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QUIZBOWL PRACTICE

BUSINESS LAW

1. Contract with a false cause is:


a. voidable c. unenforceable
b. void d. all of the above B
2. An obligation wherein various things are due, but the payment of all is required in order to
distinguish the obligation is called:
a. simple obligation c. conjoint obligation
b. alternative obligation d. facultative obligation C
3. A contract where both parties are incapable of giving consent is:
a. voidable c. unenforceable
b. void d. all of the above C
4. Which is the least defective contract?
a. rescissible contract c. unenforceable contract
b. voidable contract d. void contract A
5. S sold to B a specific car for P100,000 payable in four (4) equal installments. First and second
installments, B failed to pay. The right of S is:
a. exact fulfillment of the obligation c. demand payment from B
b. cancel the sale d. all of the above D
6. A sold to B the former’s horse for P5,000. No date is fixed by the parties for the performance of their
respective obligations. The obligation of A is:
a. to deliver the horse immediately as there is a perfected contract
b. to deliver the horse upon payment by B of P5,000
c. to deliver the horse within a reasonable time of two months from the contract date
d. to rescind the contract as there is no timed fixed for the delivery and payment B
7. P appointed A as his agent with general powers on January 1. The next day, X transacted business
with A. On January 5, P revoked the agency and published it in a newspaper of general circulation.
However, X did not read the newspaper publication. After 5 days, (January 10) X consummated
another transaction with A. Is the act of A binding against P?
a. yes, because X is in good faith
b. no, because the agency is considered revoked and its publication is a sufficient warning
c. no, because the power is general, there must be a special power
d. yes, because there was no special notice sent to X B
8. P appointed A as his agent orally to sell his parcel of land for P10,000. Five days after, A sold to B
the parcel of land for P8,000 by means of a public instrument executed between A and B. What is
the effect and status of sale between A and B?
a. the sale is valid because it was executed in a public instrument
b. the sale is unenforceable because the agent acted beyond the scope of his authority for
selling the land for less than the price instructed
c. the sale is void because the appointment of the agent is oral
d. the sale can be ratified although the appointment of A is oral, because the sale by A to B
is in a public instrument C
9. D pledged his ring to C for P10,000. D failed to pay his obligation on time. C sold it at public auction
for P8,000.
a. C can recover the deficiency even without stipulation
b. C cannot recover the deficiency even if there is stipulation
c. C cannot recover the deficiency
d. C can recover the deficiency B
10. A, B, and C borrowed from D P300,000, and as a security, they mortgaged their undivided
agricultural land to D. Subsequently, A paid D P100,000. Is the mortgage on A’s share of the land
extinguished?
a. yes, because the obligation of A on the debt is only P100,000
b. yes, the obligation of the debtors is joint, A is answerable only for P100,000
c. no, because the obligation is solidary, payment in part shall not extinguish the obligation
secured by the mortgage
d. no, because mortgages are considered indivisible, payment in part shall not extinguish
the mortgage D

11. A and B are partners engaged in real estate business. A learned that C was interested in buying a
certain parcel of land owned by the partnership, even for a higher price. Without informing B, A was
able to make B sell to him (A) his (B’s) share in the partnership. Then A sold the land at a big profit.
a. A is liable to B for the latter’s share in the profit
b. C is liable to B for the latter’s share in the profit
c. the partnership is dissolved when A became the sole owner
d. the sale of the land to C is void since it was without the knowledge of B A
12. The remedy of capitalist partners against an industrial partner who engaged in a business for himself
without the expressed permission from the partnership is:
a. to compel the industrial partner to sell his interest to the said capitalist partners
b. to exclude him from sharing in the profits of the partnership
c. to remove him as manager if he is appointed as manager of the partnership
d. to expel him from the partnership and claim for managers D
13. How many number of votes of the Board of Directors are required to change the name of a
corporation?
a. 2/3 vote of all members of the Board
b. 2/3 vote of all present
c. majority vote of all present constituting a quorum
d. majority vote of the Board D
14. After a corporation is dissolved, it shall nevertheless be continued to enable it to liquidate its affairs
for a period of:
a. 1 year c. 3 years
b. 2 years d. 5 years C
15. An endorsement which specifies the person to whom, or to whose order the instrument is to be
payable is called:
a. blank endorsement c. qualified endorsement
b. special endorsement d. restrictive endorsement B
16. Which of the following is not considered a necessary requirement in order to make an instrument
negotiable?
a. it must be payable on demand or at a fixed future time
b. it must be in writing and signed by the maker
c. it must be payable only to a specified person
d. it must contain an unconditional promise to pay a sum certain in money C

MANAGEMENT ADVISORY SERVICES

1. Managerial accounting is similar to financial accounting in that:


a. both are governed by generally accepted accounting principles
b. both deal with economic events
c. both concentrate on historical costs
d. both classify reported information in the same way B
2. As volume increases, average cost per unit
a. increases c. remains constant
b. decreases d. increases in proportion to the change in volume B
3. Contribution margin percentage is 40% and contribution margin per unit is P12. Which of the
following is true?
a. variable cost per unit is P18 c. selling price is P48
b. return on sales is 12% d. variable cost percentage is 12% A
4. A manager could not reasonable state a target profit as a:
a. peso amount per unit sold
b. percentage of total peso sales
c. total peso amount
d. percentage of the profit at break-even point D
5. Which of the following costs is relevant in deciding whether to sell joint products at split off or
process them further?
a. the unavoidable costs of further processing
b. the avoidable costs of further processing
c. the variable cost of operating the joint process
d. the cost of materials used to make the joint products B
6. M has 100 units of an obsolete part. The variable cost to produce them was P3 per unit. They could
not be sold for P2 each and it would cost P5 to make them now. The parts could be reworked for P6
each and sold for P14. What is the monetary advantage of reworking the parts over the next best
action?
a. P200 b. P500 c. P600 d. P800 C
7. Scooter Company products three products from a joint process costing for P100,000. The following
information is available:
Cost to Selling price
Selling price process after further
Units at split-off further processing
A 10,000 P25 P60,000 P30
B 20,000 P30 P20,000 P35
C 30,000 P10 P90,000 P15
Which products should be processed further?
a. A only b. A and B c. B and C d. A, B and C C
8. Budgets set at very high levels of performance:
a. assist in planning the operations of the company
b. stimulates people to perform better than they ordinarily would
c. are helpful in evaluating the performance of managers
d. can lead to low levels of performance D
9. Which of the following is a difference between a static budget and a flexible budget?
a. a flexible budget includes only variable costs, a static budget includes only fixed costs
b. a flexible budget includes all costs, a static budget includes only fixed costs
c. a flexible budget gives difference allowances for different levels of activity, a static
budget does not.
d. none C
10. Sam manufactures a single product. It keeps its inventory of finished goods at twice the coming
month’s budgeted sales, inventory of raw materials at 150% of the coming month’s budgeted
production. Each unit of output requires two pounds of materials. The production budget is, in
units: May, 1,000; June, 1,200; July, 1,300; August, 1,600. Raw material purchases in June would
be:
a. 2,600 pounds b. 2,400 pounds c. 1,800 pounds d. 2,700 pounds D
11. Which of the following budgets is usually prepared first?
a. cash disbursements budget c. production budget
b. materials purchases budget d. cash budget C
12. Stress has prepared sales to be P40,000 in June, P45,000 in July and P55,000 in August. Stress
collects 30% of a month’s sales in the month of sale, 50% in the month following the sale, and 20%
in the second month following the sale. The accounts receivable balance on August 31 would be:
a. P16,500 b. P47,500 c. P38,500 d. not given B
13. The payback criterion for capital investment decisions:
a. is conceptually superior to the internal rate of return criterion
b. takes into consideration the time value of money
c. gives priority to rapid recovery of cash
d. emphasizes the most profitable projects C
14. If an investment has a positive net present value,
a. its internal rate of return is greater than the company’s cost of capital
b. cost of capital exceeds the cutoff rate of return
c. its internal rate of return is less than the company’s cutoff rate of return
d. the cutoff rate of return exceeds the cost of capital A
15. An investment opportunity costing P75,000 is expected to yield net cash flows of P22,000 annually
for 5 years. The cost of capital is 14%. The book rate of return would be:
a. 18.7% b. 58.7% c. 14.3% d. 3.433% A
16. Scot Division has the following results for the year:
Revenues P740,000
Variable expenses 260,000
Fixed expenses 300,000
Total divisional assets are P1,000,000. The company’s minimum required rate of return is 14%.
Residual income is:
a. P34,000 b. P36,000 c. P40,000 d. P52,000 C
17. If the variable overhead standard is based on direct labor hours and actual hours worked exceed
standard hours allowed, the result is:
a. a favorable labor efficiency variance
b. an unfavorable variable overhead spending variance
c. a favorable variable overhead spending variance
d. an unfavorable variable overhead efficiency variance D

AUDITING THEORY

1. Which of the following professional services would be considered an attest engagement?


a. A consulting service engagement to provide computer processing advice to a client.
b. An engagement to report on compliance with statutory requirements.
c. An income tax engagement to prepare the income tax returns.
d. The compilation of financial statements from a client’s accounting records. B

2. The audit work performed by each assistance should be reviewed to determine whether it was
adequately performed and to evaluate whether the
a. Auditor’s system of quality control has been maintained at a high level.
b. Results are consistent with the conclusions to be presented In the auditor’s report.
c. Audit procedures performed are approved in the professional standards.
d. Audit has been performed by persons having adequate technical training and proficiency as
auditors. B

3. Which of the following services is a CPA generally required performing when conducting a personal
financial planning engagement?
a. Assisting the client to identify tasks that are essential in order to act on planning decisions.
b. Assisting the client to take action on planning decisions.
c. Monitoring progress in achieving goals.
d. Updating recommendations and revising planning decisions. A

4. Upon discovering material misstatement in a client’s financial statements that the client would not
revise, an auditor withdrew from the engagement. If asked by the successor auditor about the
termination of the engagement, the predecessor auditor should
a. State that he found material misstatements that the client would not revise.
b. Suggest that the successor ask the client.
c. Suggest that the successor obtain the client’s permission to discuss the reasons.
d. Indicate that a misunderstanding occurred. C
5. You are a CPA retained by the manager of a cooperative retirement village to do write-up work. You
are expected to prepare unaudited financial statement with each page marked “unaudited” and
accompanied by a disclaimer of opinion stating no audit was made. In performing the work, you
discover that there are no invoices to support P25,000 of the manager’s claimed disbursements. The
manager informs you that all the disbursements are proper. What should you do?
a. Submit the expected statements but omit the P25,000 of unsupported disbursements.
b. Include the unsupported disbursements in the statements because you are not expected to
make an audit.
c. Obtain from the manager a written statement that you informed him of the missing invoices
and that he gave his assurance that the disbursements were proper.
d. Notify the owners that some of the claimed disbursements are unsupported and withdrew if the
situation is not satisfactorily resolved. D

6. The objective of assurance services is best described as


a. Providing more reliable information.
b. Enhancing decision making
c. Comparing internal information and policies with those of other firms.
d. Improving the firm’s outcomes. B

7. The expansion of the attest function has resulted in attestation standards of reporting that are
organized differently from the standards of reporting included in GAAS. Consequently, the attestation
standards of reporting
a. Cover one level and form of assurance.
b. Reflect the limitation of the use of certain reports to specified users.
c. Concern one basic assertion.
d. Are inapplicable when users have established the criteria against which assertions are
measured. B

8. Which of the following field work or reporting standards included in GAAS explicitly corresponds to an
attestation standard?
a. A sufficient understanding of internal control is to be obtained to plan the audit and to
determine the nature, timing, and extent of tests to be performed.
b. The report shall identify those circumstances in which such principles (GAAP) have not been
consistently observed in the current period in relation to the preceding period.
c. Information disclosures in the financial statements are to be regarded as reasonably adequate
unless otherwise stated in the report.
d. Sufficient competent evidential matter is to be obtained through inspection, observation,
inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial
statements under audit. D

9. When engaged to compile unaudited financial statements for a private company, the accountant’s
responsibility to detect errors, irregularities, and illegal acts
a. Does not exist unless the parties have a written agreement.
b. Arises from the accountant’s obligation to apply normal auditing procedures.
c. Is to design procedures to provide reasonable assurance of detecting material misstatements.
d. Is limited to informing the client that the engagement cannot be relied upon to disclose fraud. D

10. A violation of the profession’s ethical standards most likely occurs when a CPA who
a. has been admitted to the Bar represents on letterhead to be an attorney and a CPA.
b. Has not prepared a newsletter permits the publisher to attribute it to the CPA.
c. Is controller of a bank permits the bank to use the controller’s CPA title in the listing of officers in
its publications.
d. Maintains a separate, distinct practice but forms an association with other CPAs for joint
advertising. The group practices public accounting under the association’s name. D

11. When a CPA is associated with financial statements that do not comply with promulgated GAAP
because the statements would be misleading without the departure, the CPA is not required to
disclose
a. The departure.
b. The approximated effects of the departure in comparison to the application of GAAP.
c. The reason the departure does not have a material affect on the statements.
d. The reasons compliance would be misleading. C

THEORY OF ACCOUNTS

1. Why does ASC warn against making comparisons of the disaggregated information disclosed by two
different companies?
a. the data is not an actual part of the financial statements
b. the identification of specific segments may be done differently by different companies
c. the information is not viewed in reporting trends between past and present operations
d. different types of revenues are included by some companies B
2. In the preparation of consolidated financial statements, where subsidiary is not 100% owned,
eliminations are made of the following, except:
a. all dividends declared by subsidiaries
b. intercompany open account balance
c. unrealized intercompany profits and losses on inventories or equipment
d. carrying value of the investment A
3. A pro-forma statement ordinarily shall be:
a. columnar in format
b. showing condensed historical statements
c. pro-forma adjustments
d. pro-forma results
Which of the above items are reflected?
a. A and B only c. A, B, C and D
b. C and D only d. A, B and D C
4. Consolidated financial statements will be prepared for parent and subsidiary when any of the
following, except:
a. control is temporary as when subsidiary must be disposed of under court
b. it is an issuer of registered securities, banks, finance company, investment company,
investment house
c. the total liability of any entity in the group is more than P50 million or the total liability of
the group is more than P150 million
d. if parent and subsidiaries are engaged in dissimilar activities A
5. If annual major repairs made in the first quarter and paid for in the second quarter clearly benefit the
entire year, when should they be expensed?
a. in full in the first quarter
b. in full in the second quarter
c. an allocated portion in each quarter of the year
d. all expenses affecting more than one quarter should be recognized in the last year of the
fiscal year C
6. The September 30, 2003, physical inventory D Company appropriately included P3,800 of
merchandise purchased on account which was not recorded in purchases until October 2003. What
effect will this error have on September 30, 2003 assets, liabilities, retained earnings, and earning for
the year then ended, respectively?
a. understate, no effect, overstated, overstate
b. no effect, overstate, understate, understate
c. no effect, understate, overstate, overstate
d. no effect, understate, understate, overstate C
7. A company sold a used operational asset at a P20,000 loss. The loss should be classified on the
income statement as:
a. an extraordinary item c. a prior-period adjustment
b. an operating expense d. an unusual or infrequent item B
8. Reporting extraordinary items on the income statement more closely follows which concept of net
income:
a. all inclusive c. full disclosure principle
b. current operating d. multiple step A
9. A company has identified one of its business segments as being the production of computer software.
Which of the following should not be included in determining his segment’s revenue for
disaggregation purposes?
a. interest income on intersegment loans
b. interest income on intersegment trade receivables
c. interest income on trade receivables with outside parties
d. interest income on loans made to outside parties A
10. A firm identified four business segments as reportable out of a total of 8 subunits of the firm based
on the identifiable assets criterion. Total company sales excluding intersegment sales are P2,000,000
for the year, and the sum of sales for the four identified segments is P1,300,000. Therefore, the
firm:
a. need not report on a segment basis for this period
b. must identify one or more additional segments for segmental disclosure purposes
c. must disclose only the four sub-units as segments
d. treat all sub-units of the firm as reportable B

PRACTICAL ACCOUNTING 1

1. On December 31, a corporation had a working capital (current) ratio of 2, and reported the following
accounts:
Assets Equities
Cash P4,000 Accounts payable P2,000
Accounts receivable 13,000 Wages payable 6,000
Inventory 6,600 Interest payable 4,000
Prepaid insurance 1,000 Bonds payable 14,000
Equipment (net) 24,000 Retained earnings 2,600
Therefore, the balance in the allowance for doubtful accounts was:
(a) P600 (b) P300 (c) P200 (d) P0 A
2. Ode, Inc. has 5,000,000 shares of common stock outstanding on December 31, 2003. An additional
1,000,000 shares of common stock were issued on April 1, 2004, and 500,000 more on July 1, 2004.
On October 1, 2004, Ode issued 10,000 P1,000 face value, 7% convertible bonds. Each bond is
convertible into 40 shares of common stock and were considered potential common shares and no
bonds were converted into common stock in 2004. What is the number of shares to be used in
computing basic earnings per share and diluted earnings per share, respectively?
(a) 5,750,000 and 5,950,000 (c) 6,000,000 and 6,100,000
(b) 5,750,000 and 6,150,000 (d) 6,000,000 and 6,900,000 C

3. The following information is available for Waki Jewelry and Gift Store:
Net income P5,000
Depreciation expense 2,500
Increase in deferred tax liabilities 500
Decrease in cash 3,000
Decrease in accounts receivable 2,000
Increase in inventories 9,000
Decrease in accounts payable 5,000
Increase in accrued liabilities 1,000
Increase in property and equipment 14,000
Increase in short-term notes payable 19,000
Decrease in long-term notes payable 4,000
What is the net cash flow from financing activities?
(a) P15,000 (b) (P15,000) (c) P17,000 (d) (P14,000) A

4. A company provides residential carpet cleaning at a rate of P24 per month or P250 per year if paid
one year in advance. Examination of the bank deposits revealed the following:
Accounts receivable 1/1 P12,600
Cash collected from customers (including advances) 18,000
Advances from customers 12/31 2,600
Accounts receivable 12/31 9,600
Advances from customers 1/1 2,000
Revenue for the year was:
(a) P14,400 (b) P15,600 (c) P12,600 (d) P17,400 A

5. The following information were found in the books of Knight Corporation:


Reconciled balance in Metrobank checking account P19,607.50
Reconciled balance in BPI checking account ( 402.00)
Balance in PNB 287,500.00
Certificate of deposit (150 days maturity) 300,000.00
Petty cash fund 5,000.00
Postage stamps 1,000.00
Employee’s IOU 1,250.00
Employees’ travel advances 16,400.00
Cash on hand (undeposited sales receipts) 31,094.00
Traveler’s checks 6,000.00
Customer’s postdated check 2,904.00
Total cash to be reported on balance sheet was:
(a) P349,201.50 (b) P351,703.50 (c) P648,799.50 (d) P649,201.50 A

6. The Genuine Company requires additional cash for its business. Genuine has decided to use it
accounts receivable to raise additional cash as follows:
a. On June 30, 2003, it assigned P200,000 of accounts receivable of Gel Finance Company. It
received an advance from Gel of 85% of the assigned accounts receivable, less a commission on
the advance of 3%. Prior to December 31, 2003, it collected P150,000 on the assigned accounts
receivable and remitted P160,000 to Gel, P10,000 of which represented interest on the advance
from Gel.
b. On December 1, 2003, it sold P300,000 of net accounts receivable to the Factoring Company for
P260,000. The receivables were sold outright on a nonrecourse basis.
c. On December 29, 2003, it received an advance of P100,000 from the Domestic Bank by pledging
P120,000 of its accounts receivable. Its first payment to Domestic is due on January 31, 2004.
How much is the total expenses to be reported in the income statement for the year ended
December 31, 2003?
(a) P10,000 (b) P40,000 (c) P15,100 (d) P55,100 D

7. Based on the information:


Credit sales P172,000 credit
Collections on accounts receivable during the year 170,000 credit
Cash sales 810,000 credit
Unadjusted balance in allowance for doubtful 50 debit
Sales returns and allowances for credit sales 4,000 debit
Accounts receivable, beginning of the year 14,000 debit
If bad debts are estimated to be 1 ½% of ending accounts receivable, in the adjusting entry to
recognize bad debts, you would debit bad debt expense for:
(a) P230 (b) P190 (c) P130 (d) P180 A

8. Hole Company uses a perpetual inventory system. The company’s beginning inventory of a particular
style of large screen TVs and its purchases during the month of January were as follows:
Quantity Unit Cost Total Cost
Beginning inventory (Jan. 1) 40 P200 P 8,000
Purchase (Jan. 12) 20 221 4,420
Purchase (Jan. 28) 10 158 1,580
Total 70 P14,000
On January 15, Hole Company held its annual large screen TV Sale Day. On this day, 55 of these
TVs were sold. The remaining 15 units above remain in inventory at January 31. Assuming that Hole
uses the LIFO flow assumption, the cost of goods sold to be recorded at January 15 is:
(a) P11,420 (b) P11,000 (c) P11,315 (d) P11,460 A

9. On January 1, 1999, Star Company paid P1,200,000 for 40,000 shares of Comet Corporation’s
common stock which represents a 25% investment in the net assets of Comet. Star has the ability to
exercise significant influence over Comet.
Star received a dividend of P3 per share from Comet in 1999. Comet reported net income of
P640,000 for the year ended December 31, 1999.
The balance on Star’s balance sheet account investment in Comet Corporation at December 31,
1999 should be:
(a) P1,200,000 (b) P1,240,000 (c) P1,360,000 (d) P1,480,000 B

10. The stockholders’ equity of Retro Company on December 31, 2002 includes the following:
12% preferred stock, 20,000 shares, P100 par value 2,000,000
14% preferred stock, 10,000 shares, P300 par value 3,000,000
Common stock, 50,000 shares, P100 par value 5,000,000
Retained earnings 2,240,000
Additional paid in capital 1,500,000
The 12% stock is cumulative and fully participating. The 14% stock is noncumulative and fully
participating. Dividends in arrears are for 3 years. What is the book value per share of common
stock?
(a) P132 (b) P126 (c) P100 (d) P112

11. Style Company is experiencing financial difficulty and is negotiating debt restructuring with its
creditors to relieve its financial stress. Style has a P2,500,000 note payable to United Bank. The
bank is considering acceptance of an equity interest in Style Company in the form of 200,000 shares
of common stock valued at P12 per share. The par value of common is P10 per share. How much is
the gain from the debt restructuring?
(a) P500,000 (b) P100,000 (c) P400,000 (d) P 0

12. On July 1, 2002, Durable Company purchased Rose Corporation 10-year, 12% bonds with face value
of P300,000 for P324,000, which included P12,000 of accrued interest. The bonds, which mature on
March 1, 2009, pay interest semi-annually on March 1 and September 1. Durable appropriately uses
the straight line method of amortization. The amount of income Durable should report for the
calendar year 2002 as a result of this long-term investment?
(a) P16,200 (b) P17,100 (c) P18,000 (d) P30,000

13. On July 1, 2002, Rey purchased P1,000,000 of West Company’s 8% bonds due at July 1, 2012. Rey
expects to hold the bond until maturity. The bonds, which pay interest semiannually on January 1
and July 1, were purchased for P875,000 to yield 10%. In its income statement for the year ended
December 31, 2002, Rey should report interest income at:
(a) P35,000 (b) P40,000 (c) P43,750 (d) P50,000
14. On July 1, 2002, Roger Co. paid P1,198,000 for 10% 20-year bonds with a face amount of
P1,000,000. Interest is paid on December 31 and June 30. The bonds were purchased to yield 8%.
Roger uses the effective interest method to recognize interest income from investment. What should
be reported as carrying amount of the bonds in Roger’s December 31, 2002 balance sheet?
(a) P1,207,000 (b) P1,198,000 (c) P1,195,920 (d) P1,193,050

15. Heart Company leased a new machine from Ash Company on December 31, 2002 under a lease with
the following pertinent information:
Lease term 8 years
Annual rental payable at beginning of each lease year P500,000
Useful life of the machine 10 years
Present value of the 8 lease payments at 12/31/2002 P2,580,000
Machine reverts to Ash at lease expiration date
The machine has a fair value of P2,800,000 at the inception of the lease. Heart uses the straight line
method of depreciation. For the year ended December 31, 2003, how much depreciation should
Heart record for the capitalized lease machine?
(a) P350,000 (b) P322,500 (c) P280,000 (d) P258,000

PRACTICAL ACCOUNTING 2

1. In the calendar year 2000, the partnership of A and B realized a net profit of P240,000. The capital
accounts of the partners show the following postings:
A, Capital B, Capital
Debit Credit Debit Credit
Jan. 1 P120,000 P80,000
May 1 P20,000 P10,000
July 1 20,000
Aug 1 10,000
Oct 1 10,000 5,000
If 20% interest based on the capital at the end of the year is allowed and given and the balance of
the P240,000 profit is divided equally, the total share of A and B, respectively, are:
(a) P121,500, P118,500 (c) P123,000, P117,000
(b) P124,000, P116,000 (d) P122,625, P117,375 A

2. L and M are partners with a profit and loss ratio of 75:25 and capital balances of P100,000 and
P50,000, respectively. N is to be admitted into the partnership by purchasing a 20% interest in the
capital, profits and losses for P60,000. Assuming goodwill is not recorded, the capital balances of L
and M after the admission of N are:
(a) P80,000, P40,000 (c) P112,000, P38,000
(b) P120,000, P60,000 (d) Not given A

3. The following balance sheet is presented for the partnership of D, E and F who share profits and
losses in the ratio of 5:3:2, respectively:
Cash P 60,000 Liabilities P140,000
Other assets 540,000 D, Capital 280,000
E, Capital 160,000
F, Capital 20,000
Total P600,000 Total P600,000
The partners decided to liquidate the partnership. If the other assets are sold for P400,000, how
should the available cash be distributed to each partner, respectively?
(a) P280,000, P160,000, P20,000 (c) P206,000, P114,000, P 0
(b) P210,000, P118,000, P8,000 (d) P205,000, P115,000, P 0 D

4. New Era Corp. bills its newly established branch for merchandise at 140% of cost. At the end of its
first month, the branch reported, among other things, the following:

Merchandise from home office (at billed price) P28,000


Merchandise purchased locally by branch 10,000
Inventory, September 30, of which 2,000.00 are of local purchases 9,000
Net sales for month 43,500
The branch inventory at cost should be reported at
(a) P38,000 (b) P7,000 (c) P9,000 (d) None of the above B

5. Hill Company began operations on January 1, 2000, and appropriately uses the installment method of
accounting. Data available for 2000 are as follows:
Installment accounts receivable, 12/31/2000 P500,000
Installment sales 900,000
Cost of goods sold, as percentage of sales 60%
Using the installment method, Hill’s realized gross profit for 2000 would be:
(a) P360,000 (b) P240,000 (c) P200,000 (d) P160,000 D

6. The Central Plains Subdivision sells residential subdivision lots in installment. The following
information was taken from the accounting records of Central Plains Subdivision as at December 31,
2000:
Installment accounts receivable, 1/1/2000 P755,000
Installment accounts receivable, 12/31/2000 840,000
Unrealized gross profit, 1/1/2000 339,750
Installment sales 950,000
How much is the realized gross profit in 2000?
(a) P427,500 (b) P339,750 (c) P378,000 (d) P389,250 D

7. On April 7, 1998, Dart Co. paid P620,000 for all the issued and outstanding common stock of Wall
Corp. in a transaction properly accounted as a purchase. The recorded assets and liabilities of Wall
Corp. on April 1, 1998:
Cash P 60,000
Inventory 180,000
Property & Equipment (net of accumulated
depreciation of P220,000) 320,000
Goodwill ( net of accumulated amortization of
P50,000 100,000
Liabilities (120,000)
Net Assets P540,000
On April 1, 1998, Wall’s inventory had a fair value of P150,00 and the property and equipment (net)
had a fair value of P380,000. What is the amount of goodwill resulting from the business combination?
(a) P150,000 (b) P 120,000 (c) P50,000 (d)P20,000 A

Items 8 and 9:
On December 31, 1998, Saxe Corp. was merged into Poe Corp. In the business combination, Poe
issued 200,000 shares of its P10 par common stock, with a market price of P18 per share, for all of
Saxe’s common stock. The stockholders’ equity section of each company’s balance sheet immediately
before the combination was: Poe
Saxe
Common stock P3,000,000 P1,500,000
Additional paid in capital 1,300,000 150,000
Retained earning 2,500,000 850,000
P6,800,000 P2,500,000
8. Assume that the merger qualifies for treatment as a purchase. In the December 31,1998,
consolidated balance sheet, additional paid in capital should be reported at
(a) P950,000 (b) P1,300,000 (c) P1,450,000 (d) P2,900,00 D

9. Assume that the merger qualifies for treatment as a pooling of interests. In the December 31,1998,
consolidated balance sheet, additional paid in capital should be reported at
(a) P950,000 (b) P1,300,000 (c) P1,450,000 (d) P2,900,000 A

10. Kim Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining
industry. The following information pertains to operations for the month of May 2000:
Units
Beginning work in process inventory, May 1 16,000
Started in production during May 100,000
Completed production during May 92,000
Ending work in process inventory, May 31 24,000
The beginning inventory was 60% complete for materials and 20% complete for conversion costs.
The ending inventory was 90% complete for materials and 40% complete for conversion costs.
Costs pertaining to the month of May are as follows:
a. Beginning inventory costs are: materials, P54,560; direct labor, P20,320; and factory
overhead, P15,240.
b. Cost incurred during May are: materials used, P468,000; direct labor, P182,880; and
factory overhead, P391,160.
Using the FIFO method, the equivalent units of production for materials are:
(a) 97,600 units (b) 104,000 units (c) 107,200 units (d) 108,000 units B

11. National Marketing Corp. uses a job order costing system. It has three production departments, X, Y
and Z. The manufacturing cost budget for 2000 is as follows:
Dept. X Dept. Y Dept. Z
Direct materials P600,000 P400,000 P200,000
Direct labor 200,000 500,000 400,000
Manufacturing overhead 600,000 100,000 200,000
For Job No. 01-98 which was completed in 2000, direct materials cost was P75,000 and direct
labor cost was as follows:
Dept. X P40,000 Dept. Y P100,000 Dept. Z P20,000
The corporation applies manufacturing overhead to each job order on the basis of direct labor
cost, using departmental rates predetermined at the beginning of the year based on the
manufacturing cost budget.
The total manufacturing cost of Job No. 01-98 which was completed in 2000?
(a) P235,000 (b) P310,000 (c) P385,000 (d) P150,000 C