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Basic Accounting > Test Bank - Basic Acctng > Flashcards

Test Bank - Basic Acctng Flashcards

1
Q

Which of the following items has no effect on owner’s equity?

a. Expense c. Purchase of land
b. Owner’s Withdrawal d. Revenue

A

Purchase of land

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2
Q

The asset created by a business when it makes a sale on account is
termed

a. Accounts payable c. Prepaid Expense
b. Accounts receivable d. Unearned Revenue

A

Accounts Receivable

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3
Q

What is the law regulating the practice of accountancy in the Philippines?

a. R.A. No. 9289 c. R.A. No. 9928
b. R.A. No. 9198 d. R.A. No. 9298

A

Republic Act. No. 9298

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4
Q

All of the following describe accounting, except

a. A service activity
b. An information system
c. An exact science rather than an art
d. A universal language of business

A

An exact science rather than an art

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5
Q

5.) The overall objective of accounting is
a. To provide the information that the managers of an entity need to control the
operations
b. To provide information that the creditors can use in deciding whether to make
additional loans
c. To measure the periodic income of the entity
d. To provide quantitative financial information about an entity that is useful in making economic decision

A

To provide quantitative financial information about an entity that is useful in making economic decision

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6
Q
  1. ) These users require information on risk and return on investment
    a. Creditors
    b. Investors
    c. Lenders
    d. Customers
A

Investors

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7
Q

7.) Equipment with an estimated market value of P60 000is offered for sale at P90 000.
The equipment is acquired for P30 000 in cash and a note payable of P50 000 due in 30
days. The amount used in buyer’s accounting records to record acquisition is
__________
a. P 80 000 c. P 90 000
b. P 60 000 d. P30 000

A

a. P 80 000
Cash 30,000
Note Payable 50,000

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8
Q
  1. ) Using accrual accounting, revenue is recorded and reported only______________
    a. If cash is received after the services are rendered
    b. when cash is received at the time services are rendered
    c. when the services are rendered without regard to when cash is received
    d. when cash is received without regard to when the services are rendered
A

c. when the services are rendered without regard to when cash is received

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9
Q

9.) On January 1, 2016, Potter Company bought a building for P2,750,000 to serve as
the Company’s office. It was estimated that the said building will be useful for 20 years.
After the end of its useful life, the building can still be sold for P250,000. What is the
amount of depreciation expense that should be recognized by Potter Company on
December 31, 2016?
a. P 100,000
b. P 125,000
c. P 150, 000
d. P 175, 000

A

b. P 125,000

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10
Q

10.) Which of the following entries records the receipt of a utility bill from the water
company?
a. debit Accounts Payable, credit Cash
b. debit Accounts Payable, credit Utilities Payable
c. debit Utilities Expense, credit Accounts Payable
d. debit Utilities Payable, credit Accounts Receivable

A

c. debit Utilities Expense, credit Accounts Payable

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11
Q
  1. ) The process of posting is mostly associated with_________
    a. Financial Statements c. Source documents
    b. General Ledger d. Worksheet
A

b. General Ledger

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12
Q

12.) An item retailing for P 100,000, subject to a trade discount of 25% is paid for within
the discount period on terms 2/10, n/30. What is the amount of payment made?
a. P 73,500 c. P 75,000
b. P 74,000 d. P 100,000

A 
a. 73,5000
Solution: 
100,000 x 25% = 25,000
100,000 - 25,000 = 75,000
75,000 x 2% = 1,500
75,000 - 1,5000 = 73,500
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13
Q

13.) As of December 31, Ravenclaw Merchandising Company’s records show the
following amounts:
Purchases P 1,250,000
Purchase discount 25, 000
Purchase returns 140,000
If Ravenclaw Company’s beginning inventory amounted to P 375,000, the Company’s
total Cost of Goods Available for sale is________________
a. P 710,000
b. P 1,085,000
c. P 1,460,000
d. P 1,250,000

A

c. P 1,460,000

solution:
beg. inventory 375,000
Purchases (1,250,000 - 25,000 - 140,000) 1,085,000
Cost of goods available for sale 1,460,000

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14
Q
  1. ) A post-closing trial balance is prepared before
    a. Preparing financial statements
    b. Reversing the accounts
    c. Adjusting and closing the books
    d. Preparing a worksheet
A

b. Reversing the accounts

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15
Q

15.) The unearned rent account has a balance of P 36,000. If P 4,000 of the P 36,000 is
unearned at the end of the accounting period, the amount of the adjusting entry is
a. P 4,000
b. P 40,000
c. P 32,000
d. P 36,000

A

c. P 32,000

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16
Q
  1. ) Treasury stock is classified as a(n)
    a. stockholder’s equity account
    b. contra-asset
    c. asset
    d. contra-stockholder’s equity account
A

d. contra-stockholder’s equity account

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17
Q
  1. ) Liquidation of partnership usually means that
    a. Assets are sold
    b. Liabilities are paid
    c. Remaining Cash is distributed to the partners
    d. All of the above
A

d. All of the above

18
Q

18.) Erica and Mica formed a partnership on January 1, 2016 by investing P 50,000
each into EM Coffee Shop. On June 30, 2016, Mica invested an additional 50,000 into
the business If they agreed to divide profit based on initial capital investment, how will
they divide the P 120,000 profit they earned in 2016.
a. P 60,000 to Erica and P60,000 to Mica
b. P 40,000 to Erica and P80,000 to Mica
c. P 80,000 to Erica and P40,000 to Mica
d. P 100,000 to Erica and P20,000 to Mica

A

a. P 60,000 to Erica and P60,000 to Mica

19
Q

19.) Erica and Mica formed a partnership on January 1, 2016 by investing P 50,000
each into EM Coffee Shop. On June 30, 2016, Mica invested an additional 50,000 into the business If they agreed to divide profit based on ending capital investment, how will
they divide the P 120,000 profit they earned in 2016.
a. P 60,000 to Erica and P60,000 to Mica
b. P 40,000 to Erica and P80,000 to Mica
c. P 80,000 to Erica and P40,000 to Mica
d. P 100,000 to Erica and P20,000 to Mica

A

b. P 40,000 to Erica and P80,000 to Mica

20
Q

20.) If the partner withdraws from the partnership before the end of the accounting
period, updating of the partnership books is
a. Required
b. Optional
c. Not necessary
d. None of the above

A

a. Required

21
Q
  1. ) The following are kinds of partners except one, choose the exception:
    a. Capitalist partner
    b. Capitalist-secret partner
    c. Industrial-managing partner
    d. Limited-industrial partner
A

d. Limited-industrial partner

22
Q

22.) Blossom, Bubbles and Buttercup formed a partnership to which Blossom contributed a parcel of land with an acquisition cost of P 25,000. Bubbles contributed P50,000 cash and Buttercup P 75,000 cash. The land has a fair value of P 50,000 at the formation date. The total capital credit of the partnership should be

a. P 150,000 c. P 175,000
b. P 125,000 d. P 145,000

A

c. P 175,000

23
Q

23.) Gumball and Darwin agreed to form a partnership from which Gumball will contribute P 300,000. If Darwin’s contributions is 1/3 of the total agreed capitalization, how much is the partnership’s net assets after the formation using the bonus method?

a. P 500,000 c. P 450,000
b. P 350,000 d. P 900,00

A

c. P 450,000

24
Q

24.) This allowance for profit distribution is granted only if there is profit

a. Bonus c. Salary
b. Interest d. All of the above

A

a. Bonus

25
Q

Use the following information for questions 25 and 26:

At December 31, Haha and Hehe are partners with capital balances of P 40,000 and P20,000, and they share profits and losses in the ratio of 2:1, respectively. On this date, Hihi invests P 17,000 in cash for a one-fifth interest in the capital and profit of the new partnership.

  1. ) Assuming asset revaluation will be recorded, how much is the balance of Hehe’s capital after Hihi is admitted into the partnership?
    a. P 45,333
    b. P 22,667
    c. P 17,000
    d. P 8,000
A

b. P 22,667

26
Q

26.) Assuming bonus method is used and there is no increase in net assets is recognized, what would be the total capital of the partnership after the admission by investment of Hihi?

a. P 85,000
b. P 60,000
c. P 61,600
d. P 77,000

A

d.P 77,000

27
Q

27.) If the amount invested by the incoming partner is equal to the interest he acquires, then there is

a. No bonus nor asset revaluation
b. Positive asset revaluation
c. Bonus to the old partners
D. Bonus to the new partners

A

a. No bonus nor asset revaluation

28
Q 
28.) The total number of shares the corporate charter permits the corporation to issue is
called
a. outstanding stock
b. issued stock
c. authorized stock
d. ordinary shares capital
A

c. authorized stock

29
Q

29.) If shares of stock are sold for less than their par value, the difference is called

a. discount
b. earnings
c. a gain
d. a premium

A

a. discount

30
Q

Use the following data for number 30-32

As of December 31, 2016, the balances of the shareholder’s equity of Herbie Auto Inc. are shown below:
Ordinary Share Capital, P6 par
(30,000 shares authorized, 13 000 shares issued) _________
Premium-Ordinary Share Capital P 17,000
Treasury Stock-Ordinary Share Capital
(2,000 shares at P6 per share) _________
Preference Share Capital, 5%, P12 par
(16,000 shares authorized; 5,000 shares issued) _________
Premium-Preference Share Capital P 6,000
Preference Share Capital-Subscribed (2,000 shares) _________

  1. ) The amount of Ordinary Share Capital using the above data is:
    a. P 180,000
    b. P 78,000
    c. P 60,000
    d. P 360,000
A

b. P 78,000

31
Q
  1. ) The amount of Preference Share Capital using the above data is:
    a. P 60,000
    b. P192,000
    c. P 180,000
    d. P 12,000
A

a. P 60,000

32
Q
  1. ) The amount of Treasury Stock-Ordinary Share Capital using the above data is:
    a. P 360,000
    b. P 60,000
    c. P 12,000
    d. P 180,000
A

c. P 12,000

33
Q
  1. ) The balance of the income summary account of a corporation is transferred to which of the following accounts?
    a. Retained Earnings
    b. Share Capital
    c. Premium on Sale of Share Capital
    d. Cash
A

a. Retained Earnings

34
Q
  1. ) The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a:
    a. liquidating dividend
    b. stock split
    c. stock option
    d. preferred dividend
A

b. stock split

35
Q

35.) Characteristics of a corporation include:

a. Shareholders who are mutual agents
b. Direct management by the shareholders (owners)
c. its inability to own property
d. shareholders who have limited ability

A

d. shareholders who have limited ability

36
Q

36.) The entry to record the purchase of 5,000 shares of a corporation’s own P20 par common stock at P25, paid in cash, includes a debit to:

a. Common Stock c. Retained Earnings
b. Paid-In Capital in Excess of Par d. Treasury Stock

A

d. Treasury Stock

37
Q

37.) Unlimited liability of the partners in a limited partnership pertains to

a. All the partners
b, Limited partners only
c. General partners only
d. The entities that owes the partnership

A

c. General partners only

38
Q

38.) When the investment of a new partner exceeds the new partner’s initial capital balance and asset revaluation is not recorded, who will receive the bonus?

a. The new partner
b. The old and new partners in their new profit and loss ratio
c. The old partners in their new profit and loss ratio
d. The old partners in their old profit and loss ratio

A

d. The old partners in their old profit and loss ratio

39
Q

39.) In the liquidation of the partnership, the first cash realized is used to

a. Pay the creditors
b. Pay the general partners
c. Pay the industrial partners
d. Pay all the partners

A

a. Pay the creditors

40
Q

40.) A corporation purchased 1,000 shares of its P10 par common stock at P20 and subsequently sold 500 of the shares at P30. What is the amount of revenue realized from the sale?

a. P0 c. P 5,000
b. P2,500 d. P15,000

A

a. P0

Basic Accounting (3 decks)

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