Polytechnic University of the Philippines

College of Accountancy and FinanceJunior

Philippine Institute of Accountants
MOCK FINAL EXAMINATION
Fundamentals of Accounting, Part 2

THEORIES
1. Statement 1: Purchasing supplies on account increases liabilities and capital.
Statement 2: Receiving payments on accounts receivable increases assets.
a. Both statements are true c. Both statements are false
b. Only statement 1 is true d. Only statement 2 is true

2. When a subscriber fails to pay his obligations after the corporation has sent several notices to him, his
subscribed shares are declared
a. Delinquent Subscription
b. Delinquent Shares
c. Outstanding Shares
d. Treasury Shares

3. This represents a residual ownership equity

a. Ordinary share capital
b. Preference Share Capital
c. Authorized Share Capital
d. Outstanding Share Capital

4. Which of the following will decrease the Capital account of a partner?

a. Additional investment by a partner
b. Share in partnership loss from operations
c. Debit balance of drawing account closed to capital
d. Credit balance of drawing account closed to capital

5. Which of the following statements is true?

a. Bonus is deductible as expense in determining the amount of taxable profit
b. No bonus is allowed if there is sufficient profit after distribution of salaries and interest
c. Entries in the drawing account are not considered in computing average capital ratio
d. Profits and losses, in the absence of partners’ agreement, must be divided equally.

6. Transactions affecting owner’s equity include:

a. Owner’s investments and owner’s withdrawals
b. Owner’s investments, owner’s withdrawals, revenues, and expenses
c. Owner’s investments, revenues and expenses
d. Owner’s investments, owner’s personal withdrawals, revenues, and expenses

7. Treasury Shares are accounted for using:

a. Cost Method
b. Fair Value Method
c. Equity Method
d. Any of the above
8. This is referred to as small bonus issue
a. When the number of shares of the bonus issue represents less than 20% of issued shares
b. When the number of shares of the bonus issue represents at least 20% of issued shares
c. When the number of shares of the bonus issue represents less than 20% of outstanding shares
d. When the number of shares of the bonus issue represents at least 20% of issued shares

9. The accounting equation A = L + E must remain in balance

a. When the journal entries are recorded
b. At the time the trial balance is prepared
c. When formal financial statements are prepared
d. All of the above
e. None of the above

10. The major expense in merchandising companies

a. Selling expenses
b. Administrative expenses
c. Purchases
d. Cost of Goods Sold

11. Which of the following terms represent deduction from the invoice price of purchased goods grant6ed by the
suppliers for early payment?
a. Trade discount
b. Cash Discount
c. Purchase Discount
d. Gross discount

12. Goods in transit which are shipped FOB Destination should be

a. Included In the inventory of the buyer
b. Included in the inventory of the seller
c. Included in the inventory of the shipping company
d. None of the above

13. The allocation of an error should be based on the partners’ profit and loss ratio in effect when:
a. The error was made
b. The error was discovered
c. The error was corrected
d. The allocation should always be made equally

14. Statement 1: The capital share of each partner is the percentage of equity that each of them will have in the
net assets of the newly formed partnership.
Statement 2: Partners may not agree to a division of capital that is not proportionate to their capital
investments.
a. Both statements are true c. Both statements are false
b. Only statement 2 is true d. Only statement 2 is false

15. It is the amount that would be paid on each share owned by a shareholder in case of corporate liquidation.
a. Earnings per share c. Market value per share
b. Equity per share d. Book value per share
16. Statement 1: No accumulated depreciation is carried forward to the partnership.
Statement 2: No allowance for uncollectible accounts is carried forward to the partnership.
a. Both statements are true c. Both statements are false
b. Only statement 1 is true d. Only statement 2 is true

17. The following conditions will result to partnership dissolution except:

a. Admission of a new partner
b. Death, Incapacity or bankruptcy of a partner
c. Retirement or withdrawal of a partner
d. None of the above

18. Which of the following statements is/are false?

a. A new partner may be admitted in an existing partnership by purchasing a capital equity interest directly
from the partnership
b. The admission of a new partner by purchase will not affect the total assets and the total capital of the
partnership.
c. A & C
d. None of the above

19. If A is the total capital of a partnership before the admission of a new partner, B is the total capital of the
partnership after the investment of new partner, C is the amount of the new partner’s investment, and D is the
amount of capital credit to the new partner, there is
a. Neither bonus nor asset revaluation if B = A + C and D > C
b. a bonus to the new partner if B = A + C and D > C
c. a bonus to the old partners if B > (A+C) an D < C
d. an asset revaluation to the old partners if B > (A+C) and D = C

20. The withdrawal of a partner of his interest at more than book value results in a
a. Bonus to remaining partners
b. Bonus from remaining partners
c. Loss to retiring partners
d. Gain to remaining partners

21. The residual interest in a corporation belongs to

a. Management
b. Creditors
c. Ordinary Shareholders
d. Preference Shareholders

22. Treasury shares are

a. Shares held as an investment by the treasurer
b. Shares held as an investment by the corporation
c. Issued and outstanding shares
d. Issued but not outstanding shares

23. The maximum number of shares of share capital that may be issued by a corporation
a. Outstanding shares
b. Authorized shares
c. Treasury shares
d. Redeemable shares
 24. When shares without par value but with stated value are sold, the excess proceeds over stated value shall be
credited to
a. Income
b. Retained Earnings
c. Share Premium
d. Share Capital

25. The total cost of treasury shares shall be reported as

a. Deduction from shareholders’ equity
b. Asset
c. Deduction from noncurrent liabilities
d. Deduction from noncurrent assets

PROBLEMS
26. The balance in the capital account of Holy Spirit Co. at the beginning of the year was P650,000. During the year,
the company earned revenue of P4,300,000, incurred expenses of P3,600,000, the owner withdrew P500,000 in
assets and the balance in the cash account increased by P100,000. At year end, the company’s net income and
the year-end balance in the capital account, respectively, were:
a. P200,000 and P950,000
b. P700,000 and P950,000
c. P600,000 and P750,000
d. P700,000 and P850,000

27. During the current year, the assets of Buggy increased by P238,860, and the liabilities decreased by P63,872. If
the owner’s equity in the business is P834,792 at the end of the year, how much is the owner’s equity at the
beginning of the year?
a. P532,060
b. P1,137,524
c. P659,804
d. P1,009,780

28. Jeff has beginning merchandise inventory amounting to P48,000. He purchased additional inventories worth
P23,000 net of P3,000 discount. However, due to some defects, he returned the goods he purchased worth
P5,000 to the vendor. At the end of the year, ending merchandise inventory amounts to P16,000. Determine
the cost of goods available for sale.
a. P50,000
b. P66,000
c. P47,000
d. P63,000

29. CJ, Jae, and JM formed a partnership on November 1, 2018. They agreed that JM will contribute an office
equipment which costs him P50,000 but has a fair value of P60,000. CJ also agreed to contribute a store
equipment amounting to P70,000. If Jae wants to have a one third interest in the capital, she should contribute
the following amount of cash:
a. P60,000 c. P55,000
b. P65,000 d. P70,000
30. A business received cash of P30,000 in advance for services that will be provided later. The cash received entry
debited Cash and credited Unearned Revenue for P30,000. At the end of the period, P11,000 is still unearned.
The adjusting entry for this situation is:
a. Debit Unearned Revenue and credit Revenue for P19,000
b. Debit Unearned Revenue and credit Revenue for P11,000
c. Debit Revenue and credit Unearned Revenue for P19,000
d. Debit Revenue and credit Unearned Revenue for P11,000

31. Partners RJ and AG share profits 3:2. However, RJ is to receive a yearly bonus of 20% of the net profits after
deducting such bonus, in addition to his profit share. The partnership made a net income for the year of
P24,000 after the bonus. How much profit share will RJ receive?
a. P14,400
b. P16,000
c. P19,200
d. P18,400

32. White Corporation paid P26,800 and P23,000 in insurance premiums during 2017 and 2018, respectively .
White showed P4,500 Prepaid Insurance on its December 31, 2018 Statement of Financial Position and P3,600
on December 31, 2017 and none on December 31, 2016. The Insurance Expense on the Statement of
Comprehensive Income for 2017 was:
a. P25,900
b. P22,100
c. P23,900
d. P22,300

33. Jiang chen and Xiaoxi formed a partnership and contributed the following assets:
Jiang Chen Xiaoxi
Cash P60,000 P50,000
Land P80,000

The land was subject to a P30,000 mortgage which the partnership did not assume. How much will Jiang chen’s
capital account be credited?
a. P140,000 c. P50,000
b. P110,000 d. P60,000

34. At the end of the first month of operations, St. Jude Co.’s bookkeeper prepared financial statements which
showered assets of P4,000,000 liabilities of P1,500,000 and net income of P500,000. In preparing the statements,
the bookkeeper overlooked the accrued wages at month-end of P30,000.
The correct owner’s equity at month-end is
a. P2,970,000 b. P2,350,000 c. P2,470,000 d. P1,970,000

35. Feve, Katrina, Vanessa and Jamel are partners, sharing earnings in the ratio of 3:4:6:8, respectively. The
balances of their capital accounts on April 8, 2015 are as follows:
• Feve P1,000
• Katrina P25,000
• Vanessa P25,000
• Jamel P9,000
The partners decided to liquidate, and they accordingly convert the non-cash assets into P23,200 cash. After
paying the liabilities amounting to P3,000, they still have P22,200 to divide. Assume that a debit balance in any
of the partner’s capital is uncollectible. In the final settlement, Katrina should receive:
A. P3,200 B. P3,920 C. P4,500 D. P13,880
36. Lakas and Ganda are partners who shares profits in a 2:1 ratio and losses equally . They have beginning capital
balances of P120,000 and P110,000, respectively, made no additional investments nor withdrawals, and
suffered an unprofitable year with loss of P60,000. Ganda’s share in the profit/loss will be:
c. P30,000 c. P40,000
d. P20,000 d. P25,000

37. A and B are partners who shares losses in a 2:1 ratio. They have beginning capital balances of P90,000 and
P135,000, respectively, made no additional investments nor withdrawals. The partnership had a profit of
P30,000. A’s ending capital balance will be:
a. P105,000 c. P100,000
b. P110,000 d. P102,000

38. Anne and Dominique are partners with capital balances and profit and loss ratio as follows:
Capital Profit and Loss Ratio
Anne P24,500 60%
Dominique 15,500 40%
P40,000 100%
The partners decided to liquidate the partnership. The firm’s liabilities amount to P36,000 including P4,000 owing
to Anne and P3,500 owing to Dominique on loans. After realization of assets, the cash on hand amount to P37,500

The loss on realization amounts to

a. P2,500 c. P38,500
b. P4,000 d. P37,500

39. At December 31, 2017, the JPIA Company had P990,000 balance in its Advertising Expense account before any
year-end adjustments relating to the following:
• Radio advertising spots broadcast during December 2017 were billed to JPIA on January 4, 2018. The
invoice cost of P50,000 was paid on January 15, 2018.
• Included in the amount reported as expense is P60,000 for newspaper advertising for a January 2018 sales
promotional campaign.
JPIA’s advertising expense for the year ended December 31, 2015 should be:
A. P1,040,000 B. P1,000,000 C. P980,000 D. P930,000

40. The balance sheet as of June 30,2018 for the partnership of Isaac, Dmitri and Maxwell shows the following
information:
Total Assets P360,000

Isaac, Loan P 20,000

Isaac, Capital 83,000
Dmitri, Capital 77,000
Maxwell, Capital 180,000
P 360,000

It was agreed among the partners that Isaac retires from the partnership and it was further agreed that the
assets be adjusted to their value of P408,000 as of June 30,2018. The partnership would pay Isaac, P121,000
cash for his partnership interest and includes the payment of loan to him. No goodwill is recorded. Isaac, Dmitri
and Maxwell share profits and losses, 25%, 25% and 50% respectively.

What is Maxwell’s capital balance after the retirement of Isaac?

a. P200,000 c. P204,000
b. P180,000 d. P176,000
41. Eagle Company recorded accrued salaries of P25,000 at December 31, 2014. During 2015, the company paid
salaries of P872,000. Unpaid salaries at December 31, 2015 amounted to P34,000. Eagle prepares adjustments
for the year-ended only on the first working day of the following period, and journalizes the adjusting entries as
of December 31 and reversing entries are dated January 1. The balance of Salaries Expense account that would
appear in the post-closing trial balance at December 31, 2015 is
A. P881,000 B. P34,000 C. P847,000 D. -0-

42. The partnership of Aaron and Luke provides for equal sharing of profits and losses. Prior to the admission of a
third person Elizabeth, the capital accounts are Aaron, P75,000 and Luke, P105,000. Elizabeth invests P90,000
for a P75,000 interest and partners agreed that the net assets of the new partnership would be P270,000.

How much is Luke’s capital in the new partnership?

a. P112,500 c. P110,000
b. P105,000 d. P120,000

43. During the current year, Garcia-Shapiro Co. declared a one-for-five share split, when the market value of share
was P100. Prior to the split, the entity had 100,000 shares of P10 par value issued and outstanding. After the
split, what is the par value of the share?
A. P10 B. P20 C. P50 D. P2

44. Doofenshmirtz Evil, Inc. had 1,400,000 ordinary shares authorized and 600,000 shares outstanding on January
2, 2015. The following equity transactions transpired during the year:
April 21 Declared 10% share capital dividend
May 31 Reacquired 200,000 shares
Aug 11 Reissued 100,000 shares
Dec 30 Declared a two-for-one share split
On December 31, 2015, how many ordinary shares are outstanding?
a. 1,120,000 b. 280,000 c. 330,000 d. 1,320,000

45. Abraham, Sarah and Rebecca are partners in a business and share in its earnings at respective rates of 50%, 30%
and 20%. At the beginning of the new fiscal year, they admit Isaac who is to invest in the firm sufficient cash and
give him one-third interest in the capital and in the earnings. The following closing balance is taken from the old
firm’s books:

Cash P200,000
Marketable securities 150,000
Accounts Receivable 450,000
Accounts Payable P100,000
Loans payable- Bank 60,000
Abraham, Capital 350,000
Sarah, Capital 200,000
Rebecca, Capital 90,000
P800,000 P800,000

The securities have a market value of P100,000 and an allowance of P50,000 is required to cover bad debts. No
other adjustments of the net assets are necessary, but the three old partners must among themselves bring the
balances in their capital accounts into agreement with their interest in the earnings.

What must be invested by Isaac?

a. P320,000 b. P270,000 c. P370,000 d. P180,000

46. Using the data given in No. 48, what is the new capital of Abraham?
a. P320,000 b. P270,000 c. P370,000 d. P180,000
47. Riverdale Corp. was incorporated on June 1, 2018 with an authorized 250,000 share of no-par ordinary share
capital, stated value P15 and 10,000 shares of 10% preference share capital, par value P50. Transactions
affecting company’s share capital as of June 30, 2018 were as follows:

June 1 Issued 50,000 ordinary shares for cash at P15 per share.
5 Issued 50,000 ordinary shares in exchange for assets with total market value of P900,000.
15 Received subscriptions for 100,000 ordinary shares at P30 and 5,000 preference shares at
P55.
25 Received full payment for subscriptions received on June 15 and the corresponding stock
were issued.

What is the total shareholder’s equity?

a. P3,250,000 c. P4,675,000
b. P4,500,000 d. P4,925,000

48. Refer to No. 59, what is the balance of Ordinary Share Capital account as of June 30, 2018?
a. P750,000 c. P3,000,000
b. P1,650,000 d. P4,925,000

49. Refer to No. 59, what is the balance of Ordinary Share Capital Subscribed account as of June 15, 2018?
a. P0 c. P1,500,000
b. P3,000,000 d. P4,500,000

50. The following is a list of selected account balances taken from the December 31, 2018 general ledger of
Avengers Corporation:
Accounts Payable P 80,000
Accounts Receivable 71,367
Ordinary Share Capital 252,000
Ordinary Share Premium 116,550
Preference Share Premium 118,420
Preference Share Capital 116,000
Preference Share Capital Subscribed 12,000
Retained Earnings 38,390

What is the total contributed capital?

a. P234,367 c. P602,970
b. P242,090 d. P614,970

51. Refer to No. 62, what is the total shareholders’ equity as of December 31, 2018?
a. P641,367 c. P662,870
b. P653,360 d. P674,360

52. On December 25, The Vamps split its share capital on a 5-for-2. Prior to the split, Joshua had 200,000 shares of
P15 par value share capital. What is the par value of the share capital after the split?
a. P3 c. P15
b. P6 d. P26
 53. MPHFPC Corp. holds 10,000 ordinary shares, par value P10, as treasury shares, which was purchased in year
2013 at a cost of P120,000. On December 8, 2017, MPHFPC Corp. sold all the 10,000 shares for P210,000. The
sale would result in a credit to Paid-In Capital from Sale of Treasury Shares in the amount of:
a. P90,000
b. P110,000
c. P120,000
d. P210,000

Huwag na huwag mong hahayaang dumating yung araw na sasabihin mo sa sarili mong, ‘Sana ginalingan ko pala’.

Prepared by:

(Sgd.)
JESSMAR G. INSIGNE
Vice President for Academic Affairs
PUP JPIA Manila 2018-2019

(Sgd.)
JAYSON PATRICK C. ISAGON
Associate Vice President for Academic Affairs
PUP JPIA Manila 2018-2019
10 | P a g e