Level One MCQs

1. It is the process of determining the monetary amounts at which the elements of the financial
statements are to be presented and carried in the statement of financial position and income
statement.
a. Recognition
b. Measurement
c. Realization
d. Classification

2. This pertains to the book of original entry.

a. Journal
a. Ledger
b. Source documents
c. Audit trail

3. This pertains to the book of final entry.

a. Journal
b. Ledger
c. Source documents
d. Audit trail

4. This type of journal entry consists of one debit and one credit.
a. Simple journal entry
b. Complex journal entry
c. Basic journal entry
d. Compound journal entry

5. Adjusting entries, closing entries and reversing entries are recorded in the
a. Sales journal
b. Cash receipts journal
c. General journal
d. Purchases journal

6. It refers to a listing of all the entity’s general ledger accounts in a systematic form. The accounts
are usually numbered to permit easy identification and cross-referencing with the journals.
a. Trial balance
b. Chart of accounts
c. General ledger
d. General journal

7. It is a device used in storing the details or breakdown of certain general ledger accounts.
a. Subsidiary ledger
b. Special journals
c. General ledger
d. General journal

8. What is the controlling account of customer’s subsidiary ledger?

a. Accounts payable
b. Accounts receivable
c. Common stock
d. Cash account
9. It is a listing of general ledger accounts and their balances and it consists only of real or permanent
accounts.
a. Unadjusted trial balance
b. Adjusted trial balance
c. Income statement
d. Post-closing trial balance

10. These entries are made at the beginning of the new accounting period in order to simplify
recording of certain kinds of recurring transactions.
a. Closing entries
b. Reversing entries
c. Journal entries
d. Realization entries

11. In the absence of partnership agreement to the contrary, what is the obligation of the partners as
regards to capital contribution?
a. They shall contribute equally.
b. They shall contribute based on their profit agreement.
c. They shall contribute based on their loss agreement.
d. They shall contribute based on their withdrawal agreement.

12. In the absence of partnership agreement to the contrary, the non-cash assets contributed by the
partners shall be measured initially at
a. Book value
b. Present value of future cash flows
c. Fair value
d. Historical cost

13. How shall the partnership profits or losses be distributed among the partners?
a. Based on original capital contribution ratio
b. Based on profit or loss agreement of partners
c. Based on ending capital contribution ratio
d. Equally

14. In the absence of partnership profit agreement to the contrary, how shall industrial partner share in
partnership’s profit?
a. Equal to the share of the least capitalist partner
b. Equal to the share of the highest capitalist partner
c. Just and equitable share
d. Equal to the average share capitalist partners

15. In the absence of partnership profit agreement to the contrary, how shall the remaining
partnership’s profit be distributed to the capitalist partners after distributing the share of industrial
partner?
a. Based on capital contribution ratio
b. Based on loss agreement ratio
c. Equally
d. Equal to share of industrial partner

16. In the absence of partnership loss agreement to the contrary, how shall industrial partner share in
partnership’s loss?
a. Equal to the share of the least capitalist partner
b. Based on profit agreement ratio
c. Just and equitable share
d. None
17. In the absence of partnership loss agreement to the contrary, how shall capitalist partners share in
partnership’s loss?
a. Based on capital contribution ratio
b. Based on profit agreement ratio
c. Just and equitable share
d. Equally

18. Which of the following transactions will decrease the capital balance of a partner?
a. Additional investment by said partner
b. Share in partnership’s profit
c. Drawings by said partner
d. Receipt of bonus from other partners

19. Which of the following will not result to dissolution of a general partnership?
a. Death of a partner
b. Retirement of a partner
c. Insolvency of a partner
d. Assignment of a partner’s interest to a third person

20. What is the effect of admission of a new partner to an existing partnership through the purchase of
interest of an existing partner?
a. It will result to partnership gain or loss.
b. It will increase the partnership total assets by the cash paid to the existing partner.
c. It will not change the total capital of the partnership.
d. It will decrease the capital of the partnership by the capital to be transferred to the new
partner.

21. If the total contributed capital of all the partners is equal to the total agreed capitalization of new
partnership in admission of new partner by investment, which is true?
a. Asset revaluation is recognized.
b. Impairment loss is recognized.
c. Bonus to or from new partner is recognized.
d. Any of the above.

22. In admission of new partner by investment, the total contributed capital of all the partners is more
than the total agreed capitalization of new partnership but the capital credit of new partner is less
than his capital contribution. Which of the following statements is correct?
a. There has been asset revaluation with bonus to new partner.
b. There has been asset impairment with bonus to old partners.
c. There has been bonus given to old partners without any revaluation or impairment.
d. There has been asset revaluation with bonus to old partners.

23. At the time of retirement of a partner, he receives more than his capital balance before retirement
but the capital balances of the remaining partners also increase. Which of the following is the most
valid reason under Philippine GAAP?
a. There has been asset revaluation before retirement.
b. Goodwill arising from partner’s retirement has been recognized.
c. There has been asset impairment before retirement.
d. Bonus has been given to retiring partner.
 24. The existing partnership has been incorporated but the capital balances of the partners exceed the
total par value of the shares to be issued. The difference shall be credited to
a. Retained earnings
b. Gain as part Profit or loss
c. Income as part Other comprehensive income
d. Share premium

25. At the time of liquidation of general partnership, which of the following claims shall be settled first?
a. Those from capital contribution of partners
b. Those from share in profits of partners
c. Those from advances made by partners to the partners
d. Those from loans made by third persons

Numbers 1 and 2 (Partnership Formation)

A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment with
assessed value of P100,000 with historical cost of P800,000 and accumulated depreciation of P600,000.
A day after the partnership formation, the equipment was sold for P 300,000.

B will contribute a land and building with carrying amount of P1,200,000 and fair value of P1,500,000. The
land and building are subject to a mortgage payable amounting to P300,000 to be assumed by the
partnership. The partners agreed that B will have 60% capital interest in the partnership. The partners
also agreed that C will contribute sufficient cash to the partnership.

1. What is the total agreed capitalization of the ABC Partnership?

A. 1,500,000
B. 2,000,000
C. 2,500,000
D. 3,000,000

2. What is the cash to be contributed by C in the ABC Partnership?

A. 500,000
B. 600,000
C. 700,000
D. 800,000

Numbers 3 and 4 (Partnership Operation – Capital Account Transactions)

On January 1, 2018, A, B and C formed ABC Partnership with total agreed capitalization of P1,000,000.
The capital interest ratio of the ABC Partnership is 5:1:4 while the profit or loss ratio is 3:2:5, respectively
for A, B and C.

During 2018, A and B made additional investments of P200,000 and P500,000, respectively. At the end of
2018, B and C made drawings of P300,000 and P100,000, respectively. On December 31, 2018, the
capital balance of B is reported at P200,000.

3. What is the net income or net loss of ABC Partnership for the year ended December 31, 2018?

A. 500,000 loss
B. 1,000,000 loss
C. 800,000 income
D. 1,200,000 income
4. What is the capital balance of C on December 31, 2018?

A. 150,000
B. 50,000
C. 200,000
D. 250,000

Numbers 5, 6, and 7 (Partnership Operation – Distribution of profit or loss)

On January 1, 2018, A, B and C formed ABC Partnership with original capital contribution of P300,000,
P500,000 and P200,000. A is appointed as managing partner.

During 2018, A, B and C made additional investments of P500,000, P200,000 and P300,000,
respectively. At the end of 2018, A, B and C made drawings of P200,000, P100,000 and P400,000,
respectively. At the end of 2018, the capital balance of C is reported at P320,000. The profit or loss
agreement of the partners is as follows:

 10% interest on original capital contribution of the partners.

 Quarterly salary of P40,000 and P10,000 for A and B, respectively.
 Bonus to A equivalent to 20% of Net Income after interest and salary to all partners
 Remainder is to be distributed equally among the partners.

5. What is the partnership profit for the year ended December 31, 2018?

A. 900,000
B. 1,020,000
C. 1,050,000
D. 960,000

6. What is A’s share in partnership profit for 2018?

A. 190,000
B. 340,000
C. 540,000
D. 200,000

7. What is B’s share in partnership profit for 2018?

A. 200,000
B. 290,000
C. 50,000
D. 90,000

Number 8 (Admission of partner by purchase)

On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the following
data with profit or loss ratio of 1:6:3:

Current Assets 1,000,000 Total Liabilities 600,000

Noncurrent Assets 2,000,000 A, Capital 900,000
B, Capital 800,000
C, Capital 700,000
On January 1, 2019, D is admitted to the partnership by purchasing 40% of the capital interest of B at a
price of P500,000.
What is the capital balance of B after the admission of D on January 1, 2019?

A. 540,000
B. 480,000
C. 420,000
D. 300,000

Number 9 (Retirement of partner)

On December 31, 2018, ABC Partnership’s Statement of Financial Positions shows that A, B and C have
capital balances of P500,000, P300,000 and P200,000 with profit or loss ratio of 1:3:6. On January 1,
2019, C retired from the partnership and received P350,000. At the time of C’s retirement, an asset of the
partnership is undervalued.

What is the capital balance of A after the retirement of C?

A. 462,500
B. 537,500
C. 562,500
D. 525,000

Number 10 (Retirement of partners)

On December 31, 2018, ABC Partnership’s Statement of Financial Position shows that A, B and C have
capital balances of P400,000, P300,000 and P100,000 with profit or loss ratio of 1:4:5. On January 1,
2019, C retired from the partnership and received P80,000. At the time of C’s retirement, the assets and
liabilities of the partnership are properly valued.

What is the capital balance of B after the retirement of C?

A. 284,000
B. 308,000
C. 316,000
D. 320,000

Number 11 (Partnership Dissolution – Admission of New Partner by Investment)

On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the following
data with profit or loss ratio of 1:6:3:

Current Assets 1,300,000 Total Liabilities 300,000

Noncurrent Assets 2,000,000 A, Capital 1,400,000
B, Capital 700,000
C, Capital 900,000
On January 1, 2019, D is admitted to the partnership by investing P1,000,000 to the partnership for 20%
capital interest.

If the all the assets of the existing partnership are properly valued, what is the capital balance of C after
the admission of D?

A. 960,000
B. 900,000
C. 840,000
D. 1,200,000
Numbers 12 and 13 (Admission of new partner by investment)

On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the following
data with profit or loss ratio of 5:1:4:

Current Assets 1,500,000 Total Liabilities 500,000

Noncurrent Assets 2,000,000 A, Capital 1,100,000
B, Capital 1,200,000
C, Capital 700,000

On January 1, 2019, D is admitted to the partnership by investing P500,000 to the partnership for 10%
capital interest. The total agreed capitalization of the new partnership is P3,000,000.

12. What is the capital balance of D after his admission to the partnership?

A. 500,000
B. 300,000
C. 350,000
D. 400,000

13. What is the capital balance of C after the admission of D to the partnership?

A. 580,000
B. 820,000
C. 500,000
D. 780,000

Numbers 14 and 15 (Partnership Liquidation – Lump Sum Liquidation)

On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or loss ratio of
6:1:3 of partners A, B and C respectively, revealed the following data:

Cash 1,000,000 Other Liabilities 2,000,000

Receivable from A 500,000 Payable to B 1,000,000
Other noncash assets 2,000,000 Payable to C 100,000
A, Capital 700,000
B, Capital (650,000)
C, Capital 350,000

On January 1, 2019, the partners decided to liquidate the partnership. All partners are legally declared to
be personally insolvent. The other noncash assets were sold for P1,500,000. Liquidation expenses
amounting to P100,000 were incurred.

14. How much cash was received by B at the end of partnership liquidation?

A. 250,000
B. 150,000
C. 290,000
D. 270,000

15. How much cash was received by C at the end of partnership liquidation?

A. 270,000
B. 150,000
 C. 350,000
D. 220,000
Numbers 16, 17 and 18 (Partnership Liquidation – Installment Liquidation)

On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or loss ratio of
5:3:2 of respective partners A, B and C. showed the following information:

Cash 1,600,000 Total Liabilities 2,000,000

Noncash assets 1,400,000 A, Capital 100,000
B, Capital 500,000
C, Capital 400,000

On January 1, 2019, the partners decided to liquidate the partnership in installment. All partners are
legally declared to be personally insolvent.

As of January 31, 2019, the following transactions occurred:

 Noncash assets with a carrying amount P1,000,000 were sold at a gain of P100,000.
 Liquidation expenses for the month of January amounting to P50,000 were paid.
 It is estimated that liquidation expenses amounting to P150,000 will be incurred for the month of
February, 2019.
 20% of the liabilities to third persons were settled.
 Available cash was distributed to the partners.

As of February 28, 2019, the following transactions occurred:

 Remaining noncash assets were sold at a loss of P100,000.

 The final liquidation expenses for the month of February amounted to P100,000.
 The remaining liabilities to third persons were settled at a compromise amount of P1,500,000.
 Remaining cash was finally distributed to the partners.

16. What is the amount of cash received by partner C on January 31, 2019?

A. 260,000
B. 240,000
C. 300,000
D. 350,000

17. What is the share of B in the maximum possible loss on January 31, 2019?

A. 275,000
B. 110,000
C. 120,000
D. 165,000

18. What is the amount of total cash withheld on January 31, 2019?

A. 550,000
B. 1,600,000
C. 1,750,000
D. 1,700,000