Easy

1. If the articles of co-partnership are silent on the division of profits and losses, the same are to be divided:
a. According to partners’ agreement c. Equally
b. According to capital contributions d. According to an arbitrary ratio

2. When the partner withdraws from the partnership taking assets that represent more than his capital balance
a. no bonus result c. the withdrawing partner received a bonus
b. the remaining partner received a bonus d. the remaining partner owe the withdrawing partner the difference

3. A 1:3:2 ratio is the same as

a. 10%, 30%, 20% c. 1/6, ½, 1/3
b. 1/10, 3/10, 2/10 d. 20%, 50%, 30%

4. Total partner’s equity will not change when the withdrawing partner
a. withdraws assets equal to his capital balance
b. sells his interest with an amount less than his capital contribution to a new or remaining partner
c. withdraws assets amounting to less than his capital contribution
d. withdraws assets amounting to greater than his capital contribution

5. Which of the following statements about the partnership accounts is not false?
a. Two accounts are generally maintained for each partner, a drawing account and a capital account.
b. The drawing account is debited with the partner’s withdrawal of cash and other assets during the period.
c. A is correct but B is false.
d. A and B are all correct.

6. Statement 1: The cash priority program does not allow the first priority of cash distribution to the partner who is the most vulnerable for
partnership losses.
Statement 2: There is always loss on realization when noncash assets are converted into cash during liquidation process.
a. Only statement 1 is correct. c. Both statements are correct
b. Only statement 2 is correct. d. Both statements are incorrect.

7. A restriction of retained earnings

a. has no effect on total retained earnings
b. can be reported by an entry appropriating retained earnings
c. reduces retained earnings available for the declaration of dividends
d. all of the above

8. A corporation declared cash dividends on its ordinary shares in Dec. 2011, payable in Jan. 2012. Retained earnings will
a. increase on the date of declaration c. decrease on the date of payment
b. not be affected on the date of declaration d. not be affected on the date of payment
9. Reyna and Queen are partners who share profit and losses equally. Each has a capital balance of P40,000 and P50,000, respectively. They are
to admit Lakandula as a new partner upon the investment of land costing P50,000, but which is appraised at P60,000. Profits and losses are to
be shared equally after the admission of Lakandula. What is the percentage of Lakandula’s interest in the firm?
a. 40.00% b. 33.71% c. 33.00% d. 35.71%

10. Beshy Company consumed P450,000 worth of direct materials during May, 2012. At the end of the month, the direct materials inventory of
Beshy was P25,000 lower than the May 1 inventory level. How much were the direct materials procured during May 2012?
a. P475,000 b. P375,000 c. P400,000 d. P425,000

Average
1. Which of the following statement is not correct?
a. The partnership is created by mere agreement.
b. A partnership could also be formed by partners with professions different from each other.
c. Partnership form of business is most applicable for the exercise of a common profession.
d. The partnership must not be composed of five or more parties

2. Partnership capital and drawings account are similar to the corporate

a. share capital, retained earnings, and dividends accounts c. share capital and retained earnings accounts
b. retained earnings account d. preference share capital

3. The Other Woman partnership agreement provides for Other to receive a 20% bonus on profits before the bonus. Remaining profits and
losses are divided between Other and Woman in the ratio of 2:3, respectively. Which partner has a greater advantage when the partnership
has a profit and loss, respectively?
a. Other, Woman b. Woman, Womanc. Woman, Other d. Other, Other

4. Treasury stock was acquired for cash at a price in excess of its par value. The treasury stock was subsequently reissued for cash at a price in
excess of its acquisition price. If cost method of accounting for treasury stock transactions is used, what is the effect on retained earnings?
ACQUISITION REISSUANCE ACQUISUTION REISSUANCE
a. No effect Increase c. Increase Decrease
b. No effect No effect d. Decrease Increase

5. Which of the following statements about property dividends is not true?

a. A property dividend is usually in the form of securities of other companies.
b. A property dividend is also called a dividend in kind.
c. The accounting for a property dividend should be based on the carrying value of the nonmonetary assets transferred.
d. All of these statements are true.

6. Althea, Bea and Chloe are partners with average capital balances during 2012 of P360,000, P180,000 and P120,000, respectively. Bea is
allowed to receive a 10% bonus of profit before the said bonus. Partners receive 20% interest on their average capital balances. After deducting
salaries of P90,000 to Althea and P60,000 to Chloe, the residual profit or loss is divided equally. In 2012, the partnership sustained a P99,000
loss before salaries, interests ad bonus. By what amount should Althea’s capital account change?
a. P31,700 increase b. P21,000 increase c. P35,000 increase d. P91,000 decrease
7. As of December 31, 2012, the books of AEZ Partnership showed capital balances of Amanda, P40,000; Emilia, P25,000; and Zenaida, P5,000.
The partners’ profit and loss ratio was 6:3:1, respectively. The partnership decided to liquidate and they sold all the noncash assets for P37,000.
After settlement of all liabilities amounting to P12,000, they still have cash of P28,000 for distribution. Assuming that any capital deficiency is
uncollectible, the share of Amanda in the distribution of cash would be:
a. P17,000 b. P17,800 c. P14,800 d. P19,000

8. Wiley, Inc. has 50,000 shares of P10 par value common stock and 25,000 shares of P10 par value, 6%, cumulative, participating preferred
stock outstanding. Dividends on the preferred stock are one year in arrears. Assuming that Wiley wishes to distribute P135,000 as dividends,
the common stockholders will receive
a. P30,000 b P55,000 c. P80,000 d. P105,000

9. Total manufacturing cost is P1,374,920, Direct Labor P420,000; Work in Process beg. Is P109,360; Factory Overhead is P630,000. The
Company calculates the FOH per unit based on the ratio of Total factory overhead and Total direct labor cost. Each unit contained an estimated
of P18 direct materials and P6 direct labor assigned to it. The Corp. total quantity of Work in Process at the end of the year equal to 4,300 units.
How much is the balance of WIP, end?
a. P141,900 b. P153,900 c. P142,502 d. P136,800

10. Samantha, Tiffany and Phoebe have capital balances of P20,000, P25,000 and P9,000 respectively. They share profit and losses in the ratio
of 4:2:1. If Samantha received P4,000 upon liquidation, the total amount received by all partners was
a. P28,000 b. P26,000 c. P16,000 d. P54,000

Difficult
1. Trent Corporation was organized on January 1, 2007, with an authorization of 1,200,000 shares of common stock with a par value of P6 per
share. During 2007, the corporation had the following capital transactions:
January 5- issued 675,000 shares @ P10 per share
July 28- purchased 90,000 shares @ P11 per share
December 31- sold the 90,000 shares held in treasury @ P18 per share
Trent used the cost method to record the purchase and reissuance of the treasury shares. What is the total amount of share premium as of
December 31, 2007?

Answer: P3,330,000

2. Zia Company showed cost of goods sold of P4,320,000 in its statement of comprehensive income after the first year of operations. The total
manufacturing cost comprised 50% materials used, 30% direct labor incurred, and 20% manufacturing overhead which comprised 30% of
indirect labor. Goods in process at year-end were 10% of the total manufacturing cost. Finished goods at year-end amounted to 20% of the
total cost of goods manufactured. How much was the indirect labor cost incurred?

Answer: P360,000

3. The following information was taken from Kaye Company’s accounting records for the current year:
Increase in raw materials inventory P150,000 Conversion cost 5,000,000
Decrease in finished goods inventory 350,000 Freight out 450,000
Raw materials purchased 4,300,000 Prime cost 6,150,000
What is the total manufacturing overhead for the current year?

Answer: P3,000,000

4. Cynthia Company issued 200,000 shares of P5 par value at P10 per share. On January 1, 2010, Cynthia’s retained earnings amounted to
P3,000,000. In March 2010, Cynthia reacquired 50,000 treasury shares at P20 per share. In June 2010, Cynthia sold 10,000 of these shares to its
corporate officers for P25 per share. Cynthia used the cost method to record treasury shares. Net income for the year ended December 31,
2010 was P600,000. On December 31, 2010, what amount should be reported as unappropriated retained earnings?

Answer: P2,800,000

5. Veronica Company had 80,000 ordinary shares in January 2010. The company distributed a 15% share dividend in March and 10% share
dividend in July. After acquiring 10,000 shares of treasury stock in June, the company split its share 4-for-1 in December. How many ordinary
shares are outstanding as of December 31, 2010?

Answer: P360,800

6. In 2010, Rona Company issued 5,000 shares of P10 par value for P100 per share. In 2011, Rona Company acquired 2,000 of its shares at P150
per share and immediately cancelled these shares. In connection with the retirement of these 2,000 shares, what amount is debited to share
premium-treasury shares and retained earnings?

Answer: Share premium- treasury= P0

Retained earnings= P100,000

7. Eunice Company’s materials purchase during 2011 are P25,590 and materials put into production are direct and indirect materials,
respectively, worth P18,500 and P7,090. The total factory payroll is P74,000 of which P50,000 represents direct labor. Other factory overhead
costs amount to P32,000. The company applies the actual factory overhead cost to process. Sales, cost of goods sold, and the cost of goods
manufactured, respectively, are P130,000, P120,000, and P128,000. By what amount did the company’s closing goods in process inventory
exceed its opening goods in process inventory?

Answer: P3,590

8. The following selected information pertains to Ashley Processing Company: other factory overhead is P100,000 less than the prime cost,
direct materials, P62,500; indirect materials, P12,500; factory payroll, P86,250 is composed of the direct labor and indirect labor; and prime
cost, P137,500. What is the total conversion cost?

Answer: P136,250

9. Majenta Corporation was organized on January 1, 2010 at which date it issued 100,000 shares of P10 par ordinary shares at P15 per share.
During the period Jan. 1 to Dec. 31, 2012, Majenta reported profit of P450,000 and paid cash dividends of P230,000. On Jan. 10, 2012, Majenta
purchased 6,000 shares of its ordinary shares at 12 per share. On Dec. 31, 2012, Majenta sold 4,000 treasury shares at P8 per share and retired
the remaining treasury shares. Majenta used the cost method of accounting for treasury shares. What is Majenta’s retained earnings at Dec.
31, 2012?

Answer: P204,000

10. Nathalie Corporation declared a 5% share dividend on its 10,000 issued and outstanding shares of P2 par value ordinary shares, which had a
fair market value of P5 per share before the share dividend was declared. This share dividend was distributed 60 days after the declaration
date. By what amount did Moreno’s current liabilities increase as a result of the share dividend declaration?

Answer: P0

Clincher
1. Lacus Clyne Company issued 1,000 shares with P5 par to Howe as compensation for 1,000 hours of legal services performed. Howe usually
bills P160 per hour for legal services. On the date of issuance, the share was trading on a public exchange at P140. By what amount should the
share premium account increase as a result of the transaction?
a. P135,000 b. P140,000 c. P155,000 d. P160,000

2. At the beginning of the current year, Aiza Company declared a 1 for 5 reverse share split, when the market value was P100. Prior to the split,
Aiza had 100,000 shares of P10 par value issued and outstanding. After the split, what is the par value of the share and the outstanding share
capital?