FAR/CORPO

1. Which of the following statements regarding reversing entries is incorrect?

a. Deferrals are generally entered in statement of financial position accounts, thus making
reversing entries unnecessary.
b. All accruals should be reversed.
c. Adjusting entries for depreciation and bad debts are never reversed.
d. Reversing entries change amounts reported in the statement of financial position for the
previous period.

2.As part of the objective of financial reporting, “assessing cash flow prospects” is interpreted to
mean
a. Cash basis accounting is preferred over accrual basis accounting.
b. Information about the financial effects of cash receipts and cash payments is generally
considered the best indicator of an entity’s present and continuing ability to generate
favorable cash flows.
c. Over the long run, trends in revenue and expenses are generally more meaningful than
trends in cash receipts and disbursements.
d. All of the choices are correct regarding “assessing cash flow prospects”.

3. Financial accounting standard-setting

a. Can be described as a social process which reflects political actions of various interested
user groups as well as a product of research and logic.
b. Is based solely on research and empirical findings.
c. Is a legalistic process based on rules promulgated by governmental agencies.
d. Is democratic in the sense that a majority of accountants must agree with a standard
before it becomes enforceable.

4.Which of the following is not a benefit associated with the Conceptual Framework?
a. A conceptual framework should increase financial statement users' understanding and
confidence in financial reporting.
b. Practical problems should be more quickly solvable by reference to an existing
conceptual framework.
c. A coherent set of accounting standards and rules should result.
d. Business entities will need far less assistance from accountants because the financial
reporting process will be quite easy to apply.

5. When classifying assets as current and noncurrent

a. The amount at which current assets are carried and reported must reflect realizable cash
value.
b. Prepayments for items such as insurance are included in “other assets” rather than as
current assets as they will ultimately be expensed.
c. The time period by which current assets are distinguished from noncurrent assets is
determined by the seasonal nature of the business.
d. Assets are classified as current if they are reasonably expected to be realized in cash or
consumed during the normal operating cycle.
6. Which of the following statements is incorrect regarding notes to financial statements?
a. PFRS requires specific note disclosures including disaggregation of inventories into
classifications such as merchandise, production supplies, work in process and finished
goods.
b. PFRS requires a maturity analysis for receivables.
c. PFRS requires that all notes be clear, simple to understand and nontechnical in nature.
d. All of the choices are correct regarding notes to financial statements.

7.The full disclosure principle is best described by which of the following?

a. All information related to an entity's business and operating objectives is required to be
disclosed in the financial statements.
b. Information about each account balance appearing in the financial statements is to be
included in the notes to financial statements.
c. Enough information should be disclosed in the financial statements so a person wishing
to invest in the shares of the entity can make a profitable decision.
d. Disclosure of any financial facts significant enough to influence the judgment of an
informed reader.

Wages payable P 250,000

Cash in Bank-Bank of Commerce No. 14344 175,000
Cash in Bank - Bank of Commerce No. 214567, overdraft (35,000)
Cash in Bank-Metrobank No, 888123, overdraft (66,000)
Bonds payable, due in 2024 600,000
Cash dividends payable 140,000
Prepaid expenses 136,000
Inventory 820,000
Long-term funds 525,000
Financial assets at Fair Value through Profit or Loss 153,000
Accumulated depreciation-PPE 400,000
Financial assets at Fair Value through Other Comprehensive Income 300,000
Discount on bonds payable 48,000
Investment in associates 1,020,000
Income tax payable 228,000
Accounts Payable 248,000
Accounts Receivable 366,000
Property, plant, and equipment 1,200,000
Goodwill 450,000
Investment in subsidiary 3,000,000
Advances from affiliated companies 900,000
Accrued interest expense 72,000
Advances from customers 800,000
Notes payable-BPI, due on November 30,2025 1,000,000
Mortgage payable-BDO, due on December 31,2026 2,000,000
January 1, 2023 inventory, P450,000, December 31, 2023 inventory, P480,000,
Purchases during the year, P1,800,000, Purchase returns and allowances, 105,000,
Purchase discounts, P25,000; transportation in, P10,000, Sales during the year,
P3,850,000, Sales discounts, P70,000, Sales returns, P120,000, Selling expenses,
P990,000, Administrative expenses, P825,000. Rant income- P65,000; Dividend
income, P150,000, Finance costs, P12,000; Income tax expense, P131,200, and
Retained earnings, January 1, 2023, P1,200,000.
How much is the net income or profit for the year 2023?

The accounts from the Shareholders' Equity section of the balance sheet of Ramos
Company showed the following at December 31, 2023:

Ordinary share capital (P10 par) P 475,000

Share premium 6,650,000
Retained earnings 780,000

During 2024, Ramos Company had the following transactions:

a) Issued an additional 90,000 ordinary shares at P17 per share.
b) Purchased 10,000 ordinary shares at P20 per share.
c) Sold 6,000 treasury shares P25 per share.
d). Declared total cash dividends amounting to P200,000.
e) Net income for the year P350,000.
How much is the total shareholders' equity on December 31, 2024?

In 2023, Monica Co. issued 200,000 of its 500,000 authorized shares of P10 par value
ordinary shares at P35 per share. In January 2024, Monica repurchased 15,000 shares
at P30 per share is February 2024, 5,000 treasury shares are reissued at P33 per
share. Assume these are the only share transactions the company has ever had.
What is the amount of Share premium from treasury should be credited at the
time of reissuance?
Purchase of land by issuing bands. P500,000

Proceeds from issuing bonds. 1,000,000

Purchases of inventory. 1,900,000

Purchases of treasury stock. 300,000

Loans made to affiliated corporation. 700,000

Dividends paid to preferred stockholders. 200,000

Proceeds from issuing preferred stock. 800,000

Proceeds from sale of equipment. 100,000

Cash received from customers. 1,800,000

Payment of salaries of employees. 650,000

Payment of utilities. 40,000

Determine the following:

The net cash provided (used) by investing activities during 2023 is

The net cash provided (used) by investing activities during 2023 is

The net cash provided (used) by financing activities during 2023 is

Esophagus, Inc. reported net income of P39,000 for the year ended December 31, 2023. Included in net
income were depreciation expense of P8,400 and a gain on sale of equipment of P1,700. Each of the
following accounts increased during 2023:

Accounts receivable. P2,200

Inventory. 4,500

Prepaid rent. 6,800

Available-for-sale securities. P1,000

Accounts payable. P5,000

What is the amount of cash provided by operating activities

 Sales Revenue P 5,000,000
Commission income 28,000
Interest expense 180,000
Inventory, 12/31/23 520,000
Purchase, net of returns 2,800,000
Sales commission 500,000
Administrative salaries 720,000
Office supplies expense 110,000
Dividends declared 800,000
Dividend income 16,000
Gain on sale of equipment 100,000
Rent expense 400,000
Unrealized gain on investment at Fair Value through Profit of 55,000
Loss, net of tax
Unrealized gain on investment at Fair Value through Other 88,000
Comprehensive Income, net of tax
Increase in revaluation surplus, net of tax 32,000
Depreciation expense – store equipment 70,000
Depreciation expense – office equipment 50,000
Freight-in 80,000
Freight-out 120,000
Utilities expense 80,000

Additional information:

 Merchandise inventory, January 1, 2023, P450,000

 Income tax rate, 30%
 Rent expense is allocated 60% selling, 40% administrative
 Utilities expense is allocated 30% office building, 70% store building.
Compute the following for the year ended 2023:

Cost of Sales
Gross Profit
Total Selling expense/distribution cost
Total Administrative expense
Profit or loss for the year
Total comprehensive income
BAACCEN
MAGAYON Company has total assets of P 190,000 and liabilities of 30,000. MAGAYON invested P 50,000
in cash during the year. At the end of the year, the company earned revenues of P 80,000, incurred
expenses of P 60,000.
What is the ending balance of the company's equity at the end of the year?

PROBLEM 2
A company's accounting records at the beginning of the year show that its assets are P 70,000, and its
equity is P 30,000. What is the company's total equity if its assets increase by 40% and its liabilities is
twice in amount compare to the beginning amount?

PROBLEM 3
A company has assets worth P 100,000 and liabilities worth P 40,000. How much will the equity increase
or decrease if the company acquires an additional P 20,000 in assets by taking out a loan?

PROBLEM 4
A company has assets worth P 300,000 and liabilities worth P 120,000. The company has paid 60,000
expenses and have unpaid expenses of 80,000. Total sales amounted to P 200,000. How much is the
ending asset of the company?

PROBLEM 5
A company has total assets of P 500,000, total liabilities of P 300,000, and equity of P 200,000. If the
company pays off P 50,000 of its liabilities, and invested P 50,000 what is the new value of its equity?

Situational Problems (Adjusting Entries)

PROBLEM I
MAGAYON. has an outstanding loan amounting to 500,000 and unpaid interest of P 6,250 as of
December 31, 2023. Interest payment are made on September 30 every year. Compute the interest
expense on December 31, 2024 assuming no interest was paid.

PROBLEM 2
MAGAYON accounts receivable at the beginning of the year worth 100,000 and allowance for bad debts
of 12,000 as of December 31, 2023. Cash sales and on account sales were 80,000 and 20,000
respectively. Collection of the receivable for the year amounted to 50,000 while accounts written off
amounted 10,000. Bad debts are computed at a constant percentage every year end. How much is the
ending allowance for bad debts in Dec. 2024?

PROBLEM 3
MAGAYON presented the following transactions related to its employee salaries as of December 31,
2023:
Salaries advanced to employees 30,000
 Salaries paid on regular schedule 80,000
Unpaid salaries as of year-end 12,000

MAGAYON recorded total salaries expense of 110,000 based on paid salaries. How much is the amount
to be adjusted to present the correct amount of salaries expense?

PROBLEM 4
On December 31, 2022, a company received a payment of P 12,000 for services to be provided over the
next two years. The company initially recorded the payment as revenue. However, at the end of the
company's fiscal year on December 31st, 2022, it realized that it had not yet provided P 8,000 worth of
services to the customer. Also, during the year, the company rendered service to a buyer for 24,000. No
payment was made; thus, no journal entry was also made. Prepare the adjusting entry

PROBLEM 5
On October 1, MAGAYON received 80,000 as cash proceeds from a bank loan. The interest rate of 5%
was applied on the loan. On December 1, Grow paid 24,000. Of the amount paid, 20,000 was for the
principal and the balance was for the interest. Prepare the adjusting entry on December 31.

Test IV-JOURNALIZING
August 1 Purchased P 60,000 of merchandise on account, terms 2/10, n/30
August 3 Returned P 1,500 of merchandise purchased on August 1 due to defects.
August 5 Acquired a machine worth P 30,000 was purchased on account. Cash discount of
5% can be availed if paid within 10 days
August 7 Recorded cash sales for the first week of August P 14,750; cost of the merchandise was
P 5,000.
August 8 On April 11, the business paid P 2,800 in salaries to employees for the previous month's
work.
August 9 The business received a water bill amounting to 1,100 due next month.
August 10 Sale on account made to a local breeder for P 5,500, terms 1/10 net 30; cost of the
merchandise was P200.
August 11 Paid for the merchandise purchased on August 1.
August 19 Received payment from sale of August 10.
Present below is the unadjusted trial balance of MAGAYON Corp.

ACCOUNT TITLE DEBIT CREDIT

Cash P 50,000
Accounts Receivable 25,000
Merchandise Inventory 75,000
Prepaid Insurance 5,000
Supplies 3,000
Land 146,000
Buildings 250,000
Accumulated Depreciation – Buildings P 50,000
Equipment 40,000
Accumulated Depreciation – Equipment 10,000
Accounts Payable 20,000
Salaries Payable 5,000
Interest Payable 2,000
Mortgage Payable-2% 200,000
Capital 150,000
Sales Revenue 500,000
Sales Discount 4,000
Purchases 224,000
Freight-in 12,000
Purchase Return 6,000
Purchase Discount 3,000
Salaries Expense 75,000
Rent Expense 15,000
Depreciation Expense – Buildings 10,000
Depreciation Expense – Equipment 5,000
Interest Expense 2,000
Insurance Expense 5,000
Total P 945,000 P 945,000

The ending inventory per physical count amounted to P 74,000.

At the end of the year the unrecorded salaries amounted to P 18,000.
Supplies on hand was only P 1,500.
The mortgage payable has to accrue 2% interest this year.
Building is over depreciated by P 2,000

Prepare the following financial statements:

a. Income Statement
b. Balance Sheet
The December 31, 2023 unadjusted trial balance for Min Financing Services is presented as follows

The following information pertaining to the year-end adjustments are as follows:

a. A count of the supplies at December 31 amounted to P11,000.
b. 2% of the accounts receivable is doubtful of collection.
c. The prepaid advertising represents expenditure made on July 30, 2023 for monthly
advertising over the next 12 months.
d. Office equipment can be used for 10 years with an estimated salvage value of P25,000.
e. One-fourth of the unearned service income has been earned at year-end.
f. At year-end, salaries in the amount of P55,000 have accrued.
g. The rent expense was paid on March 1, 2023 which represents rental payment for one year.
h. The notes receivable is a one-year interest bearing note with an interest rate of 12% and
was issued on August 30, 2023.
Requirement: Prepare the adjusting journal entries as of the end of year.
Which of the following accounts are normally presented as credit?
a. Sales Return c. Freight out
b. Allowance for Bad Debts d. Freight in

What type of company would normally offer trade discounts to its customers?
a. Service companies c. Retailers
b. Wholesalers d. On-line retailers

Which of the following is an example of a contra asset account?

a. Bad Debts c. Prepaid rent
b. Accumulated depreciation d. Notes payable

MAGAYON Catering recently finished catering event. The client did not make any payment for this
transaction. Petra did not enter any journal entry related to this transaction since no payment was
made. What accounting principle was violated?
a. Historical Cost c. Accrual basis accounting
b. Conservatism d. Cash Basis

What accounts are affected in the following transactions?

I. Receipt of last month's electricity bill.
II. Collection of rent in advance.

Transaction I Transaction II
a. Cash and Utilities expense Cash and Rent Expense
b. Utilities Expense and Utilities Payable Cash and Rent Expense
c. Cash and Utilities expense Cash and Rent Income
d. Utilities Expense and Utilities Payable Cash and Rent Income

. MAGAYON company uses perpetual inventory method to record its merchandising transaction. A
customer returned the that item he purchased. MAGAYON identified that the item returned is still
saleable. MAGAYON would
a. Debit Cost of sales for the returned
b. Credit Inventory for the item retuned
c. Debit Inventory for the item returned
d. Debit Purchase Return for the item returned

A company's CEO has a personal relationship with a supplier who provides goods to the company. The
supplier gives the CEO a gift worth P 10,000, and the CEO decides to record the gift as a business
revenue in the company in 10.000ds, even though the gift wits not related to the company's operations.
What accounting principle was violated?
a. Cost Principle c. Monetary Value
b. Conservatism d. Objectivity Principle

Which of the following accounts would be debited when a company pays its unpaid rent?
a. Rent expense c. Rent payable
 b. Cash d. Accounts payable

Which of the following journal entries correctly records the return of the inventory purchased on
account under the perpetual inventory system?
a. Debit Inventory, Credit Accounts Payable
b. Debit Accounts Payable, Credit Inventory
c. Debit Cost of Goods Sold, Credit Inventory
d. Debit Accounts Receivable, Credit Sales
Which of the following is an example of a prepaid expense?
a. Uncollected Rent c. Interest expense
b. Machinery d. Office supplies

In credit terms of 2/15, n/45, the "2" represents the

a. number of days in the discount period
b. full amount of the invoice
c. number of days when the entire amount is due
d. percent of the cash discount

Which of the following accounting principles requires that expenses be recognized in the same period as
the revenue they help to generate?
a. Matching principle c. Conservatism principle
b. Revenue recognition principle d. Objectivity principle

Which of the following methods of inventory valuation assumes that the cost of the most recently
acquired units are the first to be allocated to cost of goods sold?
a. First-in, first-out (FIFO) c. Last-in, first-out (LIFO)
b. Weighted average cost d. Specific identification

Mr. Juan is considering his records to be audited since a large amount is missing from the total balance.
He suspects that an employee misappropriates the money. The amount of cash lost is considered to be
a. Reliable c. Complete
b. Material d. Erroneous
PARTNERSHIP
Partners D and E already established a business, and they want to distribule the profits or
losses that were generated at the end of the year. The capital accounts during the year were
as follows:

D E

January 1 P 50,000 P 70,000

April 1, investment 30,000 -

April 1, withdrawal - (20,000)

June 30, investment - 50,000

June 30, withdrawal (temp) (25,000) -

September 1, investment - 60,000

September 1, withdrawal (45,000) -

October 1, investment 70,000 -

October 1, withdrawal (temp) (40,000)

The following were agreed on how to distribute the profits and losses:

 Interest on average capital balances at 8%

 Annual salaries of P25,000 for D and P35,000 for E
 Bonus to E at 25% of net income afer deducting the interest and salaries, but before
deducting the bonus
 Remainder were shared equally
The income summary had a debit balance of P45,000

SHARE OF NET LOSS BY E

CAPITAL BALANCE OF D

Foilowing is the balance sheet of the CPA Partnership before realization of assets on July 1,
2023:

Cash P 10,000 Liabilities P. 28,000

Accounts 50,000 C, Capital 45,000

Receivable

Inventory 30,000 P, Capital 27,000

Equipment 60,000 A, Capital 50.000

Total P150.000 Total P.150,000

The partners share income 40:40:20, respectively. On July 2, the partnership is liquidated. 60%
of the receivables are collected and that inventory is sold for P20,000. Equipment is sold for
P30,000.
How much is the total gain (loss) on the realization of assets?How much cash is distributed to
P?

Partners P, R, & A have capital balances of P 140,000, P 128,000, P 132,000, respectively on

December 31, 2022. The partners share profits and losses in the ratio of 5:8:7, respectively.
During the calendar year 2013, the partnership suffered a loss of P 112,400 and the withdrawal
of each partner as follows: P - P 12,500; R - P 8,000; A - P 10,500. Anne is not happy with the
partnership operation and has decided to withdraw as of Dec. 30, 2023. A received P90,560
cash in settlement of her interest in the partnership.

What is the capital balance of R immediately after the retirement of A?

Al and Ni are partners with present capital balances of P500,000 and P400,000, respectively.
The partners share profit and losses according to the following percentages: 60% for Al and
40% for Ni. Min is to join the original partnership upon contribution of P250,000 to the
partnership in exchange for a 20% interest in capital and 15% interest in profits and losses.
Min's contribution consists of P 170,000 of cash and equipment having a fair value of P80,000.
The assets of the original partnership have a book value equal to their fair value except that
the land has a book value of P15,000 and fair value oP55,000.

Calculate the capital balance of Min in the new partnership.

Cha, Jod and Cho have the following capital balances; P40,000; P50,000 and P30,000.
respectively. The partners share profits and losses 20 %, 40% and 40%, respectively.

What is the total partership capital after Jod retires and she receives P80,000 and using the
bonus method?
When a partner retires and receives in cash less than his capital balance, how should the difference be
treated?
A. the difference should be credited to the remaining partners in their remaining profit and loss ratio
B. the difference should be debited to the remaining partners in their remaining profit and loss ratio
C. the difference should be credited to all the partners in their profit and loss ratio
D. the difference should be debited to all the partners in their profit and loss ratio.

If a new partner purchases his interest from the existing partner, the journal entry includes:
A. a debit to the capital of a new partner
B. a debit of selling partner capital
C. a debit of bonus
D. a debit of cash

The capital deficiency of insolvent partner shall be allocated based on:

A. profit and loss ratio of the absorbing partners
B. profit and loss ratio of all partners
C. Capital ratio of the absorbing partners
D. Equal ratio

The following must exist to have a bonus to retiring partner

A. The retiring must be paid more than the book value of his capital
B. The retiring must be paid less than the book value of his capital
C. There must be a positive revaluation
D. There must be a negative revaluation

When there is no partnership agreement regarding the distribution of profits, profits will be distributed
based on
A. Beginning Capital
B. Ending Capital
C. Average Capital
D. Original Capital

Anton and Garcia formed a partnership, each contributing assets to the business. Anton contributed
inventory with a current market value in excess of its carrying amount. Garcia contributed real estate with
a carrying amount in excess of its current market value. At what amount should the partnership record
each of the following assets?
Inventory Real Estate
A. Carrying Amount Market Value
B. Market Value Carrying Amount
C. Carrying Amount Carrying Amount
D. Market Value Market Value

How does a newly formed partnership handle the contribution of previously depreciated assets?
A. continues the depreciation life as if the owner had not changed
B. starts over, using the contributed value as the new cost basis
C. shortens the useful life of the asset per the partnership agreement
D. does not depreciate the contributed asset

Paul and Mark are partners having capital balances of P50,000 and P60,000, respectively, and share
profits and losses equally. Jay is going to invest P65,000 into the business to acquire a one-third
ownership interest. If the bonus method is used to record Jay's admission to the partnership:
A. Jay's capital will be P58,333
B. Mark's capital will be P70,000
C. Paul's capital will be P46,667
D. Total capital will be P195,000

When a partnership is liquidated, the first step in the liquidation process is to ________.
A. allocate the gain or loss on sale based on income sharing ratio
B. pay off liabilities
C. sell noncash assets
D. divide the remaining cash among the partners

A and B form a partnership and agree to share profits in a 2:3 ratio. The partnership net loss for the year is
P 100,000. The partners should share the losses based on:
A. The ending capital balances
B. The average capital balances
C. 2:3 ratio
D. Original capital contribution

In bonus method, the total invested capital is equal to the total agreed capital but there is a (an)
A. decrease in the individual capital of the partner
B. increase in the individual capital of the partner
C. Increase or decrease in the individual capital of the partner
D. increase or decrease in the total capital of the partnership

When a new partner is admitted into a partnership and the new partner receives a capital credit greater
than the tangible assets contributed, which of the following explains the difference?
I. the old partners’ goodwill is being recognized
II. the new partners’ goodwill is being recognized
A. I only C. Either I or II
B. II only D. Both I and II

The main characteristic of a liquidation done in one transaction is that all the
A. assets are sold in one transaction
B. liabilities are paid in one transaction
C. cash available to partners is distributed to them in one transaction
D. assets are sold in one transaction and all the available cash is distributed to creditors and partners in
one transaction

The order of partnership liquidation process is

A. sell assets, distribute cash to partners, pay liabilities
B. disburse cash to partners, pay liabilities, sell assets
C. pay liabilities, sell assets, disburse cash to partners
D. sell assets, pay liabilities, disburse cash to partners

the final cash distribution to the partners ion a partnership in liquidation should be made in accordance
with
A. Balances of the partners’ capital accounts
B. Partners’ profit and loss sharing ratio
C. Ratio of capital contributions made by the partners
D. Ration of capital contributions less withdrawals made by the partners

. A capital deficiency can be eliminated by the following except:

A. Offsetting against a partner’s loan
B. Additional Investment
C. Selling non cash assets at a gain
D. Loss to the other partners
. If there’s no agreement as to the distribution of profit, but there is an agreement as to the distribution of
losses, how shall the partners divide profits and losses?
A. profits will be divided using the original capital contribution, while losses will be divided using the
agreed loss ratio
B. profits and losses shall be divided equally
C. profits and losses shall be divided using the agreed loss ratio
D. No distribution pf profits, only the loss shall be divided using the agreed ratio.

END

(PAPASA SA QUALI, TRUST HIM