Polytechnic University of the Philippines

COLLEGE OF ACCOUNTANCY
Sta. Mesa, Manila

Special Qualifying Examination for Freshmen

Fundamental Accounting, Parts 1 and 2
Multiple Choice Theories. Choose the letter of the correct answer. Each item is credited at a point
each.
1

The Statement of Financial Position is another name for the

A Statement of Owners Equity
C Income Statement
B Statement of Cash Flows
D Balance Sheet

Equities are legal and economic claims to the assets of a business. The owners claims on the
business assets are also known as
A Accounts Payable
C Liabilities
B Outsider Claims
D Capital

The statement which presents the entitys operations during a specific period of time is the
A Statement of Owners Equity
C Income Statement
B Statement of Cash Flows
D Balance Sheet

The purchase of office equipment on account will

increase an asset and increase owners
increase an asset and increase a
A
C
equity
liability
increase one asset and decrease another
B
D increase an asset and decrease a liability
asset

The performance of service for a customer or client and immediate receipt of cash will
increase one asset and decrease another
A
C decrease an asset and decrease a liability
asset
increase an asset and increase
B
D increase an asset and increase a liability
owners equity

The payment of an accounts payable will

decrease an asset and decrease owners
A
equity
increase one asset and decrease another
B
asset

decrease an asset and decrease a

liability

D increase an asset and increase a liability

A debit entry to the Cash account indicates

A the payment of an expense
B the borrowing of money from a bank
C the billing of a client for services, payment subsequent to invoicing
D the withdrawal of funds from the business by the owner

The
A
B
C
D

If the Income Summary account has a P 4,000 credit balance before it is closed to the capital
account, you know that
A revenues exceeded expenses by P 2,000
B the company had a net loss for the year of P 4,000
C the owner invested an additional P 4,000 in the business
D the company had a profit for the year of P 4,000

10 The
A
B
C
D

trial balance is necessary in order to

post to the ledger
prepare the source documents
record entries into the journal
check the posting accuracy, that total debits equal total credits

post closing trial balance is prepared as the next step in the accounting cycle after
combining the trial balance and adjustment figures
preparing the trial balance
journalizing and posting the closing entries
none of these
Special Qualifying Examination for First Year | 1

11 A debit column total greater than the credit column total under the Income Statement portion
of the worksheet would mean
A mistakes were made in the preparation of the adjusted trial balance
B the company had a profitable year
the Income Summary account will have a credit balance after the nominal accounts are
C
closed
D the company had a loss this year
12 The following accounts were closed to the Income Summary account: Salary Expense, P 500
debit; Telephone Expense, P 800 debit; Utilities Expense, P 250 debit; Service Revenue, P 1,200
credit. The amount and entry to close Income Summary to the Capital account would be
A P 350 credit to the Income Summary account
B P 350 debit to the Income Summary account
C P 1,200 debit to the Income Summary account
D P 2,050 credit to the Income Summary account
13 Market Consulting bought P 9,000 of furniture. Accumulated Depreciation had a balance of P
3,000 prior to the recording of this years depreciation. Depreciation Expense at the end of the
year is P 2,000. What is the book value of the furniture at the end of the year?
A P 4,000
C P 11,000
B P 6,000
D P 3,000
14 The
A
B
C

Balance Sheet reflects

Assets + Liabilities = Owners Equity
Beginning owners equity + Revenues = Expenses
Revenues - Expenses
Assets = Liabilities + (Beginning Owners Equity + Revenues - Expenses D
Withdrawals)

15 An asset account with a P 600 beginning balance, no deductions, and a P 1,000 ending
balance, would have the following amount recorded in it.
A P 600 credit entry
C P 600 debit entry
B P 400 debit entry
D P 400 credit entry
16 Failing to post the transaction of purchasing P 600 of office supplies on account would have
what effect on the trial balance?
A debit total would equal the credit total
B debit total would be P 600 greater than the credit total
C debit total would be P 1,200 greater than the credit total
D debit total would be P 600 less than the credit total
17 Peter Pan Child Care Center paid P 9,000 for three months of rent in advance. The Prepaid Rent
account had a remaining balance of P 3,000 at the end of the accounting period. The adjusting
entry to reflect this must have been
A debit Rent Expense and credit Prepaid Rent for P 3,000
B debit Rent Expense and credit Prepaid Rent for P 6,000
C debit Prepaid Rent and credit Rent Expense for P 12,000
D debit Prepaid Rent and credit Cash for P 9,000
18 Regarding one purchase of merchandise, the following entries were made by Z Company.
Purchases
17,000
Accounts Payable - Supplier

17,000

Transportation - in
1,900
Accounts Payable - Supplier

1,900

What are the shipping terms regarding this transaction?

A FOB destination, freight prepaid
C FOB destination, freight collect
B FOB shipping point, freight prepaid
D FOB shipping point, freight collect
19 The collection of a P 4,000 account within the 2% discount period would result it
A debit to Sales Discount for P 80
C credit to Cash for P 3,920
B debit to Accounts Receivable for P 3,920
D credit to Accounts Receivable for P 3,920
20 Dissolution will arise
A whenever a new partner is admitted through purchase of interest or through investment
Special Qualifying Examination for First Year | 2

of cash or non-cash assets

upon termination of the definite term or particular undertaking specified in the
B
agreement
C in case of civil interdiction of any partner
D all of the above

21 The following income and loss allocation method recognized the services rendered by the
partners in terms of time and skill as well as the contribution made by each partner, except
A interest allowance to partners, balance in agreed ratio
B salary allowance to partners, balance in agreed ratio
C bonus allowance to partners, balance in agreed ratio
D equally
22 In the absence of agreement, the share of each partner in the profits and losses shall be
according to average capital
A equally
C
contribution
B according to original capital contribution
D all of the above
23 The following will cause total retained earnings to decrease , except
A purchase of treasury stock
C declaration of bonus issue
B

appropriation of retained earnings for plant

acquisition

D A and B only

24 Which of the following would not be considered a characteristic of a corporation?

A right of succession
C unlimited liability
B separate legal entity
D created by operation of law
25 Which of the following will not decrease retained earnings?
A declaration of scrip dividends
B declaration of property dividends
C declaration of liquidating dividends
D retirement of share capital at more than the original issue price
26 Earnings per share is
net income minus annual dividends on undeclared non-cumulative preference shares
A
divided by the weighted average number of outstanding ordinary shares
B net income divided by weighted average number of outstanding ordinary shares
net income minus annual dividends on cumulative preference shares divided by the
C
weighted average number of outstanding ordinary shares
D B and C but not A
27 A capital deficiency is eliminated in any of the following ways except
A by contributing cash to the partnership
B by distributing it as additional loss to the other partners
C by declaring bankruptcy
D by contributing non-cash assets
28 When there is no bidder for delinquent subscription, the subscribed shares
A will be issued in the name of the board of directors
B will be reverted back to unsubscribed shares
C will be issued in the name of the corporation
D will be issued to the delinquent subscriber
29 On June 1, authorized ordinary share capital was sold on a subscription basis at a price in
excess of par value, and 40% of the subscription price was collected. On October 1, the
remaining 60% of the subscription price was collected. Ordinary Share Premium account will be
credited on
June 1
October 1
A
Yes
No
B
No
No
C
Yes
Yes
D
No
Yes
30 The issuance of shares of ordinary share capital to shareholders
Special Qualifying Examination for First Year | 3

A
B
C
D

decreases ordinary share capital authorized

decreases ordinary share capital outstanding
increases ordinary share capital outstanding
increases ordinary share capital authorized

Multiple Choice Problems. Choose the letter of the correct amount. Each item is credited at 2.5
points each.
31 The accountant was not able to adjust the following: P 200 of service revenue was not accrued;
P 300 of unearned revenue had been earned, but no entry was made. What should be the
amount of net income if the incorrect net income was P 19,000?
A P 19,250
C P 19,500 add both amounts.
B P 19,410
D P 18,300
32 A trial balance has debit and credit totals of P 7,000. The purchase of P 4,000 of office supplies
on account was omitted from the original journal entries. After recording and posting this
transaction, the new debit and credit totals for the trial balance would be
A P 11,000 add P 4,000.
C P 9,000
B P 7,000
D P 3,000
33 From this list of account balances, calculate the total credit column for the post-closing trial
balance: Cash, P 15,000; Accounts Receivable, P 3,000; Prepaid Rent, P 2,000; Building, P
30,000; Accumulated Depreciation, P 13,000; Accounts Payable, P 6,000; Unearned Revenue, P
1,000; Jiyeon Park, Capital, P 30,000.
A P 69,000
C P 45,000
B P 50,000 add all underlined.
D P 20,000
34 The Balance Sheet of You Are My World Company shows that capital is P 540,000 that is equal
to 1/3 of its total assets. How much are the total liabilities?
P 1,080,000 divide 540 by 1/3 then
A P 180,000
C
subtract 540.
B P 720,000
D P 1,620,000
35 The assets of Sharmaine Company amounted to P 810,000 on December 31, 2008, but
increased to P 1,305,000 by December 31, 2009. During the same period, liabilities increased
by P 270,000. Owners equity on December 31, 2008 amounted to P 495,000. What was the
amount of the Owners Equity on December 31, 2009?
A P 585,000
C P 1,035,000
P 720,000 get the beg. liab first, add
B
D P 1,080,000
270, then ALC.
36 Hillsong Company has P 60,000 in revenues, P
investment, P 9,000 in owners withdrawals, and P
changes by
A + P 48,000
C
B - P 45,000 add, sub, add, sub.
D

132,000 in expenses, P 36,000 in owner

45,000 in liabilities paid off. Owners equity
+ P 36,000
- P 3,000

37 LPCA Company purchased P 1,450,000 of land with a P 500,000 cash down payment and the
balance taken as a note payable. How much did the total assets change?
A + P 1,450,000
C - P 930,000
B + P 950,000 1,450 less 500.
D + P 500,000
38 Coleen Garcia joined a partnership by contributing the following: cash, P 20,000; accounts
receivable, P 4,000; land, P 240,000 at cost and P 400,000 at fair value; and accounts payable,
P 16,000. What will be the initial amount recorded in Coleens capital account?
A P 408,000 add assets, subtract liabilities C P 424,000
B P 248,000
D P 20,000
39 Troy and Lana are combining their separate businesses to form a partnership. Cash and noncash assets are to be contributed for a total capital of P 600,000. The non-cash assets to be
contributed and the liabilities to be assumed are as follows.
Troy
Lana
Fair Market
Fair Market
Book Value
Book Value
Value
Value
Accounts
P 40,000
P 40,000
Special Qualifying Examination for First Year | 4

Receivable
Merchandise
60,000
100,000
P 40,000
P 50,000
Inventory
Equipment
120,000
90,000
80,000
100,000
Accounts Payable
30,000
30,000
20,000
20,000
The partners capital accounts are to be equal after all the contributions of assets and the
assumption of liabilities. The amount of cash to be contributed by Troy is
P 100,000 300thou, add AP, subtract all
A P 200,000
C
assets
B P 300,000
D P 210,000
40 Using the information in item 39, the total assets of the partnership is
A P 630,000
C P 360,000
P 650,000 get all cash contrib., then add
B
D P 340,000
all assets.
41 Sunny and Jessica are partners who share profits equally and losses in a 2:1 ratio. If they have
beginning capital balances of P 120,000 and P 118,000 respectively, made no additional
investments nor withdrawals, and suffered an unprofitable year with a loss of P 48,000, their
capital balances will be
Sunny
Jessica
A
P 40,000
P 30,000
B
120,000
118,000
88,000
102,000 get the losses; subtract it to the beginning capital
C
balances.
D
152,000
134,000
42 Bucao, Basco, and Blanco share profits and losses in the ratio of 2:3:5 respectively. Their
partnership realized a profit of P 1,800,000 during the year. Bucao, with a beginning capital
balance of P 1,000,000, withdrew P 200,000 during the year. Bucaos ending capital balance is
A P 1,000,000
C P 560,000
P 1,160,000 get the share, then INC
B
D P 1,400,000
STAT approach.
43 Darlene Zschechs interest in the partnership is P 110,000. Joel Houston buys Darlenes
interest for P 120,000. How much is the capital balance of Joel after the purchase?
P 110,000 personal loss only for Joel for
A P 140,000
C
10,000.
B P 120,000
D P 130,000
44 CM and CB formed a partnership and have capital balances of P 100,000 and P 200,000
respectively. If they agreed to admit CJ into the partnership, how much will CJ have to invest to
have a 1/4 interest?
A P 75,000
C P 200,000
P 100,000 divide OPC by 3/4, then
B P 50,000
D
subtract OPC.
45 Daza, Diaz, and Ditas are partners with capital balances of P 80,000, P 120,000, and P 160,000
respectively. They share profits and losses in the ratio of 30:40:30. Diaz decides to withdraw
from the partnership. Diaz receives P 160,000 in the settlement of his interest. If the bonus
method is used, what is the capital balance of Ditas immediately after the retirement of Diaz?
P 140,000 debit entry of 20,000 to Ditas
A
C P 180,000
and Daza.
B P 160,000
D P 200,000
46 Using the information in item 45, and assuming bonus method is used, what is the total
partnership capital immediately after the retirement if Diaz?
A P 280,000
C P 200,000 80,000 + 120,000.
B P 240,000
D P 320,000
47 A partner retired from a partnership and received an amount which exceeds his capital interest
by P 40,000. The remaining partners have profit and loss ratio of 3:2. Under the bonus method,
the excess payment will be shared by the remaining partners as
A P 48,000 and P 32,000
C P 36,000 and P 24,000
P 24,000 and P 16,000 multiply 40,000
B P 12,000 and P 8,000
D
by the ratios
Special Qualifying Examination for First Year | 5

48 Kim, Coleen, and Sue are partners who share profits and losses in the ratio of 2:3:5. The
partners have decided to liquidate the partnership. Their capital accounts show the following
balances: Kim, P 60,000 credit; Coleen, P 90,000 credit; and Sue, P 30,000 debit after the sale
of non-cash assets and the payment of liabilities. What is the amount of cash available for
distribution?
A P 120,000 add, add, subtract.
C P 160,000
B P 180,000
D P 150,000
49 Hunger Games Corporation was organized on January 1, 2009 with authorized capital of
100,000 ordinary shares, P 20 par value. During 2009, Hunger Games Corporation had the
following transactions affecting the shareholders equity: January 10, issued 25,000 shares at P
22 per share; March 25, issued 1,000 shares for legal services when the fair value was P 24 per
share; September 30, issued 5,000 shares for an equipment when the value was P 26 per
share. How much is the balance of the Ordinary Share Capital account as of September 30?
A P 700,000
C P 634,000
P 620,000 multiply the shares to par
B
D P 704,000
value.
50 Using the information in item 49, what amount should be reported as Premium on Ordinary
Shares?
P 84,000 multiply shares to the excess of
A
C P 50,000
par value.
B P 54,000
D P 34,000

51 Dream High Corporation has the following classes of share capital outstanding as of December
31, 2009: Ordinary Share Capital, P 20 par value, 20,000 shares outstanding; 6% Preference
Share Capital, P 100 par value, cumulative, 2,000 shares outstanding. No dividends were paid
on preference shares for 2007 and 2008. On December 31, 2009, a total cash dividend of P
200,000 was declared. How much dividends would be received by ordinary shareholders?
A P
0
C P 176,000
P 164,000 subtract 200 to arrears and
B P 188,000
D
current div.
52 Using the information in item 51, how much dividends will be received by preference
shareholders?
A P 200,000
C P 12,000
P 36,000 add div/arrears and current
B P 24,000
D
dividends.
53 On April 8, 2009, Simsimi Corporation declared and issued 25% ordinary share capital
dividend. Prior to this date, Simsimi Corporation had 20,000 shares of P 2 par value ordinary
share that were both issued and outstanding. The carrying value of each share of stock is P 20
at the time of declaration of the dividend. As a result of the stock dividend, how much will be
debited to Retained Earnings?
A P 40,000
C P 100,000
B P 10,000 large bonus issue, at par only.
D P 75,000
54 Red Corporation and Yellow Corporation have Preference Share Capital outstanding. Red
Corporation has issued 3,000 shares of 5% Preference Share Capital, par value P 100. Yellow
Corporation has issued 5,000 shares of 10% Preference Share Capital, par value P 120. What is
the dividend per share for the Preference Share Capital for the two corporations?
P 5 for Red, P12 for Yellow current
A
C P 5 for Red, P 10 for Yellow
div / shares.
B P 100 for Red, P 120 for Yellow
D P 5 for Red, P 120 for Yellow
55 White Rock Resort Corporation has 400 shares of 6% preference share capital outstanding, par
value is P 50 per share and market value is P 80 per share. The amount of cash dividends for
the year on this share capital would be
P 1,200 6% multiplied by 400 multiplied
A
C P 2,400
by 50.
B P
12
D P 1,920

Special Qualifying Examination for First Year | 6

56 Club Manila East Corporation has 6,000 shares of P 8 non-cumulative preference shares
outstanding and 12,000 ordinary shares outstanding. At the end of the year, cash dividends of
P 180,000 were declared. How much dividends were paid on both classes of share capital?
P 48,000 and P 132,000 PS current,
A
C P 90,000 and P 90,000
balance to OS.
B P 60,000 and P 120,000
D none of the given
57 Using the information in item 56, what is the dividend per share on both classes of share
capital?
A P 10 and P 10
C P 15 and P 2.50
P 8 and P 11 divide to outstanding
B
D none of the given
shares.
58 Park Min-Young Corporation was organized on January 1, 2009 with authorized capital of
100,000 shares of P 10 par value ordinary share capital. During 2009, Park Min-Young
Corporation had the following transactions affecting shareholders equity: January 7, issued
40,000 shares at 12 per share; December 2, purchased 6,000 treasury shares at P 13 per
share. Profit for the year amounted to P 300,000. What is the amount of shareholders equity
as of December 31, 2009?
P 702,000 add issued, less treasury, add
A
C P 640,000
profit.
B P 720,000
D P 708,000
I can do all things through Christ who strengthens me.
Philippians 4:13
Note: This was the qualifying exam taken by students last April 15, 2011. This was only re-typed and
only the names of companies were changed. No amounts were changed in each problem.

/ktmc mr.coa2012 :))

Special Qualifying Examination for First Year | 7