MARIANO MARCOS STATE UNIVERSITY

College of Business, Economics and Accountancy

FINAL EXAM
ACC 31

NAME: _________________________________________________________ SECTION: ___________ SCORE: _____________

Choose the letter of the best answer. Write your answer on the space provided before each number. If answer not among the choices,
write X. Use CAPITAL letters only. (2 points each)

_____1. Which of the following with respect to a partnership is true?

I. A partnership contract shall be written and executed in a public instrument
II. An individual could only become a partner in a partnership if he contributes money, property and
industry.
III. A partnership may be created by just mere agreement thus it could be dissolved by just mere agreement.
A. All statements are true B. II and III only C. II only D. III only

_____2. Which of the following adjusting entries would require a reversing entry?
A. Adjusting entry for the recognition of depreciation expense
B. Adjusting entry for the recognition of bad debts expenses
C. Adjusting entry for advance payments under the asset method
D. Adjusting entry for the recognition of accrued interest

_____3. What happens after posting all closing entries at the end of the accounting period?
A. Revenue and expense accounts would have zero balances
B. Real and nominal accounts would have zero balances
C. Only nominal accounts would have existing balances
D. Only asset and liability accounts would have balances

The following account balances were made available by of Gee Enterprises after closing entries on December 31, 2023:
10 Year - Notes Payable due December 31, 2024 750,000
2 Year - Notes Receivable due December 31, 2025 250,000
Accounts Payable 340,000
Accounts Receivable 412,000
Accrued Interest Income 12,500
Accrued Salaries Expense 61,000
Accumulated Depreciation-Building 150,000
Accumulated Depreciation-Equipment 135,000
Allowance for Doubtful Accounts 21,000
Building 750,000
Cash 139,000
Deferred Rent Income 53,000
Equipment 450,000
Gee, Capital 829,000
Inventory 288,000
Prepaid Rent Expense 37,500

_____4. How much is the total current assets of Gee?

A. 889,000 B. 1,139,000 D. 1,118,000 D. 868,000
_____5. How much is the total current liabilities of Gee?
A. 1,204,000 B. 454,000 D. 1,090,000 D. 401,000
_____6. How much was the total assets of Gee?
A. 2,020,500 B. 2,033,000 C. 2,086,000 D. 2,073,500
_____7. How much is the total liabilities of Gee?
A. 1,151,000 B. 1,204,000 C. 1,216,500 D. 1,143,000

_____8. Partners Ben, Ten and Pen formed a partnership by contributing 120,000; 180,000 and 200,000 respectively. If the
partners did not agree on how profits and losses would be distributed and the partnership earned a profit of 300,000,
how much will each partner receive?
A. Ben, Ten and Pen will receive 100,000 each
B. Ben will receive 70,000, Ten will receive 110,000 and Pen will receive 120,000
C. Ben will receive 72,000, Ten will receive 110,000 and Pen will receive 118,000
D. Ben will receive 72,000, Ten will receive 108,000 and Pen will receive 120,000
_____9. Which of the following assets shall be classified as non-current?
A. Patent B. Accounts Receivable C. Prepaid Rent D. Interest Expense

_____10. Which of the following financial statements must be prepared first?

 A. Statement of Financial Position C. Income Statement
B. Statement of Changes in Equity D. Statement of Cash Flows

_____11. Which of the following correctly describes a partnership?

I. It has separate juridical personality
II. Liability of all the partners is limited
III. All investments are measured at agreed values or fair market values
IV. Each partner generally has the authority to enter into contracts which binds the partnership
A. I and IV only B. II and III only C. I and III only D. II and IV only

_____12. Which of the following is true with respect to the bonus computation when distributing profits or losses of a
partnership?
A. Bonus is only given when there is a profit C. Bonus is only given when profit is sufficient
B. Bonus is given regardless if there is a profit or loss D. Bonus is only given when there is a loss

_____13. John, a sole proprietor is preparing closing entries. The closing entries will contain the following accounts, except
A. Income Summary B. Rent Expense C. Accumulated Depreciation D. John, Capital

_____14. A partnership distributes profit based on the ratio of their average capital balances. Who among the following partners
would be most benefitted if the partnership sustained a loss?
A. Additional investments in March and additional investment in November
B. Additional investment in October and additional investment in December
C. Withdrawal in February and withdrawal in April
D. Withdrawal in May and withdrawal in August

_____15. Which of the following accounts are shown both in the income statement and the statement of financial position?
A. Depreciation Expense B. Bad Debts Expense C. Accrued Salaries D.Merchandise Inventory

_____16. In general, a partners capital account is credited in the following cases, except when recording
A. Additional investments B. Original contribution C. Withdrawals D. Share in the profit

_____17. A merchandising business is assured of a profit if

A. Net sales exceeds operating expenses C. Goods available for sale exceeds operating income
B. Gross profit exceeds operating expensesD. Cost of sales exceeds operating expenses

_____18. If cost of sales exceeds the sum of net purchases and freight in, which of the following statements is true?
A. Gross profit exceeds operating expenses C. Ending inventory is lower than beginning inventory
B. Goods available for sale is lower than cost of sales D. Goods available for sale exceeds total purchases

_____19. Chan contributed a piece of equipment in the formation of a partnership. The equipment was acquired six years ago for
900,000. The equipment has a carrying value of 750,000 while its fair market value was 700,000. At how much shall
this equipment be valued upon investment in the partnership?
A. 900,000 B. 750,000 C. 700,000 D. 650,000

The following data were derived from the books of Daniel Enterprises at the end of the year showed the following:
Accrued Salaries Expense 25,000 Purchase Discount 19,200
Allowance for Bad Debts 25,000 Purchase Returns and Allowances 18,300
Bad Debts Expense 16,200 Purchases 5,456,000
Depreciation Expense 82,500 Rent Expense 115,500
Freight In 72,500 Salaries Expense 292,500
Freight Out 29,000 Sales 8,000,000
Interest Expense 27,600 Sales Discounts 22,500
Interest Income 112,000 Sales Returns and allowances 37,600
Merchandise Inventory, beginning 450,600 Unearned Rent Income 65,200
Merchandise Inventory, ending 544,900 Utilities Expense 68,900

_____20. How much was the goods available for sale of Daniel Enterprises?
A. 5,898,100 B. 5,941,600 C. 5,869,100 D. 5,491,000
_____21. How much was the cost of sales of Daniel Enterprises?
A. 5,353,200 B. 5,585,300 C. 4,946,100 D. 5,396,700
_____22. How much was the operating income of Daniel Enterprises?
A. 1,940,000 B. 1,886,000 C. 1,911,000 D. 1,954,500
_____23. How much was the net income of Daniel Enterprises?
A. 1,995,900 B. 1,995,700 C. 1,994,400 D. 1,994,500
_____24. Which of the following trial balances would only contain real accounts?
A. Adjusted Trial Balance C. Pre-closing Trial Balance
B. Unadjusted Trial Balance D. Corrected Trial Balance

_____25. Which of the following statements are incorrect?

I. Beginning inventory less goods available for sale and ending inventory is cost of goods sold.
 II. If ending inventory exceeds beginning inventory, cost of sales exceeds the sum of net purchases and
freight in.
III. All returns and allowances and discounts are deducted from purchases to compute for net purchases
A. I, II and III B. I and III C. II and III D. I and II

_____26. If John, a partner, made additional investments in the form of equipment will be recorded by
A. Debiting John, Capital at fair value of the equipment
B. Debiting John, Capital at face value of the equipment
C. Crediting John, Capital at fair value of the equipment
D. Crediting John, Capital at face value of the equipment

Kim, Jim and Tim formed a partnership by contributing the following:

Kim Jim Tim
Cash 120,000 50,000 180,000
Accounts Receivable 180,000 190,000 ---
Inventories 400,000 500,000 ---
Equipment --- 500,000 ---
Furniture and Fixture --- --- 650,000
Land 750,000 --- ---
The partners agreed to the following:
a. All accounts receivable are deemed uncollectible
b. Half of the inventories contributed by Kim are obsolete while 30% of the inventories contributed by Jim is worthless
c. The equipment is overvalued by 50,000. Attached to it is a note payable of 50,000
d. Furniture and fixtures are undervalued by 75,000
e. The land is undervalued by 150,000. Attached to it is a mortgage payable of 75,000.
f. Profits and losses are to be divided in the ratio of 2:4:6

_____27. If all liabilities attached to property contributions are to be assumed by the partnership, the total partnership capital
immediately after formation would be
A. 2,850,000 B. 2,975,000 C. 2,700,000 D. 2,825,000
_____28. If all liabilities attached to the property contributions are to be assumed by the partner contributing it, total assets upon
formation of the partnership would be
A. 2,850,000 B. 2,975,000 C. 2,700,000 D. 2,775,000
_____29. Assuming the partners agreed that all liabilities attached to property contributions are to be assumed by the
partnership, total capital upon formation is 3 million and that their capital balances upon formation shall be in
accordance with their profit and loss ratio; how much shall Tim invest or withdraw?
A. Invest 559,000 B. Invest 495,000C. Invest 595,000D. Invest 670,000

_____30. The cost of sales may be derived using the following, except
A. Net sales less gross profit C. Goods available for sale less Ending Inventory
B. Operating expense plus gross profit D. Net purchases add decrease in Inventory

_____31. Which statement is not correct?

A. the post-closing trial balance reports the ending balance of each account in the general ledger
B. one purpose of preparing the unadjusted trial balance is to ensure that debits equal credits
C. financial statements are prepared based on the unadjusted trial balance
D. the unadjusted trial balance reports control account balances but omit subsidiary ledger detail

_____32. Bee has a beginning inventory of 280,000. During the period Bee purchased inventories costing 890,000. Freight paid
on the purchase totaled 30,000. If the ending inventory is 220,000, how much is the cost of goods sold?
A. 1,360,000 B. 980,000 C. 950,000 D. 920,000

_____33. Which of the following statements are true?

I. Financial statements are prepared only after adjusting entries were made. T
II. Closing entries are prepared at the end of the accounting period to zero out the balances of all real
accounts in the ledger. F
III. All adjusting entries require a reversing entry. F
A. I, II and III B. I and II C. II and III D. All statements are incorrect

_____34. Dee has a beginning inventory of 140,000. During the period Dee purchased inventories costing 790,000. Freight paid
on the purchase totaled 10,000. The ending inventory was 60,000. Gross sales were 1,800,000 while sales returns and
discounts totaled 220,000. How much is the gross profit?
A. 680,000 B. 700,000 C. 780,000 D. 880,000
_____35. Which steps in the Accounting Process are in the correct sequence?
A. record the transaction, post to the ledger, prepare the adjusted trial balance, enter adjusting entries, prepare
financial statements
B. record the transaction, prepare the unadjusted trial balance, record adjusting journal entries, record closing
entries, prepare financial statements
C. record the transaction, post to the ledger, record adjusting entries, prepare the unadjusted trial balance, prepare
financial statements
D. record the transaction, post to the ledger, prepare the adjusted trial balance, prepare financial statements, record
closing entries
 Patty, Hatty and Katty formed a partnership on January 1, 2023. Patty contributed cash of 500,000 and equipment with a fair
market value of 400,000. Hatty contributed cash of 750,000 and inventories with a fair market value of 600,000. Katty
contributed furniture with a fair market value of 200,000 and cash.

_____36. If Katty is entitled to 20% capital interest, how much cash shall she contribute?
A. 250,000 B. 562,500 C. 362,500 D. 282,500
_____37. If Katty is entitled to a 1/6 capital interest, what is the total capital of the partnership upon formation?
A. 2,700,000 B. 1,875,000 C. 2,650,000 D. 2,940,000
_____38. If cash invested by Katty entitled her to a 37.5% interest, how much was the total cash of the partnership upon
formation?
A. 2,093,750 B. D. 2,400,000 C. 3,550,000 D. 2,350,000

_____39. All of the following statements are incorrect, except

A. If depreciation expense is overstated total assets and operating expenses are also overstated
B. If bad debts expense is understated, total assets and operating expenses are also understated
C. If sales are understated, net income is also understated
D. If cost of sales is overstated, net income will also be overstated

Kimmy, Jimmy and Timmy formed a partnership by contributing 800,000; 900,000 and 1.1 million respectively at the beginning
of the year. The partners agreed to share profits and losses in the following manner:
a. Salaries of 10,000 monthly to Kimmy; 12,500 to Jimmy and 15,000 to Timmy
b. Interest of 10% based on their beginning capital balances
c. Bonus of 10% based on Profit after Salaries and Interest to be given to Timmy
d. Balance to be divided equally
The partners did not give additional investment nor made any withdrawal during the year.

_____40. How much profit should the partnership earn so that Timmy would be entitled to the Bonus
A. Exceeding 730,000 B. Exceeding 450,000 C. Exceeding 680,000 D. Exceeding 590,000
_____41. If the partnership earned a profit of 1 million, the ending capital balance of Jimmy after profit distribution is
A. 1,222,000 B. 1,122,000 C. 1,212,000 D. 1,221,000
_____42. If the partnership sustained a loss of 500,000, the total capital of the partnership after loss distribution would be
A. 2,800,000 B. 2,177,000 C. 2,300,000 D. 2,452,000
_____43. If the partnership earned a profit of 1.2 million, bonus to be given to Timmy would be
A. 120,000 B. 47,000 C. 75,000 D. 52,222

_____44. Which of the following accounts are shown in the income statement?
I. Allowance for bad debts IV. Unearned Rent Income
II. Accumulated depreciation V. Accrued Interest Expense
III. Deferred Subscription Income VI. Prepaid Rent Expense
A. I, II and VI B. III, IV and V C. I, II and III D. II, IV and VI

_____45. A partner has a capital balance of 500,000 at the beginning of the year. After three months, the partner made an
additional investment of 250,000. Five months later, the partner withdrew 150,000. What is his average capital?
A. 637,500 B. 625,000 C. 616,667 D. 604,167

Bonus Question: Enumerate the components of the shareholder’s equity (1 point each).