,000
d. P 12,000

Answer: A

32.) The amount of Treasury Stock-Ordinary Share Capital using the above data is:

a. P 360,000
b. P 60,000
c. P 12,000
d. P 180,000

Answer: C

33.) The balance of the income summary account of a corporation is transferred to

which of the following accounts?

a. Retained Earnings
b. Share Capital
c. Premium on Sale of Share Capital
d. Cash

Answer: A

34.) The reduction of par or stated value of stock by issuance of a proportionate number
of additional shares is termed a:

a. liquidating dividend
b. stock split
c. stock option
d. preferred dividend

Answer: B

35.) Characteristics of a corporation include:

a. Shareholders who are mutual agents

 b. Direct management by the shareholders (owners)
c. its inability to own property
d. shareholders who have limited ability

Answer: D

36.) The entry to record the purchase of 5,000 shares of a corporations own P20 par
common stock at P25, paid in cash, includes a debit to:

a. Common Stock c. Retained Earnings

b. Paid-In Capital in Excess of Par d. Treasury Stock

Answer: D

37.) Unlimited liability of the partners in a limited partnership pertains to

a. All the partners

b, Limited partners only
c. General partners only
d. The entities that owes the partnership

Answer: C

38.) When the investment of a new partner exceeds the new partners initial capital
balance and asset revaluation is not recorded, who will receive the bonus?

a. The new partner

b. The old and new partners in their new profit and loss ratio
c. The old partners in their new profit and loss ratio
d. The old partners in their old profit and loss ratio

Answer: D

39.) In the liquidation of the partnership, the first cash realized is used to
a. Pay the creditors
b. Pay the general partners
c. Pay the industrial partners
d. Pay all the partners

Answer: A

40.) A corporation purchased 1,000 shares of its P10 par common stock at P20 and
subsequently sold 500 of the shares at P30. What is the amount of revenue realized
from the sale?
 a. P0 c. P 5,000
b. P2,500 d. P15,000

Answer: A