Polytechnic University of the Philippines

College of Accountancy and Finance

Junior Philippine Institute of Accountants
Sta. Mesa, Manila

MOCK SPECIAL QUALIFYING EXAMINATION

Basic Accounting
April 2015

Instruction: On your answer sheet, shade the letter corresponding to your answer. For problem questions, show your solutions
on a separate worksheet. God bless!

I. Theories (40 items)

1. It is known as the language of business

A. Accounting C. Financial statements E. All of these
B. English D. Bookkeeping

2. Which of the following describes “Credit”?

I. It always decreases asset accounts
II. It is always on the right side of the T-account, regardless when the account is an asset, liability or equity
III. It is the normal balance of all contra accounts
IV. It is used to close all revenue accounts for the period

A. I only B. II only C. I, II D. I, II, III E. all of the above

3. Select the incorrect equation. If Assets= Liabilities + Capital, then

A. Assets- Liabilities = Net Assets
B. Net Increase in Capital = Increase in Assets - Increase in Liabilities - Drawings
C. Change in Capital = Additional Investments ± Net Income/loss for the period - Drawings
D. Assets=Liabilities + Owner’s Investments + Drawing + Net Income
E. Choices A and D are correct

4. What is the accounting device used to store the recorded monetary information from the entity’s transaction and
events?
A. Accounting System C. Journal E. Account
B. Financial Statements D. Ledger

5. Failure to take up the following adjustments will cause net income to be understated:
I. Unexpired portion of Prepaid Insurance
II. Accrued interest on Notes Payable
III. Earned portion of deferred income
IV. Depreciation

A. I only B. I and II C. I and III D. II and IV E. All of the above

1|Mock Special Qualifying Examination 2015

 6. Which of the following steps in the accounting cycle is not part of the recording phase?
A. Business documents are received and prepared.
B. Transactions are posted in the ledger.
C. Transactions are journalized
D. Financial statements are prepared
E. Choices A and D are correct

7. Which of the following steps in the accounting cycle are listed in logical order?
A. Post the reversing entries prepare the financial statements and then take a trial balance.
B. Prepare the closing entries, take a post-closing trial balance and then prepare the financial statements.
C. Prepare the closing entries, prepare the adjusting entries and then prepare the financial statements
D. Prepare an unadjusted trial balance, prepare the adjusting entries and then prepare the financial statements.
E. Prepare data for adjustments, post it in the worksheet then prepare the financial statements.

8. Which type of accounts needs to be closed at the end of the accounting period?
A. Real accounts C. Mixed accounts E. Adjunct accounts
B. Nominal accounts D. Contra accounts

9. What do function do general ledgers serve in the accounting process?

A. Classifying C. Reporting E. Communicating
B. Summarizing D. Recording

10. Under the “income method”, the adjusting entry for income not yet earned but already collected or recorded will
A. Increase asset, increase in revenue
B. Decrease asset, increase in liability
C. Increase liability, decrease in revenue
D. Increase liability, increase in expenses
E. Increase in Cash, increase in revenue

11. After the accounts have been closed,

A. all the accounts will have zero balance
B. the real accounts will have zero balances
C. the revenue, expense, income summary and retained earnings accounts will have zero balances
D. the revenue, expense and income summary accounts will have zero balances
E. adjusting entries will have to be journalized

12. Which of the following account titles appear in the Income Statement columns of the worksheet?
A. Unearned Fees C. Accumulated Depreciation E. Owner, Drawing
B. Freight-out D. Accrued Expenses

13. Adjusting entries are dated in the journal as of:

A. First day of the accounting period
B. Middle of the accounting period
C. Last day of the accounting period
D. Date they are actually journalized
E. First day of the next accounting period

2|Mock Special Qualifying Examination 2015

 14. An entry to recognize accrued income in a partnership business involves
A. A debit to Cash C. A debit to Accounts Receivable E. A credit to Drawing
B. A credit to Cash D. A credit to partners’ Capital accounts

15. To arrive at Cost of Sales,

A. sales discounts and sales returns and allowances must be deducted from gross sales net of VAT
B. sales discounts and sales returns and allowances must be added back to net sales
C. Add beginning inventory balance and purchases for the period and freight-in
D. Deduct cost of ending inventory from the sum of beginning inventory and net purchases for the period
E. Correct answer not given

16. The major expense of a merchandising business is

A. Purchases C. Selling Expense E. Cost of Goods Sold
B. Delivery Expense D. Advertising Expense

17. Which of the following statements regarding trade discounts and sales discounts is incorrect?
A. Trade discounts are presented as deductions from sales price in Statement of Comprehensive Income.
B. Trade discounts are usually offered to customers who buy in large volumes.
C. Sales discounts are usually offered to regular customers on credit only.
D. Sales discounts reduce the risk of uncollectibility of receivables because it encourages early payment of accounts.
E. None of the above

18. A certain VAT-registered grocery store uses Point-of-Sale (POS) terminals (with barcode reader and cash register) in
its cash sale of merchandise. The machines keep a database of all sales transactions “punched”. At the end of every
business day, the cashier prepares a report of all sale transactions during the day. Assuming the company uses
special journals, the information reported on POS daily summaries will most properly make its way to
A. Sales journal C. Cash receipts journal E. Choices A and C are correct
B. General journal D. Cash payments journal

19. If a company uses special journals, purchases of merchandise should be recorded using
A. Purchase journal only
B. Purchase journal or Cash payments journal
C. Cash payments journal only
D. Voucher register
E. General journal

20. In performing an aging of receivables, the resulting amount computed by multiplying the receivable balance classified
by age by the probability of collection is
A. Bad Debts Expense to be presented in the period’s Income Statement
B. Required ending balance of Allowance for Bad Debts
C. Required adjustment for Allowance for Bad Debts account
D. Net Accounts Receivable balance to be presented in the Balance Sheet
E. It serves no meaningful amount

21. When a company issues a credit memorandum, it means that

A. The company sold merchandise on credit to a customer
B. The company credited “Cash” account
C. The company credited customer’s “Accounts Receivable” account

3|Mock Special Qualifying Examination 2015

 D. The supplier credited customer’s “Accounts Payable” account
E. The company is informing the bank that there is an erroneous bank charge

22. When a company receives a “debit memorandum” from the supplier, the company should
A. Debit “Cash” for the amount of the debit memo
B. Credit “Cash” for the amount of the debit memo
C. Debit “Accounts Payable” account for the amount of the purchase return made
D. Credit “Accounts Receivable” account for the amount of customer return
E. Do nothing. It has been recorded the books.

23. When performing an aging of accounts receivable and the company has determined that a customer had died, went
bankrupt, absconded or whereabouts cannot be located despite sending several notices of collection, what should the
accountant do? The company uses the allowance method of recording bad debts.
A. Write-off the account
B. Set up an allowance for bad debts equal to 100% of accounts receivable in question
C. Debit Bad Debts Expense and credit Accounts Receivable for the face amount of the account
D. Suggest that action for collection be enforced in the court
E. Suggest tighter credit policies

24. When a partnership is formed, the Civil Code dictates that non-cash assets contributed to the partnership be recorded
in the books at:
A. Face value
B. Agreed value or in absence, fair value
C. Historical cost
D. Book value
E. Adjusted tax basis, as determined by BIR

25. Which of the following may be omitted from the Articles of Co-partnership?
A. Name of the partnership
B. Names, addresses, nationalities and classes of partners
C. Purpose of the partnership (whether it is a general trading partnership or a general professional partnership) and its
principal office
D. The manner of dividing profits and losses
E. None of the above

26. The distinct and major advantages of corporations over partnerships is that corporations
I. Pay a fixed corporate income tax, which is 30% of net income
II. Can avail of greater tax savings because of greater tax deductions
III. Are easier to organize
IV. Have limited liability
A. I only B. I and IV C. I, II, IV D. I, III, IV E. IV only

27. On April 2, 2015, DA and JR formed a partnership. DA contributed cash. JR, previously a sole proprietor, contributed
property other than cash, including realty subject to a mortgage which was assumed by the partnership. JR’s capital
account at April 2, 2015 assuming there is no bonus, should be recorded at:
A. JR’s book value of the property at April 2, 2015
B. JR’s book value of the property less the mortgage payable at April 2, 2015
C. The fair value of the property less the mortgage payable at April 2, 2015
D. The fair value of the property at April 2, 2015

4|Mock Special Qualifying Examination 2015

 E. The agreed value of the property at April 2, 2015

28. Which of the following statement is incorrect regarding corporation?

A. Shareholders are owners of the corporation.
B. When ownership of a corporation changes, the corporation does not terminate.
C. A corporation is subject to greater governmental regulations than partnership.
D. Management of a corporation is vested on all of its shareholders
E. Corporation’s life is not unlimited.

29. When share is sold a subscription basis and the entire subscription price has been subsequently collected, the
issuance of the share certificate is recorded by:
A. debit to cash and credit to share capital.
B. debit to cash and credit to subscription receivable
C. debit to cash and subscribed share capital and credit to subscription receivable.
D. debit to subscribed share capital and a credit to share capital.
E. a debit to share capital and a credit to subscription receivable.

30. How should the excess of the issue price over par value of the ordinary share subscribed be recorded?
A. as a revenue when the subscription price is collected.
B. as accumulated profits when the subscription is received.
C. as additional paid in capital (share premium) when subscription is received.
D. as additional paid in capital (share premium) when subscription price is collected.
E. Choices B and C are correct.

31. In a sale of delinquent share at a public auction, the highest bidder is one who is:
A. willing to pay the unpaid subscription price in exchange for the lowest number of shares.
B. willing to pay the unpaid subscription price and the expenses related to delinquent shares in exchange for the lowest
number of shares.
C. willing to pay the full subscription price in exchange for the lowest number of shares.
D.willing to pay the unpaid subscription price and the expenses related to delinquent shares in exchange for the
highest number of shares.
E. Correct answer not given.

32. How would a stock split in which the par value per share decreases in proportion to the number of additional shares
issued affect each of the following?
Choice Additional paid-in Number of shares
capital outstanding
A Increase No effect
B No effect No effect
C No effect Increase
D Increase Decrease
E Increase Increase

33. The source document required to support a journal entry for dividend declaration in the books is:
A. Copy of board resolution authorizing declaration of dividends.
B. Shareholders listed on the stockholders’ ledger as of the date of record.
C. Dividend checks payable to shareholders on record.
D. Acknowledgment receipt signed by shareholders.
E. All of the above.

For items 34-40, your choices are as follows:

A. Both statements are true. C. Only statement I is true.
B. Both statements are false. D. Only statement II is true.

5|Mock Special Qualifying Examination 2015

 34. I. Trial balance does not prove that no error of any kind has been made in the accounts during an accounting period,
even though the debit and credit columns are equal.
II. The adjustment to take up the earned portion of Unearned Fees will increase assets.

35. I. A partnership is dissolved by a mere change in relation of partners. For instance, a partner ceases to be associated
in business by reason of death, disability or retirement.
II. At a certain time, the number of issued shares and outstanding shares may not be equal as a result of treasury
share acquisition

36. I. Failure to take up adjustment to recognize unearned revenue will cause period’s net income to be overstated.
II. No liability is recognized by the corporation upon declaration of share capital dividend.

37. I. In the adjusting entry for Prepaid Insurance using the expense method, the expense account is debited for the
expired portion.
II. A capitalist-industrial partner shares in partnership profits but not in losses.

38. I. If a corporation acquires its own shares, an appropriation of Retained Earnings equal to the cost, not the fair value of
such shares is required. Nevertheless, total Retained Earnings remain unchanged.
II. If a company pays its employees every Saturday in a six-day work week and the last day of the month falls on a
Tuesday, a liability equal to one-third of weekly salaries must be recognized.

39. I. Salaries and interest on partner’s capital balances is allowed even if the partnership incurs a loss or when the profit is
not sufficient to cover the salaries and interest.
II. If 100,000 shares are authorized, 74,000 shares are issued, and 4,000 shares are reacquired, the number of
outstanding shares is 78,000.

40. I. When a corporation reacquires its own ordinary shares as treasury shares, the balance of ordinary share capital is
decreased.
II. Partnership creditors may have a claim on the personal assets of any of the partners if the partnership assets are
not sufficient to settle claims.

II. Problems (30 items)

41. A business received cash of P30,000 in advance for service that will be provided later. The cash received entry debited
Cash and credited Unearned Revenue for P30,000. At the end of the period, P11,000 is still unearned. The adjusting
entry in this situation is
A. debit Unearned Revenue and credit Revenue for P19,000
B. debit Unearned Revenue and credit Revenue for P11,000
C. debit Revenue and credit Unearned Revenue for P19,000
D. debit Revenue and credit Unearned Revenue for P11,000

42. At December 31, 2015, the JPIA Company had P990,000 balance in its Advertising Expense account before any year-
end adjustments relating to the following:
 Radio advertising spots broadcast during December 2015 were billed to JPIA on January 4, 2016. The invoice
cost of P50,000 was paid on January 15, 2016.
 Included in the amount reported as expense is P60,000 for newspaper advertising for a January 2016 sales
promotional campaign.
JPIA’s advertising expense for the year ended December 31, 2015 should be:
A. P1,040,000 B. P1,000,000 C. P980,000 D. P930,000

6|Mock Special Qualifying Examination 2015

 43. Eagle Company recorded accrued salaries of P25,000 at December 31, 2014. During 2015, the company paid salaries
of P872,000. Unpaid salaries at December 31, 2015 amounted to P34,000. Eagle prepares adjustments for the year-
ended only on the first working day of the following period, and journalizes the adjusting entries as of December 31 and
reversing entries are dated January 1. The balance of Salaries Expense account that would appear in the post-closing
trial balance at December 31, 2015 is
A. P881,000 B. P34,000 C. P847,000 D. -0-
44. Tita Regina sells merchandise on credit and has lax credit evaluation policies. As a result, some accounts are doubtful
of collection. Based on experience, Tita Regina came up with the following analysis of receivables on Dec. 31, 2015:

Days past due Amount Probability of collection

Not yet due P108,395 99%
1-30 days past due 16,340 90%
31-60 days past due 8,500 50%
61-90 days past due 3,600 10%
More than 90 days past due 2,400 0%
Tita Regina appropriately written-off the receivable worth P2,400. Records show that on January 1, 2015, the balance
of Allowance for Bad Debts is P4,550 credit. How much is the (1) “Bad Debts Expense” for 2015 and (2) the net
amount of Accounts Receivable to be presented on the Statement of Financial Position on Dec. 31, 2015? Round off
your answers to nearest peso.

A. (1) P8,058; (2) P126,627 C. (1) P10,208; (2) P134,435 E. (1) P2,400; (2) P136,835
B. (1) P8,058; (2) P134,435 D. (1) P10,208; (2) P136,835

45. Finest Enterprises failed to accrue interest on its Note Receivable on December 31, 2015. The note was dated August
11, 2015, matures in six months and had a face value of P13,000. Interest rate stipulated is 10%. As a result, 2015 net
income is __________. Round off the dates to the nearest fifteen days and assume a 360-day year.
A. P1,300 understated C. P487.50 understated E. P487.50 overstated
B. P975 understated D. P975 overstated

46. Queen Amber, Inc. failed to take up the following adjustments on December 31, 2015:
 Office supplies used, P15,000. The Office Supplies account had a balance of P8,500 on January 1, 2015.
Office supplies purchased for the year amounts to P24,200 which was debited to a real account.
 Prepaid Insurance expired, P1,125. Total premium paid on October 5, 2015 was P9,000 for a two-year fire
insurance policy. This was initially recorded as expense.
 Depreciation of Office Equipment purchased on August 3, 2015 was not taken up. The latter had a cost of
P150,000, annual depreciation of 20% based on straight line method and no residual value.
 Rent Income received from tenant on September 1, 2015 representing six months’ rent amounted to
P20,400. This was recorded as a credit to a nominal account.
 Queen Amber issued a note for P150,000 for its October 29 purchase of merchandise. The note is dated on
the same date, matures in 90 days and bears 12% interest. Queen Amber’s accounting policy is to round off
dates to the nearest half-month and uses a 360-day year for interest computations.

As a result of the omissions, 2015 net income is overstated by how much?

A. P9,025 B. P18,025 C. P29,425 D. P32,125 E. P46,925

47. Maal Nqa Kcii Kitah Co. had the following payroll information for its accounting department employees for the period
April 1-15, 2015:

7|Mock Special Qualifying Examination 2015

 Employee Position Gross Pay Withholding SSS* PHIC* Pag-ibig*
Tax
Bajang_sUpAhSt@r Bh0sx P 24,000 P 2,108 P 290.65 P 218.75 P 218.75
#Edward #selfielord 21,500 1,619 290.65 218.75 218.75
Lhady_maLditAh cLerk_o1 4,500 408 163.50 56.25 56.25
Tita Ganda cHimAy 4,500 408 163.50 56.25 56.25
* Employee’s share only.
Employer’s share are as follows: SSS- P1,881.70; PHIC and Pag-ibig- equal to employee’s share. Withholding taxes
are remitted to BIR on the 10th day of the succeeding month. Other withholding items are remitted to the respective
agencies also on the following month. Maal Nqa Kcii Kitah Co. maintains a payroll account with the bank and advises
the bank to charge its account for the amount of employees’ net pay. The debit memorandum on April 15, 2015 which
represents remittance advice amounts to?
A. P44,967 B. P47,948.70 C. P50,930.40 D. P54,500 E. P61,051.30

48. On April 8, 2015, Eliza Trading purchased goods from a supplier for an invoice price of P113,600 with credit terms
2/10, 1/15, n/30; shipment terms FOB shipping point, freight prepaid. Freight charges amounted to P1,530. On April
21, Eliza settled its account in full. On Eliza’s cash payments journal, how much should appear as credit to “Cash”
relating to the transaction?
A. P113,600 B. P115,130 C. P113,978.30 D. P112,464 E. P113,994

49. Vivian Merchandising, a VAT-registered enterprise uses POS terminals in cash sale of merchandise. At the close of
business day on April 8, 2015, Vivian obtained the following summary from the POS database:
POS Machine VAT-able Sales, subject to 12% VAT VAT-exempt sales VAT 0% rated
No.
1 P116,182.55 P38,610.75 -0-
2 113,884.70 43,915.65 -0-
3 106,932.45 31,336.30 -0-
4 121,407.25 38,571.00 -0-
5 135,717.30 39,101.35 -0-
In Vivian’s cash receipts journal, how much must be the debit to Cash, credit to Sales and credit to Output VAT relating
to April 8 sales?

Choice Dr. Cash Cr. Sales Cr. Output VAT

A. P 856,954.21 P 785,659.30 P 71,294.91
B. 785,659.30 594,124.25 191,535.05
C. 785,659.30 722,003.13 63,656.17
D. 879,938.42 785,659.30 94,279.12
E. None. The forgoing should be recorded using sales journal.

50. Daphne Co., a VAT-registered company sold merchandise at invoice price of P185,000, inclusive of 12% VAT, to
James Co., another VAT-registered company on credit. Trade discounts granted are 5% and 10%. Credit terms are
2/10, n/30; shipment terms FOB seller, freight collect. Freight charge is P2,500. In Daphne’s books, Sales amounts to:
A. P185,000 B. P165,179 C. P158,175 D. P141,228 E. P139,194

51. Use the same information in #50. Assuming James Co. uses periodic inventory system, the debit to Purchases based
on foregoing transaction is:
A. P185,000 B. P165,179 C. P167,679 D. P141,228 E. -0-
For items 52 to 55, refer to the following problem:
R&C Trading is a general trading partnership engaged in selling musical instruments. Due to the high unit cost per
item, it maintains inventory records using the perpetual system. For the year 2015, R&C had the following transactions:
 Purchases, at invoice price P1,132,500
 Discounts availed due to prompt payment to suppliers 11,325

8|Mock Special Qualifying Examination 2015

  Merchandise returns due to defects 32,180
 Freight-in 1,189
 Freight-out 17,950
Inventory, January 1, 2015 per stock card records amounts to P825,675. Ending inventory per stock card records and
confirmed by physical count amounts P685,200.
52. What is the required journal entry on December 31, 2015 to reflect correct inventory and cost of goods sold balance?

Choice Description Debit Credit

A Income Summary 825,675
Inventory 825,675

Inventory 685,200
Income Summary 685,200

B Cost of Goods Sold 1,241,360

Inventory 1,241,360

C Income Summary 685,200

Inventory 685,200

Inventory 825,675
Income Summary 825,675

D Cost of Goods Sold 1,259,310

Inventory 1,259,310

E No journal entry required.

53. Additional data regarding R&C Trading’s nominal accounts are as follows:
 Net sales for the year P5,637,200
 Sales returns 34,200
 General and Administrative Expenses 515,300
 Selling Expenses other than Delivery Expenses 493,040
 Delivery Expenses ?
Income tax rate applicable is 30%. How much is R&C’s net income for the year?
A. P2,371,250 B. P2,358,685 C. P2,347,310 D. P2,334,745 E. Correct answer not given
54. R&C is operated by partners Ricial and Christopher. Profit and loss sharing agreements are as follows:
 Interest of 2% shall be allowed on partners’ average capital balance
 Christopher is given P25,000 monthly salary as the managing partner. This shall not be recorded as
partnership expense.
 Any remaining profit or loss shall be divided 60% and 40% to Ricial and Christopher, respectively.
Permanent withdrawals are recorded by a debit to the capital account. The partners’ capital accounts are as follows:

Ricial, Capital
Christopher, Capital
7/1 P35,000 1/1 beg. P5,050,410 8/31
3/31 P400,000 P150,000 1/1 beg. P3,671,250

9|Mock Special Qualifying Examination 2015

 How much should be (1) Ricial’s share and (2) Christopher’s share on partnership income for 2015?
A. (1) P1,234,419.28; (2) P1,124,265.72
B. (1) P1,241,958.28; (2) P1,129,291.72
C. (1) P1,227,594.28; (2) P1,119,715.72
D. (1) P1,220,055.28; (2) P1,114,689.72
E. Correct answer not given

55. On January 1, 2016, Ricial and Christopher decided to admit Nathaniel into the partnership. The latter is to contribute
sufficient cash for a 1/5 interest in the partnership and 25% share in profits and losses. Assuming there is no bonus
and that the partnership assets approximate their fair values, how much cash should Nathaniel should contribute?
A. P2,817,851.25 B. P2,820,992.50 C. P2,823,836.25 D. P2,826,977.50 E. Correct answer not given

56. Bajang admits Grace as a partner in business. Accounts in the ledger of Bajang on April 8, 2015, just before Grace’s
admission, show the following balances:
 Cash P6,800
 Accounts Receivable 14,200
 Merchandise Inventory 20,000
 Accounts Payable 8,000
 Bajang, Capital 33,000
It is mutually agreed that for purposes of establishing Bajang’s interest, the following adjustments must be made:
 An allowance for doubtful accounts of 3% of gross accounts receivable is to be established
 The merchandise inventory is to be valued at P23,000
 Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized.
Grace is to invest sufficient cash to obtain 1/3 interest in partnership. Compute for (1) Bajang’s adjusted capital
balance before Grace’s admission and (2) amount of cash to be invested by Grace.
A. (1) P35,347; (2) P11,971 C. (1) P35,374; (2) P17,687 E. Correct answer not given
B. (1) P36,374; (2) P18,487 D. (1) P28,174; (2) P14,087

57. Presented below is the condensed balance sheet of the partnership of Ellaine, Jessica and Mary Vee who share profits
and losses in the ratio of 6:3:1, respectively:
Cash 85,000 Liabilities 80,000
Other Assets 415,000 Ellaine, Capital 252,000
Jessica, Capital 126,000
Mary Vee, Capital 42,000
Total 500,000 Total 500,000
The partners agree to sell Patrick 20% of their respective capital and profit and loss interests for a total payment of
P90,000. The payment by Patrick is to made directly to individual partners. The capital balances of Ellaine, Jessica and
Mary Vee, respectively after the admission of Patrick are:
A. P198,000; P99,000; P33,000 C. P216,000; P108,000; P36,000
B. P201,600; P100,800; P33,600 D. P255,600; P127,800; P42,600

58. The following condensed balance sheet is presented for the partnership of Amber, Danica and Jerwin, who share
profits and losses in the ratio of 4:3:3, respectively.

Cash 160,000 Liabilities 180,000

Other Assets 320,000 Amber, Capital 48,000

10 | M o c k S p e c i a l Q u a l i f y i n g E x a m i n a t i o n 2 0 1 5
 Danica, Capital 216,000
Jerwin, Capital 36,000
Total 480,000 Total 480,000
Due to irreconcilable differences, the partners decided to call it quits. The partners were able to sell non-cash assets
for P200,000 and liquidated its liabilities. In the final distribution of cash, who among the partners will receive cash?
A. Danica only C. Jerwin and Danica E. None of the partners
B. Amber and Danica D. All partners

59. Feve, Katrina, Vanessa and Jamel are partners, sharing earnings in the ratio of 3:4:6:8, respectively. The balances of
their capital accounts on April 8, 2015 are as follows:
 Feve P1,000
 Katrina P25,000
 Vanessa P25,000
 Jamel P9,000
The partners decided to liquidate, and they accordingly convert the non-cash assets into P23,200 cash. After paying
the liabilities amounting to P3,000, they still have P22,200 to divide. Assume that a debit balance in any of the partner’s
capital is uncollectible. In the final settlement, Katrina should receive:
A. P3,200 B. P3,920 C. P4,500 D. P13,880 E. P17,800

60. Flynn-Fletcher Co. reported the following equity accounts:

 Preference share capital, par value P15 P2,550,000
 Share Premium, Preference 150,000
 Ordinary share capital, no par, P50 stated value 3,000,000
 There are no treasury shares
What is the number of issued and outstanding shares for ordinary and preference shares, respectively?
A. 60,000; 170,000 C. 63,000; 170,000
B. 60,000; 180,000 D. 63,000; 180,000

61. During the current year, Garcia-Shapiro Co. declared a one-for-five share split, when the market value of share was
P100. Prior to the split, the entity had 100,000 shares of P10 par value issued and outstanding. After the split, what is
the par value of the share?
A. P10 B. P20 C. P50 D. P2 E. P500

62. Phinabella Corp. held 10,000 shares of P10 par value in treasury that was reacquired in 2014 for P120,000. On April 8,
2015, the entity reissued all 10,000 shares for P190,000. Under the cost method of accounting for treasury shares,
what is credited for the excess of the reissue price over the cost of treasury shares?
A. Ordinary share capital of P100,000
B. Retained Earnings of P70,000
C. Gain on sale of investment of P70,000
D. Share Premium of P70,000

63. Candace Corp. was organized on January 4, 2014 at which date it issued 100,000 ordinary shares of P10 par value at
P15 per share. During the period from incorporation through December 31, 2015, the entity reported an accumulated
profits of P450,000 and paid out P230,000 as dividends. On April 8, 2015, with SEC approval, the entity purchased
6,000 of its shares at P12 per share. On August 11, 2015, the entity sold 4,000 treasury shares at P8 per share and
retired the remaining treasury shares. There are no equity transactions for the rest of the period. What is the total
shareholders’ equity on December 31, 2015?

11 | M o c k S p e c i a l Q u a l i f y i n g E x a m i n a t i o n 2 0 1 5
 A. P1,680,000 B. P1,688,000 C. P1,704,000 D. P1,720,000

64. Doofenshmirtz Evil, Inc. had 1,400,000 ordinary shares authorized and 600,000 shares outstanding on January 2,
2015. The following equity transactions transpired during the year:
April 21 Declared 10% share capital dividend
May 31 Reacquired 200,000 shares
Aug 11 Reissued 100,000 shares
Dec 30 Declared a two-for-one share split
On December 31, 2015, how many ordinary shares are outstanding?
A. 1,120,000 B. 280,000 C. 330,000 D. 1,320,000 E. 3,280,000

65. On January 1, 2015, Baljeet Corp. had 220,000 P5 par value shares outstanding. On August 11, the entity acquired
20,000 shares to be held in treasury. On October 29, when the market price of the share was P20, the entity declared
a 10% share dividend to be issued to shareholders of record on December 16, 2015. What is the impact of the share
dividend on retained earnings?
A. P100,000 decrease B. P400,000 decrease C. P110,000 decrease D. P440,000 decrease

66. OWCA, Inc. provided the following data regarding its equity accounts:
Dec. 31, 2014 Dec. 31, 2015
Share Capital (P100 par) 5,000,000 5,100,000
Share Premium 2,500,000 2,900,000
Retained Earnings 5,000,000 ???

During 2015, the entity declared and paid cash dividend of P750,000 and also declared and issued a stock dividend.
There were no other changes in shares issued and outstanding during 2015. The net income for 2015 was P1,500,000.
What is the balance of retained earnings on December 31, 2015?
A. P6,500,000 B. P5,650,000 C. P5,750,000 D. P5,250,000

67. Perry Corp. reported the following shareholders’ equity accounts at 2015 year-end:
5% cumulative preference share capital, par value P100
per share; 25,000 shares issued and outstanding 2,500,000
Ordinary Share Capital, par value P35 per share;
100,000 shares issued and outstanding 3,500,000
Share Premium 1,250,000
Retained Earnings 3,000,000

Dividends in arrears on the preference share amounted to P250,000. If the entity were to be liquidated, the preference
shareholders would receive par value plus a premium of P500,000. What is the book value per ordinary share?
A. P77.50 B. P75.00 C. P72.50 D. P70.00

68. Drusselstein Corp. reported the following capital structure on December 31, 2014:
 Ordinary share capital 200,000 shares issued and outstanding
 Preference share capital, noncumulative and nonparticipating 50,000 shares issued and outstanding
At the beginning of 2015, Drusselstein issued a 10% stock dividend on ordinary shares, and on February 14, 2015 paid
the annual cash dividend of P200,000 on preference shares. After-tax income for 2015 was P1,920,000. What amound
should be reported as earnings per share (EPS)?
A. P6.37 B. P7.68 C. P7.82 D. P8.60 E. P9.60

12 | M o c k S p e c i a l Q u a l i f y i n g E x a m i n a t i o n 2 0 1 5
 69. Fireside Corp. provided the following information:
 Dividends on 10,000 cumulative preference shares of 10%, P100 par value have not been declared or paid
for three years.
 Treasury shares were acquired at a cost of P1,500,000. The treasury shares had not been reissued at year-
end.
What is the net effect of the appropriation of retained earnings to the total retained earnings?
A. P1,500,000 decrease B. P1,800,000 decrease C. P300,000 decrease D. No change

70. Monogram Corp. has the following shareholders’ equity balances on December 15, 2015:
 Ordinary Share Capital, P10 par, 500,000 shares authorized,
275,000 shares issued and outstanding P2,750,000
 8% Preference Share Capital, P50 par, 20,000 shares outstanding
Cumulative, participating up to 12% 1,000,000
 Share Premium- Ordinary 750,000
 Share Premium- Preference 250,000
 Retained Earnings 2,000,000

On December 15, 2015, Monogram declared P1,000,000 cash dividend. Preference share dividends are in arrears for
two years. How will the cash dividend be divided between (1) Preference shareholders and (2) Ordinary shareholders?
A. (1) P200,000; (2) P800,000 C. (1) P325,333; (2) P674,667 E. (1) P384,000; (2) P616,000
B. (1) P280,000; (2) P720,000 D. (1) P360,000; (2) P640,000

-o0o-

““No man ever reached to excellence in any one art or profession without having passed through the slow and painful
process of study and preparation.” - Horace
“It’s time to see what I can do, to test the limits and break through…”

/jrda04102015 12:43AM

13 | M o c k S p e c i a l Q u a l i f y i n g E x a m i n a t i o n 2 0 1 5