Name:

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Section:
SUMMER TUTORIAL FOR INCOMING 3RD YEAR BS ACCOUNTANCY

PRE-QUALIFYING EXAMINATION
1. The following are characteristics of a partnership, except;
a. Separate Legal personality
b. Mutual Agency
c. Ease of formation
d. Right of succession
2. Which of the following statement is incorrect?
a. Partnership creditors are preferred as to partnership assets.
b. Partnership creditors are preferred as to each partners separate assets.
c. A partners separate creditors are preferred as to the partners separate assets.
d. A partners separate creditors may attach a partners share in the partnership
assets.
3. The change in the relation of the partners caused by any ceasing to be associated
in the carrying on the business is known as:
a. Termination of the partnership
b. Winding up of partnership affairs
c. Liquidation of the partnership business
d. Dissolution of the partnership
4. What is the order of payment of liabilities of a dissolved general partnership using
the code number representing each liability?
I.
Those owing to partners other than for capital or for profits.
II.
Those owing to creditors other than partners.
III.
Those owing to partners in respect of profits.
IV.
Those owing to partners in respect of capital.
a. I,II,III,IV
b. II,I,IV,III
c. II,I,III,IV
d. I,II,IV,III
5. On February 25, 2016 Jef and Dom formed a partnership. Jef contributed cash.
Dom, previously a sole proprietor, contributed property other than cash, including
realty subject to a mortgage, which the partnership assumed. Doms capital
account of February 25, 2016 should be recorded at:
a. Doms book value of the property at February 25, 2016.
b. Doms book value of the property less mortgage payable at February 25, 2016.
c. The fair value of the property less mortgage payable at February 25, 2016.
d. The fair value of the property at February 25, 2016.
6. If the partnership agreement provides for the division of loss only. Profit should be
divided:
a. Equally

b. According to beginning capital

c. According to ending capital ratio
d. According to average ratio
7. If, A is the total capital of the partnership before the admission of a new partner, B
is the total capital of the partnership after the investment of a new partner, C is
the amount of the new partners investment, and D is the amount of capital credit
to the new partner, then there is:
a. A bonus to the new partner if B = A+C and D < C.
b. Goodwill to the old partners if B > (A+C) and D=C
c. Neither bonus nor goodwill if B = A + C and D > C.
d. Goodwill to the new partner if B > (A +C) and D < C
8. In the liquidation of a partnership, a loan payable to a partner:
a. May offset against that partners capital account balance before liquidation
commences.
b. Will not advance the time of payment to that partner during the liquidation.
c. Has the same priority as amounts payable to outside creditors of the
partnership.
d. Must be closed to that partners drawing account.
9. In
a.
b.
c.
d.

calculating safe payments, you assume:

Partnership liabilities have been paid.
No liquidation expense will be paid.
All non-cash assets are worthless.
Cash on hand can be fully distributed.

10.
During liquidation, a partners capital account drops below zero. What should
happen?
a. The other partners should file a legal suit against the partner with the deficit
balance.
b. The partner with the highest capital balance should contribute sufficient assets
to eliminate the deficit.
c. The deficit balance balance should be removed from the accounting records
with only the remaining partners sharing in the future gains and losses.
d. The partner with a deficit should contribute enough assets to offset the deficit
balance.
11.
A corporations articles of incorporation establish the total number of shares
that may be issued. What is the term applied to these shares?
a. Outstanding Share
b. Issued shares
c. Common Shares
d. Authorized Shares
12.
What are shares that carry voting rights called?
a. Preferred Shares
b. Voting Shares
c. Common Shares

d. Contributed Capital
13.
The Retained Earnings account has a debit balance of 3,000 at the beginning
of 2010. During 2010 net income totaled 12,000 and dividends of 8,000 were paid.
During 2011, no dividends were paid and an economic slowdown caused the
business to lose 25,000. What was the balance of the retained Earnings account at
the end of 2011?
a. 18,000
b. 18,000 deficit
c. 24,000
d. 24,000 deficit
14.
The following may be the consideration of the share of stock of a corporation
except:
a. Actual cash paid to the corporation
b. Previously incurred indebtedness of the corporation
c. Amounts transferred from unrestricted retained earnings
d. Service to be performed by a lawyer on the proposed increase in capital stock of
the corporation.
15.
Their names are mentioned in the articles of incorporation as originally
forming the corporation and are signatories thereof.
a. Corporators
b. Stockholders
c. Incorporators
d. Members
16.
a.
b.
c.
d.

Stock dividends differ from cash dividends in that stock dividend.

Do not increase the legal capital
Involves disbursement of corporate funds
Require approval of both the board of directors and the stockholders.
Once received by the stockholders, are beyond the reach of corporate creditors.

17.
When a treasury share is reissued above its cost, any excess above cost is
credited in what account?
a. Share Premium Ordinary Shares
b. Retained Earnings
c. Gain on share issuance
d. Share Premium Treasury Shares

18.
When a treasury share is reissued below its cost, any deficiency is debited to
what account?
a. Loss on share issuance
b. Retained Earnings
c. Share Premium Ordinary share
d. Ordinary Share Capital
19.

In the absence of any contrary statement, the preference share is:

a.
b.
c.
d.

Cumulative and Non Participating

Non Cumulative and Participating
Non Cumulative and Non Participating
Cumulative and Participating

20.
During retirement of Treasury share, any excess of cost over par value is
debited in the following order;
I.
Share Premium Treasury Shares
II.
Share Premium Ordinary Shares
III.
Retained Earnings
IV.
Loss on retirement of Treasury Shares
a. IV,II,I,III
b. I,II,IV,III
c. II,I,III
d. II,I,IV,III
PROBLEM
1. As part of the initial investment, a partner contributes office equipment that has
cost 20,000 an on which accumulated depreciation of 12,500 had been recorded. If
the partners agree on a valuation of 9,000 for the equipment. What amount should
be debited to the office equipment account?
a. 7,500
b. 9,000
c. 12,500
d. 20,000
2. Chip and Dale agree to form a partnership. Chip is to contribute 50,000 in asset
and to devote one-half time to the partnership. Dale is to contribute 20,000 and to
devote full time to the partnership. How will Chip and Dale share in the division of
net income or net loss?
a. 5:2
b. 1:2
c. 1:1
d. 2:5:1

3. Tracy and Hepburn invest 100,000 and 50,000 respectively in a partnership and
agree to a division of net income that provides for an allowance of interest at 10%
on original investment, salary allowances of 12,000 and 24,000 respectively, with
the remainder divided equally. What would be Traceys share of a net income of
45,000?
a. 22,500
b. 22,000
c. 19,000
d. 10,000

4. Lee and Stills are partner who share income in the ratio of 2:1 and who have
capital balance of 65,000 and 35,000 respectively. If Morr, with the consent of
Stills, acquired one-half of Lees interest for 40,000, for what amount Morrs Capital
account be credited.
a. 32,500
b. 40,000
c. 50,000
d. 72,500
5. C, admits D as a partner in the business. Accounts in the ledger for C on November
30, 2015, just before the admission of D, show the following balances:
Cash
P 6,800
Accounts Receivable
14,200
Merchandise inventory
20,000
Accounts payable
8,000
C, Capital
33,000
It is agreed that for the purpose of establishing C interest, the following adjustment
shall be made:
(a) An allowance for doubtful accounts of 3% of accounts receivable is to be
established.
(b)The Merchandise inventory is to be valued of 23,000
(c) Prepaid salary expense of 600 and accrued rent expense of 800 are to be
recognized.
D is to invest sufficient cash to obtain 1/3 interest in the partnership.
Compute for: (1) C adjusted capital before the admission of D: and (2) the amount
of cash investment by D:
a.
b.
c.
d.

(1)
(1)
(1)
(1)

35,347
36,374
35,374
28,174

(2)
(2)
(2)
(2)

11,971
18, 487
17, 687
14, 087

6. The partnership agreement of X,Y & Z provides for the year-end allocation of net
income in the following order:
- First, X is to receive 10% of net income up to 200,000 and 20% over 200,000.
- Second, Y and Z each are to receive 5% of the remaining income over 300,000
- The balance of income is to be allocated equally among the three partners.
The partnerships 2011 net income was 500,000 before any allocations to
partners. What amount should be allocated to X?
a. 202,000
b. 216,000
c. 206,000
d. 220,000

7. H, R, T and k own a publishing company that they operate as a partnership. The

partnership agreement includes the following:
- H receives a salary of 20,000 and a bonus of 3% of income after all bonuses.
- R receives a salary of 10,000 and a bonus of 2% of income after all bonuses.
- All partners are to receive 10% interest on their average capital balances.
The average capital balances are as follows:
H
50,000
R
45,000
T
20,000
K
47,000
Any remaining profit and loss are to be divided equally among the partners.
Determine how a profit of 105,000 would be allocated among the partners.
a. H 41,450; R 29,950; T 15,450; K 18,150
b. H 29,950; R 41,450; 15,450; K 18,150
c. H 41,540; R 29,950; T 15,450; K 18,150
d. Cannot be determined.
8. M, N & O partners, share profit on a 5:3:2 ratios. On January 1, 2016, P admitted
into the partnership with a 10% share in profits. The old partners continue to
participate in profit in their original ratio.
For the year 2016, the net income of the partnership was reported as 12,500.
However, it was discovered that the following items were omitted in the firms
books:
Unrecorded at year-end
2015
2016
Prepaid Expenses
800
Accrued expenses
600
Unearned income
700
Accrued income
500
(1)The new profit and loss ratio for N, and (2) the share of partner O in the 2016
net income:
a. (1) 30%; (2) 2,214
b. (1) 27%; (2) 2,214
c. (1) 27%; (2) 2,286
d. (1) 30%; (2) 2,286
9. R and X formed a partnership and agreed to divide initial capital equally, even
though R contributed 25,000 and X contributed 21,000 in identifiable asset. Under
the bonus approach to adjust the capital accounts. X unidentifiable assets should
be debited for:
a. 11,500
b. 4,000
c. 2,000
d. 0
10.
P, R & S were partners with capital balances as of January 1, 2015 of,
20,000; 30,000; and 40,000 respectively, sharing profit and loss on 5:3:2 ratio.
On July 1, 2015 P withdraw from the partnership. Partners agreed that at the time
of withdrawal, certain inventories had to be revalued at 14,000 from its cost of

10,000. For the six months period ending June 30, 2015, the partnership generated
a net income of 28,000, further, partners agreed to pay P, 39,000 for his interest
and that the remaining partners capital accounts, would be adjusted for whatever
goodwill the settlement would generate. The payment of P included a goodwill of:
a. 3,000
b. 5,000
c. 10,000
d. 8,500
11.
The assets and equities of the Queen, Reed and Stac partnership at the end
of its fiscal year in October 31, 2015 are as follows:
ASSETS

LIABILITIES and EQUITY

Cash

15,000

Liabilities

50,000

Receivable- net
Inventory
45,000
Plant asset Net
30,000
Loan to Reed
15,000
TOTAL ASSETS
150,000

20,000
40,000

Loan from Stac

Queen, Capital- 30%

10,000

70,000

Reed, Capital- 50%

5,000

150,000

Stac, Capital 20%

TOTAL LIAB & EQUITY

The partners decide to liquidate the partnership. They estimate that the non cash assets,
other than the loan to Reed, can be converted into 100,000 cash over the two months
period ending December 31, 2015. Cash is to be distributed to the appropriate parties as
it becomes available during the liquidation process.
The partner most vulnerable to partnership losses on liquidation is:
a.
b.
c.
d.

Queen
Reed
Reed and Queen equally
Stac

12.
Using the information above, if 65,000 is available for first distribution, it
should be paid to:
a.
b.
c.
d.

Priority Creditors
60,000
60,000
50,000
50,000

Queen
5,000
1,500
5,000
12,000

Reed
0
2,500
0
0

Stac
0
1,000
10,000
3,000

13.
The partnership of A, B and C was dissolved on June 30, 2015 and account
balances after non-cash assets were converted into cash on September 1, 2015
are:
ASSETS
Cash

50,000

LIABILITIES and EQUITY

Accounts payable
120,000
A, Capital 30%
90,000
B, Capital 30%
(60,000)
C, Capital 40%
(100,000)

Personal assets and liabilities of the partners at September 1, 2015 are:

Personal Asset
Personal Liabilities
A
80,000
90,000
B
100,000
61,000
C
192,000
80,000
If C contributes 70,000 to the partnership to provide cash to pay the creditors,
what amount of A 90,000 partnership equity would appear to be recoverable?
a.
b.
c.
d.

90,000
81,000
79,000
None

14.
After all partnership assets were converted into cash and all available cash
was distributed to creditors, the ledger of D, O and M partnership showed the
following balances:
Debit
Accounts payable
D, Capital (40%)
O, Capital (30%)
M, Capital (30%)

Credit
20,000
10,000
60,000

90,000
90,000

90,000

Personal assets and liabilities of the partners are as follows:

D
O
M
Personal assets
50,000
50,000
100,000
Personal liabilities
45,000
40,000
40,000
The partnership creditors proceed against M for recovery of their claims, and that
partners settle their claims against each other. How much would O receive?
a. 0
b. 45,000
c. 47,143
d. 60,000

15.
Roy and Gil are partners sharing profits and losses in the ratio 1:2,
respectively. On July 1, 2015, they decided to form the R&G Corporation by
transferring the asset and liabilities from the partnership to the Corporation in
exchange of its shares. The following is the post-closing trial balance of the
partnership.
Cash
Accounts Receivable Net
Inventory
Fixed asset net
Liabilities
Roy, Capital
Gil, Capital
TOTAL

Debit
45,000
60,000
90,000
174,000

369,000

Credit

60,000
94,800
214,200
369,000

It was agreed that adjustments be made to the following assets to be transferred

to the corporation:
Accounts Receivable
Inventory
Fixed Assets

40,000
68,000
180,600

The R&G Corporation was authorized to issue 100 par preferenced shares and 10
par ordinary shares. Roy and Gil to receive for their equity in the partnership 720
ordinary share each, plus even multiples of 10 shares for their remaining interest.
The total number of shares of preference and ordinary shares issued by the
corporation in exchange of the assets and liabilities of the partnership are:
a.
b.
c.
d.

Preference Share
Ordinary Shares
2,540 shares 1,500 shares
2,592 shares 1,440 shares
2,642 shares 1,440 shares
2,642 shares 1,550 shares

16.
Walang Forever Company was organized on January 1, 2013 with authorized
capital of 100,000 shares of 200 par value.
January 10
Issued 25,000 shares at 220 a share.
March 15
Issued 1,000 shares for legal services when the fair value was
240 a share.
September 30
Issued 5,000 shares for a tract of land when the fair value
was 260 a share.
What amount should be reported for Share premium?
a. 840,000
b. 800,000
c. 540,000
d. 500,000

17.
Broken hearted Company held 10,000 shares of 10 par value as treasury
reacquired in 2012 for 120,000. On December 31, 2013 entity reissued all 10,000
shares for 190,000. Under the cost method of accounting for treasury shares, what
is credited for the excess of the issue price over the cost of treasury shares?
a. Share Capital of 100,000
b. Retained Earnings of 70,000
c. Gain on sale of investment of 70,000
d. Share Premium of 70,000
18.
On January 1, 2013, No Boyfriend Since Birth Company had 125, 000 share
issued which include 25,000 shares held as treasury.
January 1 through October 31 - 13,000 Treasury shares were distributed to officers
as part of a share
compensation plan.
November 1 A 3 for 1 share split took effect.
December 1 The entity purchased 5,000 of its own shares to discourage an
unfriendly takeover. These share were not retired
On December 31, 2013, how many shares were issued and outstanding,
respectively?
a. 375,000 and 334,000
b. 375,000 and 324,000
c. 334,000 and 334,000
d. 324,000 and 324,000
19.
Break Na Sila Company issued all of the outstanding shares for 390 per share
in 2013. On January 1, 2014, the entity reacquired 200,000 shares at 360 per
shares and retired them. The entity reported the following shareholders equity on
December 31, 2013:
Retained Earnings
75,000,000
Share Premium
162,000,000
Share Capital, 300 par value, 2,000,000 shares authorized,
1,800,000 shares issued and outstanding
540,000,000
What is the balance of the share premium immediately after the retirement of the
shares?
a. 156,000,000
b. 150,000,000
c. 144,000,000
d. 168,000,000
20.
Bitter Company was organized on January 1, 2013 at which date it issued
100,000 ordinary shares of 10 par value at 15 per share. During the period January
1, 2013 through December 31, 2014, the entity reported net income of 450,000
and paid cash dividends of 230,000. On January 10, 2014, the entity purchased
6,000 treasury shares at 12 per share. On December 31, 2014, the entity sold
4,000 treasury shares at 8 per share and retired the remaining treasury shares.
What is the total shareholders equity on December 31, 2014?
a. 1,720,000
b. 1,704,000

c. 1,688,000
d. 1,680,000
21.
Hopia Company provided the following information in January 1, 2013:
Share Capital, 250,000 shares authorized; 100,000 shares issued and outstanding
3,000,000
Share Premium
4,000,000
Retained Earnings
8,000,000
The entity declared a 10% dividend on April 1, 2013 when the market value of the
share was 70. The stock dividend was issued on July 1, 2013 when the market
value of the share was 100. The share has a par value of 30. The entity sustained a
net loss of 1,200,000 for 2013. What amount should be reported as retained
earnings on December 31, 2013?
a. 6,100,000
b. 6,500,000
c. 6,800,000
d. 5,050,000
22.
On November 1, 2013, Paasa Company declared a property dividend of
equipment payable on March 1, 2014. The carrying amount of the equipment is
3,000,000 and the fair value is 2,500,000 on November 1, 2013.
However, the fair value less cost to distribute the equipment is 2,200,000 on
December 31, 2013 and 2,000,000 on March 1, 2014.
What is the dividend payable on December 31,2013?
a. 2,500,000
b. 2,200,000
c. 3,000,000
d. All of the choices is incorrect
23.
On January 1, 2013, Hugotboy Company had ordinary and preference shares
outstanding. The incorporators or original shareholders own ten ordinary shares
but no preference shares. On December 31, 2013, the entity declared dividends on
the ordinary shares. The entity decided to give the ordinary shareholders a choice
between receiving a cash dividend of 500,000 per share or a property dividend in
the form of a noncash asset. The noncash asset is a standard model from the
entitys car fleet. Each car has a fair value of 600,000. The entity estimated that
80% of the ordinary shareholders will take the option of cash dividend and 20% will
elect the noncash asset. What is the dividend payable that should be recognized
on December 31, 2013?
a. 5,500,000
b. 5,200,000
c. 4,000,000
d. 6,000,000
24.

Pafall Company provided the following data on December 31, 2013:

12% Preferance share capital, 20,000 shares, 100 par value

2,000,000

14% Preferance share capital, 10,000 shares, 300 par value

3,000,000
Ordinary Share Capital, 50,000 shares, 100 par value
Retained Earnings
Share Premium

5,000,000
2,240,000
1,500,000

12% preference share is cumulative and participating. The 14% preference share is
noncumulative and participating. Dividends are in arrears for 3 years. What is the
book value per ordinary share?
a. 132
b. 126
c. 100
d. 112
25.

Heartbreaker Company provided the following on December 31, 2013:

Ordinary Share capital, 20 par value, 200,000 shares

Preference share Capital, 6% 100 par value, cumulative
and fully participating, 10,000 shares outstanding
1,000,000

4,000,000

Preference dividends have been in arrears for 2011 and 2012. On December 31,
2013, a cash dividend of 900,000 was declared. What is the dividend payable on
the preference and ordinary shares, respectively?
a. 324,000 and 576,000
b. 220,000 and 672,000
c. 276,000 and 624,000
d. 180,000 and 720,000
26.
Choosy Company was organized on January 1, 2013 with the following capital
structure:
10% cumulative preference share capital, par value 10, liquidation value 12,
authorized, issued and outstanding 100,000 shares, 1,000,000.
Ordinary Share capital, par value 100, authorized 40,000 shares issued and
outstanding 30,000 shares, 3,000,000.
The net income for 2013 was 6,000,000 and no dividends were declared in 2013.
What is the book value per ordinary share?
a. 290
b. 293
c. 300
d. 333
27.
During 2013, Kiligmuch Company had the following two classes of share
capital issued and outstanding for the entire year:
Ordinary Share Capital, 200,000 shares, 10 par
2,000,000
Preference share capital, 2,000 shares, 100 par,
12% convertible share for share into ordinary share
200,000

The net income for 2013 was 1,800,000 and the income tax rate was 30%.What is
the basic earnings per share?
a. 8.88
b. 6.18
c. 9.0
d. All of the answers are incorrect
28-30
Hunter X Hunter Company provided the following statement of financial position on
December 31, 2013 and 2012 and information relating to 2013 activities:
2013

2012

ASSETS
Cash
Trading securities
Accounts receivable (net)
Inventory
Long-term investment
Property, plant and equipment
Accumulated depreciation
Patent
Total assets

460,000
600,000
1,020,000
1,360,000
400,000
3,400,000
(900,000)
180,000
6,520,000

LIABILITIES and SHAREHOLDERS EQUITY

Accounts payable and accrued liabilities
Short-term debt
Share Capital, 20 par
Share Premium
Retained Earnings
Total Liabilities and Shareholders Equity

1,650,000
1,440,000
650,000
1,600,000
1,400,000
740,000
500,000
1,880,000
980,000
6,520,000
4,320,000

28.
a.
b.
c.
d.

200,000
1,020,000
1,200,000
600,000
2,000,000
(900,000)
200,000
4,320,000

Net income for 2013 was 1,380,000

Cash dividends of 480,000 were declared and paid in 2013.
Equipment Costing 800,000 and having a carrying amount of 300,000 was sold
in 2013 for 300,000.
A long term investment was sold in 2013 for 270,000. There were no other
transactions affecting long term investments in 2013.
10,000 shares were issued in 2013 for 44 a share.
Trading securities were purchased were purchased for cash on December 31,
2013.
What is the net cash provided by operating activities?
1,380,000
1,830,000
1,280,000
1,900,000

29.
What is the net cash used in investing activities?
a. 2,230,000
b. 1,790,000

c. 1,730,000
d. 1,630,000
30.
a.
b.
c.
d.

What is the net cash provided by financing activities?

610,000
880,000
910,000
1,090,000

BONUS QUESTION
31.

On December 31,2013, Basted Company reported the following balances:

Share capital authorized, 100 par

5,000,000
Share capital unissued
2,000,000
Subscribed share capital
1,000,000
Treasury shares, 5,000 shares at cost
600,000
Share Premium
500,000
Retained earnings
1,500,000
On December 31, 2013, the board of directors declared and issued a dividend from
the treasury shares of one share for each ten shares held. The market value of the
share on same date is 150. What is the decrease in retained earnings as a result of
the stock dividends?
a.
b.
c.
d.

480,000
525,000
350,000
420,000
P - Pray
F - Focus
R Be Responsible
S Self Discipline
Good Luck Future CPA!! Apply PFRS in your studies.
You must be prepared to face the worst possible scenarios because
harsh reality strikes without warning. You must be prepared for the
day your paths diverge. Hunter X Hunter Episode 2
jmd,cpa2016