afar

Question 1

Which of the following will decrease the capital balance of a partner?

a. Share in partnership income
b. Advances made by a partner to the partnership.
c. Share in the upward revaluation of a partnership’s assets.
d. None of the above

Answer 1

d. None of the above

Question 2

I. Temporary drawings of a partner do not affect their ending capital
balance.
II. Temporary drawings of a partner do not affect their weighted average capital balance.

a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false

Answer 2

b. Only statement 2 is true

Question 3

Which of the following transactions will not affect the capital balance of a
partner?

a. Share of a partner in the partnership’s net loss
b. Receipt of bonus by a partner from another partner
c. Loans made by the partnership to a partner
d. Additional investment by a partner into the partnership

Answer 3

c. Loans made by the partnership to a partner

Question 4

Statement 1: All the original partners will share in the gain or loss on asset
revaluation in case one of the partners withdrew from the partnership.
Statement 2: All the partners, including the new partner, will share in the gain
or loss on asset revaluation in case a new partner is admitted to the partnership.

a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false

Answer 4

a. Only statement 1 is true

Question 5

What is the main reason for the difference between the reported net income and the true net income of the branch?

a. Understatement of branch’s cost of sales for goods coming from outsiders
b. Understatement of branch’s cost of sales for goods coming from home office
c. Overstatement of branch’s cost of sales for goods coming from outsiders
d. Overstatement of branch’s cost of sales for goods coming from home office

Answer 5

d. Overstatement of branch’s cost of sales for goods coming from home office

Question 6

The cost of normal spoilage attributable to exacting specifications will be

a. Charged to overhead control
b. Charged to period cost
c. Included in the cost of finished goods
d. Will be deducted from the work-in-process

Answer 6

c. Included in the cost of finished goods

Question 7

If a partner with a debit capital balance during liquidation is personally
solvent, the

a. Partner’s debit balance will be absorbed by the other partners
b. Other partners will give the partner enough cash to absorb the debit balance
c. Partnership will loan the partner enough cash to absorb the debit balance
d. Partner must invest additional assets in the partnership

Answer 7

d. Partner must invest additional assets in the partnership

Question 8

I. A home office records shipments to its branch at billed prices and adjusts the allowance for overvaluation of inventory (AOI) account at year-end.
When this approach is used, the AOI account in the separate books of the home office will always be zero at year-end.

Statement 2: If an AOI account is used, the “Shipments to Branch” account on the home office books is equal to the actual cost of shipments made to the branch, whereas the “Shipments from the Home Office” on the branch’s books includes any
initial unrealized profit.

a. Statement 1 - True; Statement 2 – True
b. Statement 1 - True; Statement 2 – False
c. Statement 1 - False: Statement 2 - True
d. Statement 1 - False: Statement 2 – False

Answer 8

c. Statement 1 - False: Statement 2 - True

Question 9

When a secured creditor is not fully settled after foreclosure of the underlying
collateral, the remaining portion

a. Of the liability cannot be collected by the creditor
b. Is classified as an unsecured liability with priority
c. Remains as a secured liability
d. Is classified as an unsecured liability without priority

Answer 9

d. Is classified as an unsecured liability without priority

Question 10

When the home office ships merchandise to the branch at billed prices, the credit to Shipments to Branch account is at

a. Billed price
b. Billed price plus freight
c. Cost plus freight
d. Cost

Answer 10

d. Cost

Question 11

On December 31, the Investment in Branch account on the home office books shows a
balance of P168,000.

The following are some of the transactions between the home
office and the branch:
a. Merchandise billed at P12,300 was shipped by the home office to the branch
on December 28. The merchandise is in transit and has not been recognized
on the books of the branch.

b. The branch collected a home office accounts receivable of P50,000 but failed to notify the home office of this collection.

c. The home office was charged P12,800 when the branch returned merchandise to
the home office on December 31. The merchandise is in transit.

d. The home office recorded incorrectly the branch net income for November at
P22,500. The branch reported net income of P25,200.

The adjusted balance of the Investment in Branch account is:

a. P157,900
b. P195,600
c. P205,200
d. P207,900

The unadjusted balance of the Home Office account is:

a. P180,300
b. P168,000
c. P220,200
d. P195,600

Answer 11

d. P207,900
d. P195,600

Question 12

If at the end of an accounting period the balance of the Investment in Branch
account in the accounting records of the home office is P20,000 and the balance of the Home Office account in the accounting records of the branch after closing entries is P25,500, the most likely explanation for the discrepancy of P5,500 is a

a. Remittance of cash from the branch not recorded by the home office
b. Net income of branch not recorded by the home office
c. Net loss of branch not recorded by the home office
d. Remittance of cash from the home office not yet recorded by the branch

Answer 12

b. Net income of branch not recorded by the home office

Question 13

Statement 1: Fully secured creditors will always receive a settlement at least
equal to the amount due to them.

Statement 2: Assets pledged to partially secured creditors may have an excess
free portion.

Statement 3: Unsecured creditors with priority are not secured by any asset but are mandated by law to be paid first before any other unsecured creditors.

a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect

Answer 13

b. Only two (2) statements are correct

Question 14

On April 1, A, B and C formed a partnership with capital contributions of
P2,000,000, P5,000,000 and P3,000,000, respectively. The partners agreed that the profit or loss shall be distributed accordingly:

 20% interest based on original capital contribution.

 P120,000 quarterly salary for A and P30,000 monthly salary for C.

 The remainder shall be distributed based on profit and loss ratio of 2:5:3 to
A, B and C, respectively.

A, B and C made withdrawals of P500,000, P1,000,000, and P200,000, respectively,
during the year. B’s capital balance on December 31 is P6,500,000.

How much is the partnership net income for the year?

a. P3,000,000
b. P3,500,000
c. P5,130,000
d. P5,630,000

How much is the capital balance of A on December 31?

a. P1,360,000
b. P2,860,000
c. P2,960,000
d. P3,360,000

How much is the capital balance of C on December 31?
a. P4,570,000
b. P4,770,000
c. P4,920,000
d. P4,970,000

Answer 14

d. P5,630,000
b. P2,860,000
a. P4,570,000

Question 15

When a partner retires from the partnership and the final settlement of
his interest exceeds his capital balance. Under the bonus method, the excess

a. Is recorded as goodwill
b. Reduces the capital balances of the remaining partners
c. Increases the capital balance of the remaining partners
d. Has no effect on the capital balances of the remaining partners

Answer 15

b. Reduces the capital balances of the remaining partners

Question 16

If a new partner acquires a partnership interest directly from the partners rather than from the partnership itself,

a. The partnership asset should be revalued
b. The partnership has undergone a reorganization
c. No entry is required because it is a transaction between them
d. The existing partners’ capital accounts should be reduced and the new
partner’s account increased

Answer 16

d. The existing partners’ capital accounts should be reduced and the new
partner’s account increased

Question 17

Initially, a partner’s interest in a partnership is generally equal to

a. The sum of the fair values of the assets contributed to the firm, increased by the liabilities of the partners assumed by the partnership
b. Total fair market value of assets contributed less liabilities, at book
value, to be assumed by the partnership
c. Total fair market value of assets contributed
d. Net assets contributed at fair market value

Answer 17

d. Net assets contributed at fair market value

Question 18

Salaries to partners typically should be

a. A device for sharing net income
b. An operating expense of the partnership
c. Drawings by the partners
d. Reduction for the partners’ capital account balances

Answer 18

a. A device for sharing net income

Question 19

Which of the following is most likely to use process costing system?

a. Cement manufacturer
b. Building contractor
c. Automobile repair shop
d. Manufacturer of personalized shirts

Answer 19

a. Cement manufacturer

Question 20

In process costing system using the FIFO method, the percentage of completion
with respect to the conversion costs is included in the calculation of the
WIP, beg WIP, end
a. Yes No
b. Yes Yes
c. No No
d. No Yes

Answer 20

b. Yes Yes

Question 21

The total unsecured liabilities without priority can be computed as

a. Unsecured creditors without priority plus deficiency of assets pledged to
partially secured creditors
b. Unsecured creditors without priority less estimated realizable value of
assets pledged to partially secured creditors
c. Sum of administrative expenses, unpaid employee salaries and benefits, and
taxes and assessments.
d. Total liabilities less priority claims

Answer 21

a. Unsecured creditors without priority plus deficiency of assets pledged to
partially secured creditors

Question 22

Which of the following interest component calculation bases is least susceptible to manipulation when allocating profits and losses to partners?

a. Beginning capital account balance
b. Ending capital account balance
c. Average of beginning and ending capital account balances
d. Weighted average capital account balance

Answer 22

d. Weighted average capital account balance

Question 23

If the partnership assumes a liability of a partner, the journal entry upon formation of a partnership includes a

a. Debit to Due to account of that partner
b. Debit Capital account of that partner
c. Credit to Loan to partner account
d. Credit to Capital account of that partner

Answer 23

b. Debit Capital account of that partner

Question 24

Statement 1: All partners will receive a distribution of cash upon liquidation
of a partnership.
Statement 2: The gain or loss on realization of non-cash assets is distributed
to all partners.
Statement 3: In installment liquidation, all outside creditors must be paid
first before distribution to partners are made.

a. Only one (1) statement is correct
b. Only two (2) statements are correct
c. All statements are correct
d. All statements are incorrect

Answer 24

a. Only one (1) statement is correct

Question 25

A, B, and C were partners with capital balances on January 1 of P560,000,
P672,000, and P496,000 respectively. Their profit and loss ratio is 3:5:2. On August 1, A retires from the partnership. On the date of retirement, the partnership net loss from January 1 is P384,000; and the partners agreed to
revalue inventories to P296,000 from P272,000. The payment to A for her interest is to be P454,800. Upon retirement of A, which of the following will result?

a. Bonus to B of P2,000
b. Goodwill to C of P2,800
c. Bonus to C of P800
d. B’s capital is P66,800 more than C’s

Answer 25

d. B’s capital is P66,800 more than C’s

Question 26

In a job order costing system,

a. Labor is typically assigned to jobs on the basis of some cost driver
b. Overhead is typically assigned to jobs on the basis of some cost driver
c. Standard or normal costs cannot be used
d. Costs are accumulated by departments and averaged among all jobs

Answer 26

a. Labor is typically assigned to jobs on the basis of some cost driver

Question 27

In a normal costing system, a debit to Work in Process would not be made for

a. Actual overhead
b. Applied overhead
c. Direct materials used
d. Direct labor

Answer 27

a. Actual overhead