Basic FINANCIAL ACCOUNTING & REPORTING (BFAR)

1.) Which of the following items has no effect on owner’s equity?

a. Expense b. Owner’s Withdrawal

c. Purchase of land. d. Revenue

2.) The asset created by a business when it makes a sale on account is termed__________

a. Accounts payable b. Accounts receivable

c. Prepaid Expense d. Unearned Revenue

3.) What is the law regulating the practice of accountancy in the Philippines?

a. R.A. No. 9289. b. R.A. No. 9198

c. R.A. No. 9928 d. R.A. No. 9298

4.) All of the following describe accounting, except

a. A service activity. b. An information system

c. An exact science rather than an art d. A universal language of business

5.) The overall objective of accounting is

a. To provide the information that the managers of an entity need to control the operations

b. To provide information that the creditors can use in deciding whether to make additional
loans

c. To measure the periodic income of the entity

d. To provide quantitative financial information about an entity that is useful in making

6.) These users require information on risk and return on investment

a. Creditors. b. Investors

c. Lenders. d. Customers

7.) Equipment with an estimated market value of P60 000is offered for sale at P90 000. The
equipment is acquired for P30 000 in cash and a note payable of P50 000 due in 30 days. The
amount used in buyer’s accounting records to record acquisition is __________

a. P 80 000 b. P 60 000

c. P 90 000 d. P30 000

8.) Using accrual accounting, revenue is recorded and reported only______________

a. If cash is received after the services are rendered

b. when cash is received at the time services are rendered

c. when the services are rendered without regard to when cash is received

d. when cash is received without regard to when the services are rendered

9.) On January 1, 2016, Potter Company bought a building for P2,750,000 to serve as the
Company’s office. It was estimated that the said building will be useful for 20 years. After the
end of its useful life, the building can still be sold for P250,000. What is the amount of
depreciation expense that should be recognized by Potter Company on December 31, 2016?
a. P 100,000. b. P 125,000

c. P 150, 000. d. P 175, 000

10.) Which of the following entries records the receipt of a utility bill from the water company?

a. debit Accounts Payable, credit Cash

b. debit Accounts Payable, credit Utilities Payable

c. debit Utilities Expense, credit Accounts Payable

d. debit Utilities Payable, credit Accounts Receivable

11.) The process of posting is mostly associated with_________

a. Financial Statements. b. General Ledger.

c. Source documents. d. Worksheet

12.) An item retailing for P 100,000, subject to a trade discount of 25% is paid for within the
discount period on terms 2/10, n/30. What is the amount of payment made?

a. P 73,500 b. P 74,000

c. P 75,000. d. P 100,000

13.) As of December 31, Ravenclaw Merchandising Company’s records show the following
amounts: Purchases P 1,250,000 Purchase discount 25, 000 Purchase returns 140,000 If
Ravenclaw Company’s beginning inventory amounted to P 375,000, the Company’s total Cost of
Goods Available for sale is________________

a. P 710,000 b. P 1,085,000

c. P 1,460,000 d. P 1,250,000

14.) A post-closing trial balance is prepared before

a. Preparing financial statements. b. Reversing the accounts

c. Adjusting and closing the books d. Preparing a worksheet

15.) The unearned rent account has a balance of P 36,000. If P 4,000 of the P 36,000 is unearned
at the end of the accounting period, the amount of the adjusting entry is

a. P 4,000 b. P 40,000

c. P 32,000 d. P 36,000

16.) Treasury stock is classified as a(n)

a. stockholder’s equity account b. contra-asset

c. asset. d. contra-stockholder’s equity account

17.) Liquidation of partnership usually means that

a. Assets are sold b. Liabilities are paid

c. Remaining Cash is distributed to the partners d. All of the above

18.) Erica and Mica formed a partnership on January 1, 2016 by investing P 50,000 each into EM
Coffee Shop. On June 30, 2016, Mica invested an additional 50,000 into the business If they
agreed to divide profit based on initial capital investment, how will they divide the P 120,000
profit they earned in 2016.
a. P 60,000 to Erica and P60,000 to Mica

b. P 40,000 to Erica and P80,000 to Mica

c. P 80,000 to Erica and P40,000 to Mica

d. P 100,000 to Erica and P20,000 to Mica

19.) Erica and Mica formed a partnership on January 1, 2016 by investing P 50,000 each into EM
Coffee Shop. On June 30, 2016, Mica invested an additional 50,000 intothe business If they
agreed to divide profit based on ending capital investment, how will they divide the P 120,000
profit they earned in 2016.

a. P 60,000 to Erica and P60,000 to Mica

b. P 40,000 to Erica and P80,000 to Mica

c. P 80,000 to Erica and P40,000 to Mica

d. P 100,000 to Erica and P20,000 to Mica

20.) If the partner withdraws from the partnership before the end of the accounting period,
updating of the partnership books is

a. Required. b. Optional

c. Not necessary. d. None of the above

21.) The following are kinds of partners except one, choose the exception:

a. Capitalist partner b. Capitalist-secret partner

c. Industrial-managing partner. d. Limited-industrial partner

22.) Blossom, Bubbles and Buttercup formed a partnership to which Blossom contributed a
parcel of land with an acquisition cost of P 25,000. Bubbles contributed P 50,000 cash and
Buttercup P 75,000 cash. The land has a fair value of P 50,000 at the formation date. The total
capital credit of the partnership should be

a. P 150,000 b. P 125,000

c. P 175,000 d. P 145,000

23.) Gumball and Darwin agreed to form a partnership from which Gumball will contribute P
300,000. If Darwin’s contributions is 1/3 of the total agreed capitalization, how much is the
partnerships net assets after the formation using the bonus method?

a. P 500,000. b. P 350,000

c. P 450,000 d. P 900,00

24.) This allowance for profit distribution is granted only if there is profit

a. Bonus. b. Interest

c. Salary. d. All of the above

Use the following information for questions 25 and 26: At December 31, Haha and Hehe are
partners with capital balances of P 40,000 and P20,000, and they share profits and losses in the
ratio of 2:1, respectively. On this date Hihi invests P 17,000 in cash for a one-fifth interest in the
capital and profit of the new partnership.

25.) Assuming asset revaluation will be recorded, how much is the balance of Hehe’s capital
after Hihi is admitted into the partnership?
a. P 45,333. b. P 22,667

c. P 17,000. d. P 8,000

26.) Assuming bonus method is used and there is no increase in net assets is recognized, what
would be the total capital of the partnership after the admission by investment of Hihi?

a. P 85,000 b. P 60,000

c. P 61,600 d.P 77,000

27.) If the amount invested by the incoming partner is equal to the interest he acquires, then
there is

a. No bonus nor asset revaluation. b. Positive asset revaluation

c. Bonus to the old partners D. Bonus to the new partners

28.) The total number of shares the corporate charter permits the corporation to issue is called

a. outstanding stock b. issued stock

c. authorized stock d. ordinary shares capital

29.) If shares of stock are sold for less than their par value, the difference is called

a. discount b. earnings

c. a gain. d. a premium

Use the following data for number 30-32 As of December 31, 2016, the balances of the
shareholder’s equity of Herbie Auto Inc. are shown below: Ordinary Share Capital, P6 par
(30,000 shares authorized, 13 000 shares issued) _________

30.) Premium-Ordinary Share Capital. P 17,000

Treasury Stock-Ordinary Share Capital (2,000 shares at P6 per share)

Preference Share Capital, 5%, P12 par (16,000 shares authorized; 5,000 shares issued)

Premium-Preference Share Capital. P 6,000

Preference Share Capital-Subscribed (2,000 shares)

The amount of Ordinary Share Capital using the above data is:

a. P 180,000 b. P 78,000

c. P 60,000. d. P 360,000

31.) The amount of Preference Share Capital using the above data is:

a. P 60,000. b. P192,000

c. P 180,000 d. P 12,000

32.) The amount of Treasury Stock-Ordinary Share Capital using the above data is:

a. P 360,000. b. P 60,000

c. P 12,000 d. P 180,000

33.) The balance of the income summary account of a corporation is transferred to which of the
following accounts?

a. Retained Earnings b. Share Capital

34.) The reduction of par or stated value of stock by issuance of a proportionate number of
additional shares is termed a:

a. liquidating dividend b. stock split

c. stock option. d. preferred dividend

35.) Characteristics of a corporation include:

a. Shareholders who are mutual agents

b. Direct management by the shareholders (owners)

c. its inability to own property

d. shareholders who have limited ability

36.) The entry to record the purchase of 5,000 shares of a corporation’s own P20 par common
stock at P25, paid in cash, includes a debit to:

a. Common Stock. b. Paid-In Capital in Excess of Par

c. Retained Earnings d. Treasury Stock

37.) Unlimited liability of the partners in a limited partnership pertains to

a. All the partners b. Limited partners only c. General partners only

d. The entities that owes the partnership

38.) When the investment of a new partner exceeds the new partner’s initial capital balance and
asset revaluation is not recorded, who will receive the bonus?

a. The new partner

b. The old and new partners in their new profit and loss ratio

c. The old partners in their new profit and loss ratio

d. The old partners in their old profit and loss ratio

39.) In the liquidation of the partnership, the first cash realized is used to

a. Pay the creditors. b. Pay the general partners

c. Pay the industrial partners. d. Pay all the partners

40.) A corporation purchased 1,000 shares of its P10 par common stock at P20 and subsequently
sold 500 of the shares at P30. What is the amount of revenue realized from the sale?

a. P0 b. P2,500

c. P 5,000. d. P15,000