Morning Session Instructions: Answer as required. Use the papers provided as answer sheets.

Place your code number on the upper right hand corner of your answer sheets. The exam is good for three hours. Make your work as neat as possible. I. MULTIPLE CHOICE 1. An entity returned merchandise purchased on account. Under a perpetual inventory system, the account credited in the journal entry to record the return is a. Purchases b. Purchase returns and allowances c. Inventory d. Accounts payable 2. In preparing monthly bank reconciliation, which of the following items would be added to the balance per bank statement to arrive at the correct cash balance? a. Outstanding checks b. Bank service charge c. Deposits in transit d. A customers note collected by the bank on behalf of the depositor 3. Which of the following is not considered as an operation expense? a. Cost of goods sold c. Transportation out b. Advertising expense d. Administrative expenses 4. If an inventory account is understated at year-end, the effect will be to a. Overstate the net purchases b. Overstate the gross margin c. Overstated the cost of goods available for sale d. Overstate the cost of goods sold 5. Using the expense method, payment for an expense to be incurred in the future is: a. Debited to prepayment c. Debited to receivable b. Credited to cash d. Credited to unearned revenue 6. Which of the following is a valid effect on an adjusting entry related to unearned revenue? a. Decrease in revenue c. Decrease in expenses b. Increase in assets d. Increase in equity 7. A person may become a partner in a partnership by all of the following methods except a. Investing in the partnership with a bonus to the new partner b. Makin a loan to the partnership c. Investing in the partnership with a bonus to the old partners d. Purchasing a partners interest 8. When there is no bidder for delinquent subscription, the subscribed shares a. Will be issued to the delinquent subscriber b. Will be issued in the name of the corporation c. Will be reverted back to unsubscribed shares d. Will remain subscribed 9. The par value of an ordinary share represents a. The liquidation value of the stock b. The book value of the stock c. The legal nominal value assigned to the stock d. The amount received by the corporation when the stock was originally issued 10. Which of the following will not enhance reliability of financial statements? a. Faithful representation c. Understandability b. Neutrality d. Prudence 11. The order of partnership liquidation process is a. Sell assets, disburse 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
BSA Pre-Qualifying Examination 2009 Morning Session

12. Which of the following is not a valid effect of a cash disbursement transaction? a. Increase in asset c. Decrease in liability b. Increase in revenue d. Decrease in equity 13. A partner who takes active part in the business but whose connection with the partnership is concealed to the public is known as a/an: a. Silent partner c. Nominal partner b. Secret partner d. Ostensible partner 14. The articles of Co-Partnership should make clear all of the following except a. Taxes paid by the partnership c. Withdrawals allowed to partners b. Cause of partnership dissolution d. Profit-sharing ratio 15. The entry to record the issuance of ordinary shares for fully paid stock subscription is a. Memo entry b. Debit common stock subscribed and credit common stock c. Debit common stock subscribed and credit additional paid in capital d. Debit common stock subscribed and credit subscription receivable 16. The amount deducted from the catalog price for an item of merchandise is called a a. Trade discount c. Customer discount b. Sales discount d. Purchase discount 17. This document evidences the receipt of cash by the seller a. Cash invoice c. Voucher b. Purchase invoice d. Official receipt 18. Nonstick dividends shall be recognized as liabilities on the a. Date of declaration c. Date of payment b. Date of record d. Date of issuing check 19. Depreciation is best described as a method of a. Asset valuation c. Cost allocation b. Current value allocation d. Useful life determination 20. Which underlying concept serves as the basis for preparing financial statements at regular intervals? a. Accounting entity c. Accounting period b. Going concern d. Stable monetary unit 21. If shares are issued for noncash consideration, the shares should be recorded at the a. The book value of the share b. The fair value of the consideration received c. The book value of the consideration received d. The fair value of the share 22. In a partnership liquidation, a loss from sale of noncash assets is a. Allocated to the partner with the lowest capital balance b. Allocated to partnership liabilities c. Allocated to partners based on their capital balances d. Allocated to partners based on the profit and loss sharing ratio 23. Which of the following does not result in the dissolution of a partnership? a. Marriage of a partner c. Addition of a new partner b. Withdrawal of a partner d. Death of a partner 24. Treasury shares shall be recorded at cost irrespective of whether these are acquired below or above par value. The cost of treasury shares acquired for noncash consideration is usually measured by a. Fair value of the noncash consideration given b. Recorded amount of noncash asset surrendered c. Par value of the shares d. Book value of the shares 25. An item should be included as part of inventory when a. It is out on consignment and is already sold by the consignee b. It has been shipped out FOB destination and was already received by the customer c. It was excluded from the year end count but the company holds illegal title to it d. It has been delivered already but the client refuses to accept due to damage

BSA Pre-Qualifying Examination 2009 Morning Session

II. IDENTIFICATION 1. 2. 3. ___________ is an account with credit balance which is deducted from an asset account. _______ accounts have balances which are carried to the next accounting period. _________ are entries prepared at the beginning of a new accounting period to facilitate the recording of expense payments and revenue receipts in the usual manner. _______ and ________ accounts are closed at the end of each of accounting period by transferring their balances to a summary account called _______________. A _______ balance in this summary account represents net income for the period; a _____ balance represents a net loss for the period. ______ memo is a document issued to show a reduction in the amount owed by a customer because of a goods returned, a defect in the goods or services provided, or an error. ____________ is a partnership which has failed to comply with one or more of the legal requirements for its establishment. ____________ is an entry prepared when a partner contributes skill or industry into the partnership. The ___________ is the value assigned to the non-cash asset contributed into the partnership. _________ is the transfer of capital from one partner to another.

4.

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7. 8. 9.

10. ___________ refers to the termination of the business activities carried on by the partnership. 11. ___________ refers to the termination of the life of an existing partnership. 12. ___________ is the legal right to apply part or the entire amount owing to a partner on a loan balance against deficiency in his capital account resulting from losses in the process of liquidation. 13. ___________ are the persons who compose the corporation whether shareholders or members and may or may not be incorporators. 14. When the value assigned to the asset is understated, the share capital is said to contain _____________. 15. When the value assigned to the asset received in exchange for capital share is overstated, the capital issued is called _________ share capital. 16. ___________ is the change in the capital structure of as corporation by reducing the par or stated value of share capital or by exchanging par value for no par value share capital or vice versa. 17. The equation A= L + OE is known as the _____________. 18. Information has ________ value when it can help users increase the likelihood of correctly or accurately predicting or forecasting outcome of events. 19. Under ____________ when alternatives exist, the alternative which has the least effect on equity should be chosen. 20. ___________ is increase in economic benefit during the accounting period in the form of inflow or increase in asset or decrease in liability that results in increase in equity, other than contribution from equity participants. 21. ___________ is the residual interest in the assets of the entity after deducting all its liabilities. 22. ______________ are checks which are drawn, recorded, and are already given to the payees but bear a date subsequent to the Balance Sheet date. 23. ___________ refer to items not representing checks paid by the bank which are charged by the bank to the account of the depositor, but not yet recorded by the depositor as cash disbursements. 24. The type of dividend that does not affect total assets and total stockholders equity is called ___________. 25. The maximum capital of loss that a partner may absorb without incurring capital deficiency. ___________

BSA Pre-Qualifying Examination 2009 Morning Session

26. ___________ are also known as the books of final entry. 27. When ending inventory is overstated, net income is ___________. 28. When stock is issued for services, the transaction should be recorded at either a Fair Value of the services rendered or ___________ of the share capital issued, whichever is clearly determinable. 29. Under a small stock dividend, Retained Earnings is debited for the ___________ of the share capital on the date of declaration. 30. Costs incurred in organizing a corporation and prior to its operations such as registration costs and printing costs of stock certificates. ____________ III. TRUE OR FALSE 1. A worksheet is optional; it facilitates the preparation of financial statements. 2. The entry to record depreciation expense is an example of an adjustment that would be reversed if reversing entries are made. The balances of all accounts in the general ledger must be closed at the end of the accounting period. The general ledger account that summarizes the detailed information in a subsidiary ledger is known as control account. Reversing entries are prepared at the end of the accounting period. A written partnership contract is required to be prepared whenever a partnership is to be formed. All partnerships are subject to 35% income tax according to the Civil Code of the Philippines. A partners contribution in the form of non-cash assets should be recorded at its agreed value in the absence of a fair market value. All partnerships have at least one general partner.

3. 4.

5. 6. 7. 8.

9.

10. When industry is contributed into the partnership, no entry is prepared. 11. Bonus is allowed to partners only if there is a profit, since bonus is based on profit. 12. All partners are to share on whatever partnership profits or losses, in accordance with their agreement. 13. Profit is represented by a credit balance in the Income Summary account after closing into it all the operating accounts. 14. Partners may intend for salary and interest allowances to be deducted in determining the base for computing bonus. In such case, no bonus is allowed if there is insufficient profit after distribution of salaries and interests. 15. The total assets of the partnership will not increase upon admission of a new partner by purchase of interest. 16. A new partner may be admitted into the partnership even without the consent of all partners provided that at least the majority of the old partners consented thereto. 17. In the admission of a new partner by purchase, the new partner may pay more than, less than or equal to the book value of the interest sold by any or all of the old partners. 18. Asset Revaluation may be recorded upon the admission of a new partner whether by purchase or by investment. 19. The retirement of one of the partners automatically dissolves the partnership. 20. The purchase of treasury share reduces both the total assets and total stockholders equity.

BSA Pre-Qualifying Examination 2009 Morning Session

21. Stock dividends increase the proportionate interests of the stockholders because of the increase in their shareholdings. 22. Revenue and Expense accounts are to be closed by crediting these accounts and debiting the income summary account. 23. The higher the amount assigned to ending inventory, the higher is the net income. 24. In the working paper, you find beginning inventory in the Income Statement, but not in the unadjusted trial balance. 25. When there is income, the balance of the credit side is lower than the debit of the income statement columns. 26. When a stock dividend is declared, total shareholders equity before and after the declaration and distribution of stock dividends are the same. 27. An appropriation of Retained Earnings reduces the total amount of Retained Earnings. 28. The reacquisition of a companys own shares reduces the number of outstanding shares but does not affect the number of issued shares. 29. Upon receipt of capital shares as donation, a memorandum entry is made by crediting Donated Capital 30. When purchases are overstated, income is also overstated. IV. ENTRY MAKING A. Service Entity Problem 1 Journalizing and Trial balance preparation Mr. Rudy Lim owns the RL Cars and Trucks for hire business. On January 1, 2008, he invested the following: Cash P825,000; Land P500,000; Trucks, P2,800,00 and a 14% Notes Payable with BPI for P600,000. The note payable is monthly for a year plus interest. The following are the transactions for the month: 3 4 9 1 4 1 5 1 6 1 7 1 9 2 0 2 2 2 3 2 7 3 0 Paid LTO for the yearly registration of the truck, P2,000. Paid to Surety Insurance Company for a one-comprehensive insurance for the truck, P25,000 Paid for the construction of the garage for the vehicles, P50,000 Hired three drivers for a monthly salary of P8,000 each. Paid for gas and oil, P5,000. Cash receipts for the week, P55,000. Billed Bantayan Furniture Co. P25,000 for hauling of wood from Lope de Vega to Bantayan. Paid semi-monthly salaries of the drivers. Paid BPI for the monthly installment of the notes payable, plus the interest. Received a bill from Petron for the gas and oil, P8,000. Collected from Bantayan Furniture Co. P15,000. Cash receipts for the week, P22,500. Paid 50% of our account with Petron. Received bills for light, P3,500; telephone, P2,250; and water P1,200. Paid for the semi-monthly salaries of the drivers.

Requirements:

BSA Pre-Qualifying Examination 2009 Morning Session

1. Record the above transactions using the following account titles: Cash, Accounts receivable, Prepaid
2. insurance, Trucks, Land, Garage, Accounts payable, Notes Payable, RL, Capital; RL, Drawing; Rental fee revenue; Salaries expense; Gas & Oil expense; Registration fee expense; Utilities expense; Interest expense Prepare a trial balance.

Problem 2 Adjusted trial balance and financial statement preparation DOTA Company Unadjusted Trial balance December 31, 2008 Accounts payable Accounts receivable Accumulated depreciation - Building Accumulated depreciation - Equipment DOTA, Capital DOTA, Drawing Building Cash Equipment Land Miscellaneous expense Notes receivable Office supplies Prepaid insurance Rent expense Repairs expense Salaries expense Service Revenues Unearned Service Revenue 213,000 156,000 254,000 612,000 2,763,000 600,000 1,590,000 45,000 2,150,000 300,000 37,000 360,000 63,000 72,000 36,000 116,000 875,000 2,108,000 450,000

Additional information: 1. Office supplies on hand as of December 31, 2008 is 21,000. 2. One-third of the unearned revenues have been earned as of December 31, 2008. 3. Depreciation for the year is 38,000 for the building and 123,000 for the equipment. 4. Salaries in the amount of 14,000 have accrued at year-end. 5. Allowance for doubtful accounts is estimated to be 2% of accounts receivable. 6. Rent expense paid on August 1, 2006 was for one-year use. 7. An analysis of the insurance policies showed that 30,000 is still unexpired. Requirement: 1. Adjusting entries 2. Balance sheet and Income statement in good form. B. Merchandising Radiohead Company and Creed Supply Company engaged in the following transaction during the month of May 2008: May 4 5 6 7 9 1 0 1 2 1 Radiohead sold merchandise on account to Creed, P162,000. Terms: FOB Destination, 2/10, n/30. Freight charges amounted to P2,000. Radiohead sold merchandise on account to Creed, P710,000. Terms: FOB shipping point, 2/10, n/30. Freight charges amounted to P8,000. Creed paid freight charges on the purchase of May 5. Radiohead received returned merchandise from Creed in the amount of P12,000 from the May 4 sale. Radiohead received payment form Creed for the May 4 transaction less returns and discount. Radiohead paid the transportation charges for the May 4 shipment. Radiohead received payment from Creed for the May 5 transaction. Radiohead sold merchandise on account to Creed, P250,000. Terms:40% trade discount, FOB shipping point, 2/10, n/30. Paid freight charges on the May 18 transaction, P3,000.

BSA Pre-Qualifying Examination 2009 Morning Session

Radiohead received payment from Creed for the amount due from the transaction of May 18.

2 1 2 3 Requirements: 1. Prepare the journal entries for Radiohead Company 2. Prepare the journal entries for Creed Company.

C. Corporate Accounting
Prepare for all entries indicated in the following transactions of Dreamtim Inc.s first year of operations. Jan Feb Mar Apr May Jun Aug Oct Nov Dec 3 1 5 2 6 1 0 1 2 2 5 1 0 4 2 1 2 3 2 4 2 5 3 1 Issued for cash 10,000 common shares at P100 par value. Received subscription for 15,000 preferred shares (6%, P130 par, cumulative, participating) at P150 per share. Issued for cash 20,000 preferred shares at P140 per share. Collected of the Jan 5 subscription as partial payment for all shares subscribed. Received equipment (cost=P400,000, market value=P475,000) in exchange for the issuance of 3,000 common shares. Issued 20,000 shares of common stock at P130 per share. A stockholder donated 15,000 common shares to the corporation. Reacquired 5,000 common shares (this came from Jan3 issue) at P110 per share. Issued 12,500 shares received last May 10 for P115 per share. Re-issued 2,000 of the shares reacquired last June 4 for P120 per share. Received a parcel of land worth P300,000 as donation. Retired 1,500 shares of those reacquired last June 4. Income for the year is P2,500,000. Appropriated retained earnings equal to the balance of the remaining treasury stock.

BSA Pre-Qualifying Examination 2009 Morning Session