NAME: Date:

Professor: Section: Score:

Financial Accounting & Reporting

SECOND GRADING EXAMINATION

1. The amounts shown on this trial balance represent the beginning balances of accounts in the
next accounting period.
a. Unadjusted trial balance
b. Adjusted trial balance
c. Post-closing trial balance
d. Carry-over trial balance

Use the following information for the next three questions:

Entity A started operations on November 1, 20x1. The following were the transactions during the
month:

Nov. 1, 20x1 The business owner provides ₱2,000,000 cash as investment to the business.
Nov. 5, 20x1 Entity A obtains a ₱500,000 loan and issues a promissory note.
Nov. 8, 20x1 Entity A acquires land costing ₱1,000,000 on cash basis.
Nov. 16, 20x1 Entity A renders services worth ₱1,200,000 on account.
Nov. 30, 20x1 Entity A pays salaries expense of ₱280,000.

2. How much is the total assets at the end of the period? (Hint: use the basic accounting equation)
a. 4,320,000
b. 3,840,000
c. 3,420,000
d. 2,980,000

3. How much is the total liabilities at the end of the period?

a. 500,000
b. 520,000
c. 580,000
d. 680,000

4. How much is the equity at the end of the period after taking into account income and expenses?
a. 2,920,000
b. 2,980,000
c. 3,120,000
d. 3,280,000

Solutions:
  Assets Liabilities Equity
Nov. 1, 20x1 2,000,000 2,000,000
Nov. 5, 20x1 500,000 500,000

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 Nov. 8, 20x1 -
Nov. 16,
1,200,000 1,200,000
20x1
Nov. 30,
20x1 (280,000) (280,000)
Totals 3,420,000 500,000 2,920,000

5. In a worksheet, which of the following is prepared after the unadjusted trial balance?
a. Adjusted trial balance columns
b. Income statement columns
c. Adjusting entries columns
d. Balance sheet columns

6. If total debits exceed total credits in the balance sheet columns of a worksheet, there is
a. profit.
b. loss.
c. owner’s drawings.
d. an error.

7. Adding amounts horizontally in a worksheet is called

a. footing.
b. cross-footing.
c. cross-legging.
d. horizontaling.

8. Accounts are listed in the trial balance in this sequence.

a. Asset, Liabilities, Equity, Expense, and Income
b. Asset, Equity, Liabilities, Expense, and Income
c. Asset, Liabilities, Equity, Income, and Expense
d. Asset, Expense, Liabilities, Equity, and Income

9. In accounting parlance, an account that has no balance is called a

a. closed account.
b. dead account.
c. ghost account.
d. blocked account.

10. This trial balance contains only real accounts.

a. Unadjusted trial balance
b. Adjusted trial balance
c. Post-closing trial balance
d. Permanent trial balance

11. It is a journal entry that is the exact opposite of a previous adjusting entry.
a. inside-out entry
b. closing entry
c. gnitsujda entry

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 d. reversing entry

12. In accounting parlance, to “accrue” means to

a. accumulate.
b. postpone.
c. reduce.
d. sneeze.

13. It is an account used temporarily to store discrepancies in the accounts pending their analysis
and permanent classification.
a. Suspense account
b. Horror account
c. Thriller account
d. Romantic comedy account

14. The first step in the accounting cycle is

a. posting to the ledger.
b. journalizing.
c. preparing the adjusting entries.
d. analyzing events.

15. Credit is on which side of an account?

a. Right
b. Left
c. Top
d. Bottom

16. A debit may signify an increase in

a. liability account.
b. asset account.
c. revenue account.
d. liability and revenue account.

17. A business sells goods in Year 1 but collects the sale price only in Year 2. According to the
accrual basis and time period concepts, the business should include the sale in its income
statement in
a. Year 1.
b. Year 2.
c. Year 3.
d. Every year

18. Debit and debit result to

a. addition.
b. deduction.
c. multiplication.
d. two debits.

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Instruction for the next twelve (12) questions: Choose the letter corresponding to the correct
journal entry for each of the transactions described.

19. Owner’s cash investment to the business.

Debit Credit
a. Cash Owner’s capital
b. Cash Owner’s drawings
c. Owner’s capital Cash
d. Cash Sales

20. Acquisition of equipment on cash basis.

Debit Credit
a. Cash Equipment
b. Expense Cash
c. Equipment Cash
d. Equipment Owner’s capital

21. Acquisition of inventory on cash basis

Debit Credit
a. Inventory Accounts payable
b. Expense Cash
c. Inventory Cash
d. Cost of sales Cash

22. Acquisition of inventory on credit.

Debit Credit
a. Inventory Accounts payable
b. Accounts payable Inventory
c. Accounts payable Cash
d. Cost of sales Accounts payable

23. Payment (settlement) of accounts payable

Debit Credit
a. Inventory Accounts payable
b. Cash Accounts payable
c. Accounts payable Cash
d. Cost of sales Inventory

24. Sale of inventory on cash basis

Debit Credit
a. Inventory Sales
b. Cash Accounts receivable
c. Cash Sales
d. Cost of sales Cash

25. Sale of inventory on credit

Debit Credit
a. Cost of sales Sales

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 b. Cash Accounts receivable
c. Cash Sales
d. Accounts receivable Sales

26. Collection of accounts receivable

Debit Credit
a. Cost of sales Sales
b. Cash Accounts receivable
c. Cash Sales
d. Accounts receivable Sales

27. Payment of advertising expense

Debit Credit
a. Advertising expense Cash
b. Cash Advertising expense
c. Cash Advertisement payable
d. Advertising expense Accounts payable

28. Owner’s drawings (owner’s withdrawal of cash from the business)

Debit Credit
a. Drawings expense Cash
b. Cash Owner’s drawings
c. Owner’s drawings Cash
d. Cash Owner’s capital

29. Recognition of depreciation

Debit Credit
a. Depreciation expense Cash
b. Depreciation expense Equipment
c. Depreciation expense Accumulated depreciation
d. Accumulated depreciation Depreciation expense

30. Recognition of bad debts

Debit Credit
a. Bad debts expense Cash
b. Bad debts expense Accounts receivable
c. Bad debts expense Allowance for bad debts
d. Allowance for bad debts Bad debts expense

31. Which of the following statements is correct?

a. The “Sales” account is used by both service and merchandising businesses in recording
revenues from primary business activities.
b. “Accounts receivable” is used only by service businesses but not by merchandising
businesses.
c. The “Inventory” account is most likely to be found in the financial statements of a
merchandising or manufacturing business but not of those of a service business.
d. A manufacturing business cannot be organized as a sole proprietorship.

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32. Recording assets at their acquisition cost (entry value), rather than at their net selling price (exit
value), is in line with the concept of
a. Single entity concept.
b. Historical cost concept.
c. Going concern concept.
d. Matching principle.

33. The term “posting” as used in accounting means

a. recording an accountable event in debit-credit format.
b. transferring the debits and credits of journal entries from the journal to the affected accounts
in the ledger.
c. checking the equality of the monetary totals of debits and credits of accounts in the ledger.
d. uploading photographs to the internet.

34. At the beginning of the period, Addy had a cash balance of ₱20,000 and a notes payable of
₱15,000. During the period, Addy collected ₱11,000 accounts receivable, paid ₱8,000 notes
payable, and issued additional notes payable of ₱5,000 in exchange for cash. How much are the
ending balances of cash and notes payable, respectively?
Cash Notes payable
a. 17,000 20,000
b. 20,000 12,000
c. 28,000 12,000
d. 36,000 20,000

Cash
beg. 20,000  
Collection of accounts
receivable 11,000 8,000 Payment of notes payable

Issuance of notes payable 5,000  

28,000 end.

Notes payable
15,000 beg.
Payment of notes payable 8,000 5,000 Issuance of notes payable
   
end. 12,000  

35. What is the normal balance of the purchase returns account?

a. debit
b. credit
c. zero
d. none of these

36. Which of the following is equal to total goods available for sale?

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 a. Net purchases – Inventory, beg.
b. Cost of sales – Inventory, end.
c. Inventory, end. + Cost of sales
d. Net purchases + Inventory, end.

37. A business has total assets, liabilities, and equity of ₱10,000, ₱7,000 and ₱3,000, respectively, at
the beginning of the period. During the period, total liabilities decreased to ₱4,000 while profit
was ₱5,000. How much is the ending total assets?
a. 12,000
b. 11,000
c. 9,000
d. 7,000

Solution:
Assets = Liabilities + Equity
Beg. Irrelevant = Irrelevant + 3,000
Profit Irrelevant 5,000
End. ? = 4,000 + 8,000
Answer: Ending total assets = (4,000 liabilities, end. + 8,000 equity, end.) = 12,000

38. Imagine you are a business manager. Your company has an opportunity to venture out into a
new market with a new product. However, your current resources are limited. In order to take
the opportunity, you need to discontinue the production of one of your existing products. Your
company’s accountant provided you with the following information to help you decide which
product to discontinue.

  Product A Product B Product C

Net sales (income) 5,000,000 3,500,000 2,100,000
Attributable costs (expenses) (4,800,000) (2,275,000) (630,000)

Which product will you most likely consider to stop producing?

a. Product A
b. Product B
c. Product C
d. All them

Solution:
  Product A Product B Product C
Net sales (income) 5,000,000 3,500,000 2,100,000
Attributable costs (expenses) (4,800,000) (2,275,000) (630,000)
Contribution to profit 200,000 1,225,000 1,470,000

Product A has the least amount of contribution to the company’s profit, and therefore, the most
likely candidate for discontinuance.

39. Which of the following is not a special journal?

a. General Journal

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 b. Sales Journal
c. Purchase Journal
d. Cash Receipts Journal

40. A business sells goods on cash basis. This transaction is most likely recorded in which of the
following special journals?
a. Sales journal
b. Purchases journal
c. Cash receipts journal
d. Diary journal

41. At the beginning of the period, Entity A’s notes payable had a balance of ₱1,200. During the
period, Entity A obtained an additional loan of ₱800 and made total payments of ₱500. How
much is the ending balance of Entity A’s notes payable?
a. 1,800
b. 1,500
c. 1,200
d. 900

Solution:
Notes payable
Dr. Cr.
1,200 Beginning balance
Payments on the loan 500 800 Additional loan
1,500 Ending balance

42. This branch of accounting involves teaching accounting, taxation, and other business-related
subjects.
a. Accounting education
b. Government Accounting
c. Accounting research
d. Tax accounting

43. This account is used to record payments received from customers prior to the delivery of goods
or rendering of services.
a. Accrued income
b. Unearned income
c. Prepaid asset
d. Accounts receivable

44. A chart of accounts is

a. a listing of all accounts and their balances.
b. a subsidiary ledger.
c. a special journal.
d. a listing of all account titles.

45. How is profit or loss calculated?

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 a. It is the difference between net assets at the beginning and end of the accounting period
irrespective of transactions with owners.
b. It is the difference between net liabilities at the beginning and end of the accounting period.
c. It is the difference between assets and liabilities.
d. It is the difference between income and expenses.

46. The beginning equity is ₱5,000. If total income for the period is ₱8,000 while total expenses are
₱6,000, how much is the ending balance of equity?
a. 7,000
b. 5,000
c. 3,000
d. 1,000

Solution: 5,000 + 8,000 – 6,000 = 7,000

47. The ending equity is ₱9,000. If total income for the period is ₱5,000 while total expenses are
₱8,000, how much is the beginning balance of equity?
a. 12,000
b. 9,000
c. 6,000
d. 0

Solution:
Equity, beginning (squeeze) 12,000
Add: Income 5,000
Less: Expenses (8,000)
Equity, ending (start) 9,000

48. At the start of the period, a business has total assets of ₱500,000 and total liabilities of ₱300,000.
During the period, the business earned total income of ₱1,000,000 and total expenses of ₱640,000.
No additional investments or withdrawals were made by the owner. Total assets at the end of
the period were ₱830,000. How much is the total liabilities at the end of the period?
a. 280,000
b. 270,000
c. 260,000
d. 240,000

Solution:
500,000 – 300,000 = 200,000 + 1,000,000 – 640,000 = 560,000 equity, end.
830,000 – 560,000 = 270,000

49. The generally accepted accounting principles (GAAP) in the Philippines are represented by the
PFRSs which are issued by the
a. Pinoy Accounting Standards.
b. Kapisanan ng mga Kontador sa Pilipinas.
c. Financial Reporting Standards Council.
d. Philippine Accounting Standards Board.

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50. Imagine you are a business manager of a manufacturing company. Your company’s
manufacturing process involves four (4) stages. The first stage takes most of the manufacturing
time and costs and is the bottleneck (i.e., obstacle, hindrance or handicap) in the manufacturing
process. The demand for your product is high and your company can sell all that it can produce.
Your predicament now is your productive capacity.

You want to streamline the first stage and came up with two proposals. Each of those proposals
decreases the manufacturing time but entails additional costs, such as additional investment in
new machines and employment of additional personnel. Your accountant prepared the
following cost analysis to help you decide which of those proposals to implement:

  Existing set-up Proposal #1 Proposal #2

Units of production 4,000 4,400 5,300
Manufacturing time (in days) 30 30 30
Attributable costs 1,000,000 1,249,600 1,346,200
Sale price per unit 450 450 450

So what is your decision? (Hint: Prepare pro-forma statements of profit for each of the proposals,
including the existing set-up.)
a. Implement Proposal #1
b. Implement Proposal #2
c. Retain the existing set-up
d. This is too difficult for me. I’m quitting my job.

Solution:
  Existing set-up Proposal #1 Proposal #2
Total sales (sale price x units of production) 1,800,000 1,980,000 2,385,000

Attributable costs (1,000,000) (1,249,600) (1,346,200)

Profit 800,000 730,400 1,038,800

Proposal #2 should be implemented because it increases profit.

51. Which of the following accounts is increased by a credit?

a. Cash
b. Accounts receivable
c. Accounts payable
d. Owner’s drawings

52. Which of the following accounts is increased by debiting it?

a. Accounts payable
b. Equipment
c. Sales
d. Accumulated depreciation

53. Which of the following special journal is used when a business purchases inventory on cash
basis?

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 a. Cash disbursements journal
b. Purchases journal
c. Inventory journal
d. Cash receipts journal

54. If the ending balance of accounts payable is ₱100,000 and the total debits and credits to that
account during period were ₱60,000 and ₱40,000, respectively, the beginning balance must be
a. 0
b. 20,000
c. 80,000
d. 120,000
  Accounts payable  
beg.
    120,000 (squeeze)
  60,000 40,000  
       
end
. 100,000    

55. A business has total assets of ₱640,000 and total equity of ₱360,000 at the beginning of the
period. The business earns income of ₱220,000 during the period and reports profit of ₱80,000.
There were no transactions with the owner during the period. Total liabilities increased by
₱40,000 by the end of the period. How much is the total assets at the end of the period?
a. 560,000
b. 440,000
c. 860,000
d. 760,000

Solution: 640,000 assets, beg. – 360,000 equity, beg. = 280,000 liabilities, beg. + 40,000 increase during
the year = 320,000 liabilities, end.;
360,000 equity, beg. + 80,000 profit = 440,000 equity, end.;
320,000 liabilities, end. + 440,000 equity, end. = 760,000 assets, end.

56. On January 1, 20x1, Johnny Company acquires a building for ₱10M. The building is estimated to
have a useful life of 20 years. How much expense is recognized in 20x1 in relation to the
building?
a. 10,000,000
b. 1,000,000
c. 500,000
d. 0

Solution: (10M ÷ 20 years) = 500,000 depreciation expense

57. The main purpose of accounting is

a. to account for money so it will not be lost.
b. to provide information that is useful in making economic decisions.

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 c. to safeguard the assets of a company.
d. to provide a clear view of the industry’s econ

58. This branch of accounting focuses on catering to the information needs of external users.
a. Management accounting
b. Financial accounting
c. Auditing
d. External accounting

59. Entity A’s income statement shows a line item described as “Cost of goods sold.” Entity A is
most likely a
a. service business.
b. merchandising business.
c. sole proprietorship business.
d. partnership business.

60. Under this concept, the business is treated separately from its owners.
a. Separate entity concept
b. Historical cost concept
c. Going concern
d. Matching principle

61. Which of the following statements regarding owner’s capital is not valid?
a. It is increased by investments to the business by the owner.
b. It is increased by income earned by the business.
c. It is increased by distributions to the owners (drawings by owners).
d. It is decreased by expenses incurred by the business.

62. Which of the following is a purpose of preparing an unadjusted trial balance?

a. to facilitate the preparation of the financial statements
b. to provide reasonable assurance that all accountable events are recorded
c. to facilitate the preparation of adjusting entries
d. to provide reasonable assurance that all nominal accounts are zeroed-out

63. Which of the following does not describe an advantage of a partnership over the other forms of
business organizations?
a. “Two heads are better than one.”
b.“The more the merrier.”
c.Making business decisions may give rise to conflict among the partners.
d.Sharing of risk.

64. Entity A has accounts receivable of ₱500,000 and a related allowance for bad debts of ₱120,000.
How much is the carrying amount of the accounts receivable?
a. 620,000
b. 500,000
c. 480,000
d. 380,000

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Solution: 500,000 – 120,000 = 380,000

65. Which of the following is not a correct expanded accounting equation?

a. Assets = Liabilities + Equity + Income - Expenses
b. Assets + Expenses = Liabilities + Equity + Income
c. Assets – Liabilities = Equity + Income - Expenses
d. Assets = Liabilities + Equity + Income + Expenses

66. The financial statement that shows information on assets, liabilities and equity is the
a. balance statement.
b. income sheet.
c. balance sheet.
d. income statement.

67. This represents the unused portion of rentals that have been paid in advance.
a. Prepaid rent
b. Travel expense
c. Rent expense
d. Cost of sales

68. The balance of accumulated depreciation in Entity A’s unadjusted trial balance is ₱100,000. If the
adjustments columns in the worksheet show a debit adjustment of ₱20,000, how much is the
balance of accumulated depreciation that is extended to the adjusted trial balance columns of the
worksheet?
a. 80,000
b. 100,000
c. 120,000
d. 0

Solution: 100,000 credit – 20,000 debit = 80,000

69. When preparing closing entries, which of the following accounts is debited when closing to the
“Income summary” account?
a. Depreciation expense
b. Owner’s drawings
c. Sales
d. Salaries payable

70. If the “Income summary” account has a credit balance after all income and expense accounts are
closed, there is
a. profit.
b. loss.
c. owner’s drawings.
d. an error.

71. Which of the following adjustments can be reversed in the next accounting period?
a. Adjusting entry to take up depreciation expense
b. Adjusting entry to record bad debts expense

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 c. Adjusting entry to record accrued interest income
d. All of these

72. Which of the following is not an adjusting entry?

a. An entry to take up bad debts expense at the end of the period.
b. An entry to take up depreciation expense for the period.
c. An entry to recognize interest expense for the period.
d. An entry to record the cash acquisition of equipment.

73. Entity A received a 12%, ₱200,000, one-year, note receivable on October 1, 20x1. Entity A uses a
calendar year period. The principal and interest on the note are due on October 1, 20x2. How
much is the interest income to be accrued on December 31, 20x1?
a. 24,000
b. 12,000
c. 6,000
d. 0

Solution: (200,000 x 12% x 3/12) = 6,000

74. At the beginning of the period, a business has a cash balance of ₱20,000. During the period, total
cash collections and total cash payments amounted to ₱100,000 and ₱70,000, respectively. How
much is the ending balance of cash?
a. 10,000
b. 30,000
c. 50,000
d. 70,000

Solution: 20,000 + 100,000 – 70,000 =50,000

75. At the beginning of the period, a business has accounts payable of ₱200,000. During the period,
the total debits and credits to the accounts payable account were ₱100,000 and ₱70,000,
respectively. How much is the ending balance of accounts payable?
a. 230,000
b. 170,000
c. 370,000
d. 30,000

Solution: 200,000 – 100,000 + 70,000 = 170,000

76. At the beginning of the period, the owner’s capital account of a business has a balance of
₱220,000. During the period, the total debits and credits to that account were ₱60,000 and
₱70,000, respectively. How much is the ending balance of the owner’s capital account?
a. 230,000
b. 210,000
c. 350,000
d. 90,000

Solution: 220,000 - 60,000 + 70,000 = 230,000

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77. If the ending balance of accounts receivable is ₱100,000 and the total debits and credits to that
account during period were ₱60,000 and ₱40,000, respectively, the beginning balance must be
a. 0
b. 20,000
c. 80,000
d. 120,000

Solution:
Accounts receivable
beg.
(squeeze) 80,000  
60,000 40,000
   
100,000 end.

78. The equipment of ABC Co. has a historical cost of ₱500,000 and an accumulated depreciation of
₱120,000. How much is the carrying amount of the equipment?
a. 620,000
b. 500,000
c. 480,000
d. 380,000

Solution: 500,000 – 120,000 = 380,000

79. The business acquires equipment. The business allocates the equipment’s cost over the
equipment’s useful life, instead of expensing it right away. The portion of the equipment’s cost
that is expensed during the period is recorded as
a. Bad debts expense.
b. Equipment.
c. Allowance for bad debts.
d. Depreciation expense.

80. This account is used when a business purchases inventory on account (on credit).
a. Cash
b. Accounts receivable
c. Accounts payable
d. Prepaid supplies

81. Revenues earned from rendering services are recorded in this account.
a. Sales
b. Service fees
c. Interest income
d. Gains

82. Which of the following would result to income of ₱320,000?

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 a. Total expenses of ₱280,000 and loss of ₱40,000
b. Total expenses of ₱360,000 and profit of ₱40,000
c. Total expenses of ₱220,000 and loss of ₱100,000
d. Total expenses of ₱360,000 and loss of ₱40,000

Solution: 360,000 – 40,000 = 320,000 income (checking: 320,000 income – 360,000 expenses = -40,000 loss)

83. Which of the following would result to total expenses of ₱480,000?

a. Total income of ₱360,000 and profit ₱120,000
b. Total income of ₱580,000 and loss of ₱100,000
c. Total income of ₱630,000 and profit of ₱150,000
d. Total income of ₱630,000 and loss of ₱150,000

Solution: 630,000 – 150,000 = 480,000 expense (checking: 630,000 income – 480,000 expenses = 150,000
profit)

84. The accounts debited when recording purchases of inventory under the perpetual inventory
system and periodic inventory system, respectively, are
Perpetual Periodic
a. Inventory Purchases
b. Purchases Inventory
c. Inventory Merchandise inventory
d. Purchases Purchases

85. Under this inventory system, physical count is necessary in order to determine the inventory on
hand and cost of goods sold.
a. Perpetual system
b. Counting system
c. Periodic system
d. Physical system

86. The account used under the periodic inventory system to record the transportation costs
incurred on purchases.
a. Freight-out
b. Transportation out
c. Freight-in
d. Purchases-in

87. Cost of goods sold is debited each time a sale is made under which of the following inventory
systems?
a. Perpetual system
b. COGS system
c. Periodic system
d. Endocrine system

88. Net sales minus cost of sales equals

a. Gross profit.
b. Net net sales.

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 c. Net profit.
d. Net cost.

89. Which of the following results to the amount of cost of goods sold?
a. Inventory, beg. + Inventory, end. – Net purchases
b. Net purchases – Inventory, end.
c. Inventory, beg. + Net purchases – Inventory, end.
d. Sale price x number of units sold

90. Which of the following is equal to the amount of total goods available for sale?
a. Inventory, beg. + Inventory, end.
b. Net purchases + Inventory, end.
c. Cost of goods sold – Inventory, beg.
d. Cost of goods sold + Inventory, end.

91. Which of the following is a report used in external reporting?

a. Statement of cost of goods sold and gross profit
b. Statement of T-account
c. Worksheet
d. Balance sheet

92. Inventory, beg. ₱50,000; Net purchases, ₱120,000; Cost of goods sold, ₱80,000. How much is the
Inventory, end.?
a. 90,000
b. 120,000
c. 70,000
d. 80,000

Solution:
Inventory
beg. 50,000  
Net purchases 120,000 80,000 COGS
   
90,000 end.

93. Inventory, beg. ₱50,000; Net purchases, ₱180,000; Inventory, end., ₱90,000. How much is the Cost
of goods sold?
a. 140,000
b. 120,000
c. 90,000
d. 180,000

Solution:
Inventory
beg. 50,000  
Net purchases 180,000 140,000 COGS

17
    
90,000 end.

94. Inventory, beg. ₱50,000; Cost of goods sold, ₱80,000; Inventory, end. ₱90,000. How much is the
Net purchases?

a. 90,000
b. 120,000
c. 70,000
d. 80,000

Solution:
Inventory
beg. 50,000  
Net purchases 120,000 80,000 COGS
   
90,000 end.

95. Inventory, end. ₱162,000; Net purchases, ₱216,000; Cost of goods sold, ₱144,000. How much is
the Inventory, beg.?
a. 90,000
b. 120,000
c. 144,000
d. 80,000

Solution:
Inventory
beg. 90,000  
Net purchases 216,000 144,000 COGS
   
162,000 end.

96. Inventory, end. ₱162,000; Net purchases, ₱216,000; Cost of goods sold, ₱144,000. How much is
the Total Goods Available for Sale?
a. 306,000
b. 163,000
c. 370,000
d. 280,000

Solution:
Inventory
beg.    

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 Net purchases 144,000 COGS
   
162,000 end.

TGAS (144K COGS + 162 Invty. end.) 306,000

Use the following information for the next two questions:

A, B and C formed a partnership. Their contributions are as follows:
A B C
Cash 750,000 1,000,000 500,000
Accounts receivable 1,500,000
Inventories 1,250,000
Building 1,875,000
Totals 2,250,000 2,875,000 1,750,000

Additional information:
 Only ₱875,000 of the accounts receivable are deemed collectible.
 The inventories have a net realizable value of ₱1,125,000 and related accounts payable of
₱375,000 which the partnership assumes to repay.
 The building is under-depreciated by ₱125,000.

97. The partners agreed to equalize their interests. Cash settlements among the partners are to be
made outside the partnership. Which of the following statements is correct?
a. A and C pay B ₱250,000 and ₱625,000, respectively.
b. A pays B ₱250,000 while B pays C ₱625,000.
c. C pays A and B ₱625,000.
d. A provides additional ₱250,000 to the partnership.

Solutions:
  A B C Partnership
Cash 750,000 1,000,000 500,000 2,250,000
Accounts receivable 875,000 875,000
Inventories 1,125,000 1,125,000
Building 1,750,000 1,750,000
Accounts payable (375,000) (375,000)
Net contribution 1,625,000 2,750,000 1,250,000 5,625,000
Equal interest 1,875,000 1, 875,000 1,875,000 5,625,000
Cash receipt (payment) (250,000) 875,000 (625,000) -

98. How much are the capital balances of partners’ A, B and C, respectively, right after the
formation of the partnership?
a. 1,875,000; 1,875,000; 1,875,000
b. 1,625,000; 2,750,000; 1,250,000
c. 1,500,000; 1,500,000; 1,500,000
d. 750,000 ; 1,000,000; 500,000

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99. A and B agreed to form a partnership. The contributions of the partners are as follows:

  A B
Cash 600,000
Inventory 20,000
Land 400,000
Equipment 50,000

Additional information:
 Half of the inventory is unpaid. The partnership agreed to assume the related accounts payable.
 The land has a fair value of ₱700,000 and is subject to a mortgage of ₱100,000. However, B agreed
to settle the mortgage personally.

How much are the adjusted capital contributions of A and B, respectively?

a. 670,000; 690,000
b. 670,000; 700,000
c. 660,000; 700,000
d. 670,000; 600,000

Solution:
  A B
Cash 600,000
Inventory 20,000
Land 700,000
Equipment 50,000
Accounts payable (20,000 x ½) (10,000)
Adjusted capital balances 660,000 700,000

100. A and B formed a partnership. The following are their contributions:

  A B
Cash 400,000 -
Accounts receivable 100,000 -
Equipment 700,000
Total 500,000 700,000

A, capital 500,000
B, capital 700,000
Total 500,000 700,000

Additional information:
 The accounts receivable includes a ₱30,000 account that is deemed uncollectible.
 The equipment is over-depreciated by ₱50,000. The equipment was obtained by B through
financing. The related loan payable has an unpaid balance of ₱250,000 which the partnership
assumes on repaying.

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Which partner has the higher capital credit, and how much?
a. A, ₱470,000
b. A, ₱500,000
c. B, ₱500,000
d. B, ₱400,000

Solution:

Partnershi
  A B p
Cash 400,000 - 400,000
Accounts receivable
(100K – 30K) 70,000 - 70,000
Equipment
(700K+ 50K) 750,000 750,000
Loan payable (250,000) (250,000)
Net contributions 470,000 500,000 970,000

Bonus question (The perfect score is 101/100!)

101. Who invented the calculator?
a. Jose Rizal
b. Justin Bieber
c. Taylor Swift
d. Blaise Pascal

“I press on toward the goal to win the prize for which God has called me heavenward in Christ Jesus.”
(Philippians 3:14)

- END –

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