LA SALLE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY

1st Semester of Academic Year 2018-2019

Qualifying Examination
FINANCIAL ACCOUNTING AND REPORTING
December 3, 2018 | 1:30 PM – 4:30 PM

Instructions:
Select the correct answer for each of the following questions. Mark only one answer for each item by shading the box
corresponding to the letter of your choice on the provided official answer sheet. Strictly no erasures allowed. Any erasures will
render your answer invalid. You have 3 hours to complete the exam.

PART ONE
FUNDAMENTALS OF ACCOUNTING

1. Which of the following statements is incorrect? 8. Which of the following is not a correct rule of debits
a. Primary users of accounting information are and credits?
accountants. a. assets, expenses and dividends are increased by
b. Accounting is thought to be the "language of debits.
business" because business information is b. assets are decreased by credits and have a normal
communicated to stakeholders. debit balance.
c. The role of accounting is to provide many c. liabilities, revenues and stockholders’ equity are
different users with financial information to make increased by credits.
economic decisions. d. the normal balance for revenues and expenses is a
d. Accounting reports are designed with the credit.
information needs of the stakeholders in mind.
9. When the supplier’s account is paid, there will be a –
2. Accounting standards in the Philippines are adopted a. Decrease in liability and increase in asset
by the b. Decrease in liability and decrease in asset
a. Professional Regulatory Board (PRC) c. Total assets remain the same
b. Board of Accountancy (BOA) d. Total liabilities remain the same
c. Philippine Financial Reporting Standards Council
(PFRSC) 10. An Accounts Payable has a debit and credit entries of
d. Philippine Institute of Certified Public ₱120,000 and ₱85,000 respectively with the normal
Accountants (PICPA) ending balance of ₱235,000. Which of the following
was posted as beginning balance?
3. The expanded accounting equation is – a. ₱265,000 c. ₱270,000
a. A = L + OE + R – D + E b. ₱205,000 d. ₱200,000
b. A = L + OE – D + R – E
c. A = L + OE + D – R + E 11. A trial balance is prepared to
d. A = L + OE – E – R – D a. prove that there were no errors made in recording
transactions into the journal
4. At the beginning of the year, Master Enterprises had b. prove that no errors were made in posting to the
total assets of ₱700,000 and total liabilities of ledger
₱500,000. During the year, total liabilities increased by c. prove that each account balance is correct
40%, and owner’s equity decreased by 30%, what is d. summarize the account balances to help prepare
the amount of total assets at the end of the year? financial statements
a. ₱840,000 c. ₱770,000
b. ₱910,000 d. ₱630,000 12. If the two totals of a trial balance are not equal, it
could be due to
5. Owner’s withdrawals are reported on the a. failure to record a transaction
a. Balance sheet b. recording the same erroneous amount for both
b. Income statement the debit and the credit parts of a transaction
c. Statement of changes in equity c. an error in determining the account balances, such
d. It is not reported as a balance being incorrectly computed
d. recording the same transaction more than once
6. What is the normal balance of prepaid expenses and
accrued expenses, respectively? 13. The trial balance is out of balance and the accountant
a. Debit, debit c. Credit, credit suspects that a transposition or slide error has
b. Debit, credit d. Credit, debit occurred. What will the accountant do to find the
error?
7. Which of the following account is classified as a a. Determine the amount of the error and look for
liability? that amount on the trial balance.
a. Unearned rent income c. Rent income b. Determine the amount of the error and divide by
b. Accrued rent income d. Rent expense two, then look for that amount on the trial
balance.
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 c. Determine the amount of the error and refer to d. Stockholders’ equity at the end of the year was
the journal entries for that amount understated.
d. Determine the amount of the error and divide by
nine. If the result is evenly divided, then this type 21. When is the adjusted trial balance prepared?
of error is likely. a. Before adjusting journal entries are posted.
b. After adjusting journal entries are posted.
14. Which of the following is not a short-cut in finding c. After the adjusting journal entries are journalized.
errors on the trial balance? d. Before the adjusting journal entries are
a. Determine the difference between debits and journalized.
credits and look for the amount.
b. Determine the amount and change any account to 22. The column of the income statement show the debits
make the trial balance correct. are equal to ₱56,899 and credits are ₱60,333. What do
c. Determine the difference between debits and this information mean to the accountant?
credits, divide the amount by 2, look for the a. Net income of ₱3,434
amount. b. Net loss of ₱3,434
d. Determine the difference between debits and c. the accounts are out of balance
credits, divide the amount by 9, if it divides evenly, d. None are correct
look for a transposition or slide error.
Use the following to answer the next three questions:
15. Adjusting entries are The following is the adjusted trial balance for Steely
a. the same as correcting entries Company.
b. needed to bring accounts up to date and match Steely Company
revenue and expense Adjusted Trial Balance
c. optional under generally accepted accounting For the Year ended December 31, 2018
principles
d. rarely needed in large companies Cash 6,130
Accounts Receivable 2,300
16. If the effect of the debit portion of an adjusting entry is Prepaid Expenses 750
to increase the balance of an expense account, which Equipment 13,400
of the following describes the effect of the credit Accumulated Depreciation 1,200
portion of the entry? Accounts Payable 1,700
a. decreases the balance of an stockholders’ equity Notes Payable 5,000
account S., Capital 12,000
b. increases the balance of an liability account S., Drawing 870
c. increases the balance of an asset account Service Revenue 6,600
d. decreases the balance of an expense account Wages Expense 1,450
Rent Expense 900
17. Which one of the accounts below would likely be
Utilities Expense 475
included in an accrual adjusting entry?
Depreciation Expense 150
a. Insurance Expense c. Interest Expense
Miscellaneous Expense 75
b. Prepaid Rent d. Unearned Rent
Totals 26,500 26,500
18. The balance in the prepaid rent account before
adjustment at the end of the year is ₱15,000, which 23. Determine the net income (loss) for the period.
represents three months' rent paid on December 1. a. Net Income 26,500 c. Net Loss 870
The adjusting entry required on December 31 is b. Net Loss 3,550 d. Net Income 3,550
a. debit Rent Expense, ₱5,000; credit Prepaid Rent,
₱5,000 24. Determine the owner’s equity ending balance for the
b. debit Prepaid Rent, ₱10,000; credit Rent Expense, period.
₱5,000 a. ₱14,680 c. ₱15,550
c. debit Rent Expense, ₱10,000; credit Prepaid Rent, b. ₱11,130 d. ₱2,680
₱5,000
d. debit Prepaid Rent, ₱5,000; credit Rent Expense, 25. Determine total assets.
₱5,000 a. ₱26,500 c. ₱21,380
b. ₱15,380 d. ₱22,580
19. The balance in the office supplies account on June 1
was ₱5,200, supplies purchased during June were 26. Which is the following that is not true about closing
₱2,500, and the supplies on hand at June 30 were entries?
₱2,000. The amount to be used for the appropriate a. There are four closing entries that update the
adjusting entry is owner’s equity account.
a. ₱4,500 c. ₱9,700 b. After the second closing entry, the income
b. ₱2,500 d. ₱5,700 summary account is equal to the net income or
(loss) for the period.
20. At the end of the fiscal year, the usual adjusting entry c. All real accounts are closed at the end of the
for accrued salaries owed to employees was omitted. period.
Which of the following statements is true? d. By closing nominal accounts at the end of the
a. Salary Expense for the year was understated. period to zero, it is possible to isolate next
b. The total of the liabilities at the end of the year period’s information correctly.
was overstated.
c. Net income for the year was understated.

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27. The post-closing trial balance differs from the adjusted
trial balance in that it
a. does not take into account closing entries
b. does not take into account adjusting entries
c. does not include balance sheet accounts
d. does not include income statement accounts
28. Which one of the following entries is a reversing
entry?
a. Dr. Rent expense, ₱500; Cr. Rent payable, ₱500.
b. Dr. Rent payable, ₱500; Cr. Rent expense, ₱500.
c. Dr. Prepaid rent, ₱500; Cr. Rent expense, ₱500.
d. Dr. Rent income, ₱500; Cr. Unearned rent, ₱500.

PART TWO
MERCHANDISING AND MANUFACTURING FIRMS

29. Which one of the following accounts is unique under supplier. On December 11, what account should be
merchandising and manufacturing firms compared to credited?
service concern firms? a. Purchase discount for ₱30,000
a. Cash on hand c. Inventories b. Inventory for ₱30,000
b. Transportation expense d. Delivery Truck c. Purchase discount for ₱27,000
d. Inventory for ₱27,000
30. An old equipment owned by the business was sold for
cash. This is recorded in the – 38. The following information is available from Dell
a. Cash receipts journal c. Sales journal Company’s accounting records for the current year:
b. Purchases journal d. General journal
Purchases ₱5,300,000
31. The controlling account in the general ledger that Purchase discounts 100,000
summarizes the individual accounts with supplies in a Beginning inventory 1,600,000
subsidiary ledger is called Ending inventory 2,150,000
a. Accounts payable Freight out 400,000
b. Accounts receivable
c. Purchases Dell’s cost of goods sold for the current year is
d. Sales returns and allowances a. ₱4,650,000 c. ₱4,750,000
b. ₱5,050,000 d. ₱5,850,000
32. An item retailing for ₱10,000 subject to a trade
discount of 25%, is paid for within the discount period 39. Goods in transit which are shipped f.o.b. destination
on terms of 2/10, n/30. What is the amount of should be
payment? a. Included in the inventory of the seller.
a. ₱7,350 c. ₱7,400 b. Included in the inventory of the buyer.
b. ₱7,500 d. ₱10,000 c. Included in the inventory of the shipping
company.
33. Goods totaling ₱50,000 were purchased January 25 d. Cannot be determined.
with terms of 2/10, n/30. Returns of ₱10,000 were
made on February 1. What discounts, if any, can be 40. The accountant for the Orion Sales Company is
availed of if the invoice was paid on February 5? preparing the income statement for 2018 and the
a. None c. ₱200 balance sheet at December 31, 2018. Orion uses the
b. ₱800 d. ₱1,000 periodic inventory system. The January 1, 2018
merchandise inventory balance will appear
34. What is the normal balance of sales and freight-out, a. only as an asset on the balance sheet.
respectively? b. only in the cost of goods sold section of the income
a. Debit, Credit c. Debit, Debit statement.
b. Credit, Debit d. Credit, Credit c. as a deduction in the cost of goods sold section of
the income statement and as a current asset on
35. What is the normal balance of purchases and freight- the balance sheet.
in, respectively? d. as an addition in the cost of goods sold section of
a. Debit, Credit c. Debit, Debit the income statement and as a current asset on
b. Credit, Debit d. Credit, Credit the balance sheet.

36. On June 1, 2017 Compassion Company sold 41. Which of the following accounts is closed by debiting
merchandise with a list price of ₱1,000,000 to a the account?
customer. The entity allowed trade discounts of 20% a. Sales returns and allowances
and 10%. Credit terms were 5/10, n/30 and the sale b. Purchases discounts
was made FOB shipping point. The entity prepaid c. Transportation in
₱50,000 of delivery cost for the customer as an d. Purchases
accommodation. On June 11, 2017, what amount is
received from the customer as full remittance? 42. Which of the following accounts would not appear on
a. ₱684,000 c. ₱720,000 a worksheet for a merchandising company that uses
b. ₱734,000 d. ₱770,000 the perpetual inventory system?
a. Sales returns and allowances
37. Cognac Company used the perpetual inventory b. Cost of Goods Sold
method. On December 1, the entity purchased c. Transportation Out
₱1,500,000 of inventory, terms 2/10, n/30. On d. Transportation In
December 5, the entity returned goods that cost
₱150,000. On December 11, the entity paid the 43. Jith Manufacturing Company has the following account
balances at year end:

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 Office supplies ₱4,000 Rent expense – factory 25,000
Raw materials 27,000 Depreciation – factory 40,000
Work-in-process 59,000 Depreciation – office 48,000
Finished goods 92,000
Prepaid insurance 6,000 44. How much is direct materials?
a. ₱125,000 c. ₱100,000
What amount should Jith report as inventories in its b. ₱130,000 d. ₱ 95,000
balance sheet?
a. ₱92,000 c. ₱178,000 45. How much is manufacturing overhead?
b. ₱96,000 d. ₱182,000 a. ₱225,000 c. ₱576,000
b. ₱273,000 d. ₱581,000
Use the following to answer the next six questions:
The following account balances were taken from 46. How much is prime cost?
Panramona Bakeshop for the quarter ending a. ₱478,000 c. ₱490,000
December 31, 2018: b. ₱438,000 d. ₱495,000
Inventories
October 1 December 31 47. How much is conversion cost?
Raw materials ₱120,000 ₱105,000 a. ₱590,000 c. ₱533,000
Work in process 250,000 275,000 b. ₱581,000 d. ₱594,000
Finished goods 170,000 290,000
48. How much is cost of goods manufactured?
Purchases – raw materials ₱110,000 a. ₱695,000 c. ₱690,000
Freight-in 5,000 b. ₱688,000 d. ₱638,000
Direct labor 308,000
Indirect labor 45,000 49. How much is cost of goods sold?
Indirect materials 65,000 a. ₱518,000 c. ₱540,000
Amortization of trademark 50,000 b. ₱525,000 d. ₱550,000

PART THREE
PARTNERSHIPS

50. Which of the following is incorrect regarding  Salary allowance of ₱15,000 to LT and ₱7,500 to
disadvantages of partnership? AM
a. Misunderstanding and disputes may arise among  Remainder in 3:2 ratio
partners The partnership reported net income of ₱10,000 for
b. Limited source of capital as compared to a sole the year, before interest and salary allowances to
proprietorship partners. What are the profit share of LT and AM,
c. Possible divisiveness in reaching a decision respectively?
d. Limited life of existence a. ₱6,620, and ₱3,380 c. ₱6,500 and ₱3,500
b. ₱6,630 and ₱3,380 d. ₱6,000 and ₱4,000
51. A partner who has a financial interest in the
partnership but does not take active part in running 54. Green and White are partners. They shared profits and
the partnership affair and is not known as partner. losses in the ratio of 3:2. On January 1, 2018, Blue was
a. Nominal partner c. Secret partner admitted into the partnership with a 30% share in the
b. Dormant partner d. Silent partner profits and losses and old partners will continue to
participate in profits and losses in their original ratio.
52. On January 2, 2018, N. Capitania, D. Quinco, and C. For the year 2018, the partnership realized a profit of
Yting formed a partnership business with the ₱450,000.
following contributions:
 N. Capitania (General Partner) contributed cash of It was disclosed, however that the following errors
₱100,000 and shares profit of 45%. were committed in 2018:
 D. Quinco (Limited Partner) contributed brand  Inventory at the end was understated by ₱15,000
new motorcycle costing ₱120,000 in which her  Accrued expenses in the amount of ₱5,000 was
liability of ₱15,000 from Cebu Motorama will be not recorded
assumed by the partnership and shares profit of  Prepaid expenses in the amount of ₱4,000 was not
45%. taken up
 C. Yting (Industrial Partner) contribution will be
his personal services and shares 10% in profit. How much is the partners’ respective share in profit?
Green White Blue
The opening journal entry on January 2, 2018 will a. ₱85,200 ₱213,000 ₱127,800
include b. ₱92,800 ₱232,000 ₱139,200
a. Debit, equipment ₱105,000 c. ₱194,880 ₱129,920 ₱139,200
b. Credit, accounts payable ₱15,000 d. ₱195,720 ₱130,480 ₱139,800
c. Credit, D. Quinco capital ₱92,250
d. Credit, C. Yting capital ₱20,500 55. Clotty and Cotto are partners operating a grocery
store. Their partnership agreement requires that
53. LT and AM have capital account balance at the profits and losses be divided as follows:
beginning of the year of ₱40,000 and ₱45,000, Clotty Cotto
respectively. They share net income and losses as Salaries ₱20,000 None
follows: Commission on
 8 percent interest on beginning capital balances gross sales None 2 percent
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 Interest on average Call decided to retire from the partnership. By mutual
capital balances 8 percent 8 percent agreement, the assets are to be adjusted to their fair
Bonus 20% of net None value of ₱216,000 at June 30, 2018. It was agreed that
income before the partnership would pay Call ₱61,200 cash for Call’s
commission and partnership interest, including Call’s loan which is to
interest but after be repaid in full. No goodwill is to be recorded. After
salaries and Call’s retirement, what is the balance of Mall’s capital
bonus account?
Remainder 60% 40% a. ₱36,450 c. ₱45,450
b. ₱39,000 d. ₱46,200
Gross sales for 2018 were ₱1,250,000. Income before
deducting amounts for salary, commission, interest, 60. A liquidation differs from a dissolution in that in a
and bonus were ₱200,000. Average capital balances of liquidation
Clotty and Cotto are ₱400,000 and 420,000, a. There may be an adjustment of partners’ capital
respectively. What are the profit share of Clotty and accounts.
Cotto, respectively? b. Assets may be revalued.
a. ₱117,640 and ₱82,360 c. Gains and losses are distributed according to the
b. ₱110,640 and ₱89,360 partnership agreement.
c. ₱35,460 and ₱23,760 d. The business will not continue.
d. ₱117,460 and ₱82,540
61. Partners Mateo and Fornolles each have a ₱200,000
56. The capital balances in DEA Partnership are: D, capital capital balance and share profits and losses in a 3:2
₱60,000; E, capital ₱50,000; and A, capital ₱40,000 ratio, respectively. Cash equals ₱100,000, non-cash
and income ratios are: 5:3:2, respectively. The DEAR assets equal ₱600,000, and liabilities equal ₱300,000.
Partnership is formed by admitting R to the firm with If the non-cash assets are sold for ₱225,000, and both
cash investment of ₱60,000 for a 25% interest in partners agreed to make up for any capital deficits
capital. What is the amount of bonus to be credited to with personal cash contributions, Fornolles eventually
A capital in admitting R? will receive cash of
a. ₱10,000 c. ₱3,750 a. ₱0 c. ₱50,000
b. ₱7,500 d. ₱1,500 b. ₱25,000 d. ₱90,000

57. Clemente and Banas are partners with capitals 62. The following balance sheet is presented for the
₱200,000 and ₱100,000 sharing profits and losses 3:1, partnership of A, B, and C, who share profits and losses
respectively. They agreed to admit Puzalan as a in the respective ratio of 5:3:2.
partner. Punzalan invested ₱125,000 for a 25% Assets
interest in the firm. Parties agreed that the total firm Cash ₱ 30,000
capital after Puzalan’s admission will be ₱425,000. The Other assets
capital balance of the partners after Punzalan’s 1,080,000
admission are Total ₱1,200,000
Clemente Banas Punzalan
a. ₱214,062.50 ₱104,687.50 ₱106,250.00 Liabilities and Capital
b. ₱200,000.00 ₱100,000.00 ₱125,000.00 Liabilities ₱ 280,000
c. ₱239,062.50 ₱ 79,687.50 ₱125,000.00 A, capital 560,000
d. ₱250,000.00 ₱125,000.00 ₱100,000.00 B, capital 320,000
C, capital 40,000
58. The following information pertains to ABC Partnership Total ₱1,200,000
of All, Ball, and Call:
All, capital (20%) ₱200,000 Assume that the three partners decide to liquidate the
Ball, capital (30%) 200,000 partnership. If the other assets are sold for ₱800,000,
Call, capital (50%) 300,000 how should the available cash be distributed to each
On this date, the partners agree to admit Dall into the partner?
partnership. Assuming Dall purchased fifty percent of
the partners capital and pays ₱500,000 to the old A B C
partners, how would this amount be distributed to a. ₱280,000 ₱320,000 ₱40,000
them? b. ₱324,000 ₱236,000 ₱16,000
All Ball Call c. ₱410,000 ₱230,000 ₱0
a. ₱100,000 ₱150,000 ₱250,000 d. ₱412,000 ₱228,000 ₱0
b. ₱130,000 ₱145,000 ₱225,000
c. ₱166,667 ₱166,667 ₱166,666 63. As of December 31, 2018, the books of AEZ
d. ₱150,000 ₱150,000 ₱200,000 Partnership showed capital balances of: Amurao,
₱40,000; Estoque, ₱25,000; Zulueta, ₱5,000. The
59. On June 30, 2018, the balance sheet for the partners’ profit and loss ratio was 3:2:1, respectively.
partnership of Call, Mall, and Pall, together with their The partners decided to liquidate and they sold all
respective profit and loss ratios, were as follows: non-cash assets for ₱37,000. After settlement of all
Assets, at cost ₱180,000 liabilities amounting to ₱12,000, they still have cash of
₱28,000 left for distribution. Assuming that any capital
Call, loan ₱ 9,000 deficiency in uncollectible, the share of Amurao in the
Call, capital (20%) 42,000 distribution of cash would be:
Mall, capital (20%) 39,000 a. ₱17,000 c. ₱18,000
Pall, capital (60%) 90,000 b. ₱17,800 d. ₱19,000
Total ₱180,000

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 PART FOUR
CORPORATIONS

64. Which of the following statements is correct regarding
corporations?
a. A share can be transferred without the consent of
other shareholders.
b. A corporation can be formed by mere agreement
among shareholders.
c. Creditors can run after the personal assets of a
shareholder in case of liquidation.
d. It may be dissolved at any time by the will of any
or all of the partners.
65. Which of the following statements is incorrect
regarding disadvantages of a corporations?
a. It is not easy to organize because of complicated
legal requirements.
b. Shareholders are not liable to corporate
obligations in excess of their contribution.
c. Subject to strict government control.
d. Since management of a corporation is vested on
Board of Directors who may happen to be the
majority shareholders, abuse of powers is
possible.
66. What is the journal entry for transaction (a)?
a. Debit, cash ₱600,000
b. Debit, machinery ₱2,400,000
c. Credit, common stock ₱700,000
d. Credit, share premium ₱650,000
67. What is the journal entry for transaction (b)?
a. Debit, subscription receivable ₱144,000
b. Debit, cash ₱86,400
c. Credit, subscribed common stock, ₱90,000
d. Credit, common stock ₱57,600
68. What is the journal entry for transaction (c)?
a. Debit, cash ₱30,000
b. Credit, cash ₱30,000
c. Debit, treasury stock ₱20,000
d. Credit, treasury stock ₱20,000
69. What is Pure’s total stockholders’ equity at December
31, 2018?
a. ₱4,027,600 c. ₱3,477,600
b. ₱3,677,600 d. ₱3,973,600

Use the following to answer the next four questions: 70. The following information pertains to Buds Company’s
Pure Company is authorized to issue 200,000 shares of December 31, 2018:
₱10 par value common stock, and 60,000 shares of 6% 8% Preference Shares authorized, 5,000
cumulative and nonparticipating preferred stock, par shares at ₱100 par value ₱500,000
value ₱100 per share. Ordinary Share authorized, 20,000
shares at ₱50 par value 1,000,000
The company engaged in the following stock Unissued Preference Share Capital 475,000
transactions through December 31, 2018: Unissued Ordinary Share Capital 950,000
(a) 60,000 shares of common stock were issued for Subscribed Preference Share Capital 100,000
₱700,000 and 24,000 shares of preferred stock for Subscribed Ordinary Share Capital 200,000
machinery valued at ₱2,950,000. Subscription Receivable – preference 75,000
(b) Subscriptions for 9,000 shares of common have Subscription Receivable – ordinary 150,000
been taken, and 40% of the subscription price of Share premium – preference 250,000
₱16 per share has been collected. The stock will be Share premium – ordinary 300,000
issued upon collection of the subscription price in Retained earnings 750,000
full. Treasury shares – preference, at cost 45,000
(c) Treasury stock of 2,000 shares of common has Treasury shares – ordinary, at cost 85,000
been purchased for ₱15 and accounted for under
the cost method. What is Buds’ total shareholders’ at December 31,
(d) The post-closing retained earnings balance at 2018?
December 31, 2018 is ₱350,000. a. ₱4,880,000 c. ₱2,030,000
b. ₱1,320,000 d. ₱1,580,000

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