Advanced Financial Accounting and Reporting

Accounting Hawk Questionnaire and Answers

1. Which of the following is not a characteristic of most partnerships?

a. Limited life
b. Limited Liability
c. Ease of Formation
d. Mutual Agency

2. At what amount should the partnership record non-cash investments contributed upon formation of a
partnership?
a. Carrying amount
b. Net realizable value
c. value
d. Cost

3. capital account of a partner is debited for all of the following, except:

a. Partnership obligations assumed by the partner
b. Permanent withdrawal of capital
c. Debit balance of the drawing account at the end of the period
d. Partner’s share in the losses for the period

4. Partnership profit and losses are to be divided

a. According to their contribution ratio
b. According to the article of incorporation
c. among partners
d. None of the above

5. Allison and Jianne formed a partnership and agreed to divide initial capital equally even though Allison
only contributed P100,000 and Jianne contributed P84,000 in identifiable assets. Under the bonus
approach to adjust the capital accounts, Jianne’s unidentifiable asset should be debited for:
a. 16,000 c. 0
b. 8,000 d. 46,000

6. Which of the following statements are correct?

a. A partnership is an artificial being created by operation of law, having the right of succession and
the powers, attributes, and properties expressly authorized by law or incidental to its existence.
b. By the contract of partnership two or more persons bind themselves to contribute money,
property, or industry to separate funds, with the intention of dividing the profits among
themselves.
c. Two or more persons may form a partnership for the exercise of a profession.
d. A partnership is that which have capital stock divided into shares and are authorized to distribute
to the holders of such shares, dividends, or allotments of the surplus profits on the basis of the
shares held

For numbers 7 and 8

During the first year of operations, the books of Bacolod Branch showed the following balances:
Sales 2,400,000
Shipments from home office 2,240,000
Purchases 240,000
Ending inventory 400,000
Operating expenses 300,000

Shipments to the branch were billed at 140% of cost. The ending inventory of the branch included P52,800 from
outside purchases.
7. What amount should be reported as ending inventory of the Bacolod branch at cost?
a. 400,000
b. 347,200
c. 300,800
d. 538,880
Solution:
Ending Inventory from Home Office at cost
[(400,000 – 52,800)/140%] 248,000
Ending inventory from outsiders 52,000
Ending inventory at cost 300,800

8. What amount should be reported as true net income of Bacolod branch?

a. 560,800
b. 20,000
c. 508,000
d. 540,800
Solution:
Shipments from home office at cost
(2,240,000/140%) 1,600,000
Purchases from outsiders 240,000
Total available for sale at cost 1,840,000
Ending inventory at cost (300,800)
Cost of goods sold at cost 1,539,200
Gross profit 860,800
OPEX (300,000)
True net income of branch 560,800

9. DD, EE, and FF decided to dissolve the partnership on July 31, 2021. Their capital balances and profit ratio
on this date follow: DD, P33,600 (45%) : EE, P43,200 (25%) : FF, P19,200 (30%). The net income from
January 1 to July 31, 2021 is P7,200. Also, on this date, cash and liabilities are P25,200 and P34,800
respectively. If FF received P24,960 in full settlement of his interest in the firm how much will DD receive
in full settlement of his interest?
a. 42,240
b. 124,800
c. 3,000
d. 115,200
Solution:
DD (45%) EE (25%) FF (30%)
Capital before liquidation 33,600 43,200 19,200
Share in net income 3,240 1,800 2,160
Interest before liquidation 36,840 45,000 21,360
Share in the total gain 5,400 3,000 3,600
Amount received upon liquidation 42,240 48,000 24,960

10. What theory is applicable for partnerships?

a. Proprietary theory
b. Entity theory
c. A mix of proprietary and entity theory
d. Partnership theory

11. A kind of partner who is liable to the extent of his separate property after all the assets of the partnership
are exhausted.
a. General Partnership
b. General Partner
c. Limited Partnership
d. Limited Partner

12. Which of the following is a cash inflow from Financing Activity?

a. Receipts from collection on notes payable
b. Receipts from investment by owners
c. Receipts from royalties and other revenues
d. Receipts from sales of debt securities

13. The following outflows are cash flows from Operating Activities, except:
a. Payment for taxes
b. Payment for interest
c. Payment to settle notes payable
d. Payment to employees

14. Which of the following is not a right of a shareholder?

a. Right to remove directors
b. Right to receive dividend even undeclared
c. Right to attend or vote by proxy
d. Right to amend or repeal by-laws

15. Which of the following is not an advantage of a corporation?

a. Shareholders have limited liability
b. It has continuity of existence
c. Shareholders are general agents of the business
d. Shares of stock can be transferred without the consent of other shareholders

16. type of preference shares that give the issuing corporation the right to purchase (retire) the shares from
its holders at a specified price.
a. Callable Preference Shares
b. Preference Shares
c. Redeemable Preference Shares
d. Cumulative Preference Shares
17. A partnership is a(n):
I. Accounting entity
II. Taxable entity
a. I only c. Neither I nor II
b. only d. Both I and II

18. L&M Ltd is a private limited company, limited by shares. The company has only one director. How many
shareholders does the law require to maintain it?
a.
b. Two
c. One provided it is a different person from the director
d. One which can be the same person as the director

19. A partner's tax basis in a partnership is comprised of which of the following items?
I. The partner's share of other partner's liabilities assumed by the partnership.
II. The partner's tax basis of assets contributed to the partnership.
III. The amount of the partner's liabilities assumed by the other partners.
a. II minus I plus III
b. II minus I minus III
c. I minus II plus III
d. I miss II minus III

20. When a company a makes an offer or invites the public in general to subscribe its shares, it is known
a. Issue of shares at par
b. Initial public offer
c. Public placement of shares
d. Issue of shares at premium

21. On this date the dividend liability is set up

a. Date of declaration
b. Date of record
c. Date of distribution
d. Date of payment

22. In a partnership liquidation, the assets of the partnership shall be applied lastly to
a. Those owing to outside creditors
b. Those owing to the partners with respect to their capital contributions
c. Those owing to the partners with respect to their share of profits
d. Those owing to inside creditors in the form of loans or advances for business expenses by the
partner

23. A partnership agreement most likely will stipulate that assets be reappraised when
a. The partnership is liquidated
b. Profits and losses are being distributed
c. New partner is admitted to the partnership
d. A partner leaves the partnership
 24. In a liquidation, the liabilities of the partnership should be paid
a. Before any sales of assets
b. After a revaluation of assets
c. Before the distribution of cash to partners
d. After the distribution of cash to partners

25. partnership agreement most likely will stipulate that assets be reappraised when
a. The partnership is liquidated
b. and losses are being distributed
c. New partner is admitted to the partnership
d. A partner leaves the partnership

26. paid Diane P500,000 for his P300,000 interest in a partnership. On the partnership books,
a. Daniel will give up a bonus.
b. Daniel will receive a bonus.
c. Daniel will have a P500,000 capital balance.
d. Daniel will have a P300,000 capital balance

27. Total partners' equity will not change when a withdrawing partner
a. Withdraws assets equal to his balance
b. Withdraws assets amounting to greater than his capital balance
c. Withdraws assets amounting to less than his capital balance
d. Sells his interest to a new or remaining partner

28. At the beginning of the current year, Mercado Co. had 270,000, P5 par value shares outstanding. On June
1, the entity acquired 25,000 shares to be held in the treasury. On December 1, 2020, when the market
price of the share was P25, the entity declared a 10% share dividend to be issued to shareholders of
record on December 15. What was the impact of the share dividend on retained earnings?
a. 390,000 decrease
b. 612,500 decrease
c. 390,000 increase
d. 612,500 increase
Solution:
Shares Outstanding (270,000 – 25,000) = 245,000 shares
Impact of share dividend on retained earnings: (245,000 x 10% x P25) = P612,500 decrease

29. The admission of a new partner under the bonus method will result in
a. Bonus to the new partner only
b. Bonus to the old partner only
c. Bonus to either the new partner or the old partner
d. Bonus to both new and old partners

30. When a partner withdraws from a partnership taking assets that represent less than his capital balance,
a. The remaining partners receive a bonus
b. The withdrawing partner receives a bonus
c. The remaining partners owe the withdrawing partner the difference
d. No bonus results

31. Cyril invested P500,000 for a 10% interest in a partnership that has total capital of P3,000,000 after
admitting Cyril. Which of the following is true?
 a. Cyril's capital balance is P500,000
b. Cyril received a bonus of P200,000
c. The original partners received a bonus of P200,000
d. The original partners' capital in the business was P2,700,000 before admitting Cyril
Solution:
Partnership’s Total Capital Balance P3,000,000
Cyril’s interest x 10%
Cyril’s Capital Balance P300,000
Cyril’s investment (P500,000)
Bonus to Old Partners (P200,000)

32. A 1:3:2 ratio is the same as

a. 10%:30%:20%
b. 20%:50%:30%
c. 1/6:1/2:1/3
d. 1/10:3/10:2/10

33. partnership of Michael, Renz, and Erven divides profits or losses in the ratio of 4:3:5. During 2020, the
business earned P95,000. Renz’ share of this profit is
a. P28,500
b. P23,750
c. P38,000
d. P33,334
Solution:
Partnership Income P95,000
Renz’ Ratio x 3/12
Renz’ share of profit P23,750

34. A partner's loss absorption balance is calculated by

a. Dividing the partner's capital balance by his percentage in the rest in capital
b. Multiplying distributable assets by the partner's profit sharing percentage
c. Dividing the partner's total interests by his profit and loss sharing percentage.
d. Multiplying the partner's total interests by his profit and loss sharing percentage.

35. In a partnership liquidation, the final cash distribution to the partners should be made in accordance with
the,
a. Safe payments computation
b. Partner's profit and loss sharing ratios
c. Balances of partner's capital accounts
d. Ratio of the capital contributions by partners.

36. On December 31, 2019 and 2020, Dianne Company had 100,000 ordinary shares and 10,000 cumulative
preference shares of 5% par value. No dividends were declared on either the preference or ordinary
shares in 2019 or 2020. Net income for the current year was P850,000. What is the amount reported as
basic earnings per share?
a. P8.50
b. P9.50
c. P9.00
d. P8.00

Solution:
 Net Income P850,000

Less: Preference Dividend (10,000 shares x P100 par x 5%) (P50,000)

Net Income to ordinary shares P800,000

Basic Earnings Per Share (P800,000/100,000 shares) P8.00

37. January 1,2021, Kimberly Company had ordinary share capital outstanding of P100 par value, 600,000
shares or a total par value of P20,000,000. On July 1,2021, a bonus issue was made in the ratio of one
additional ordinary share for each original share. The net income for the current year was P48,000,000.
What amount should be reported as basic earnings per share?
a. P30
b. P40
c. P50
d. P60
Solution:
Ordinary Shares 600,000 shares

Bonus Issue 200,000 shares

Total Ordinary Shares 800,000 shares

Basic Earnings Per Share (P48,000,000/800,000 shares) P60.00

38. What is the minimum number of members in a public company?

a. 4
b. 6
c. 5
d. 7

39. Which of the following journal entries is the correct accounting treatment for share issue costs?
a. Dr. Cas;h Cr. Share Capital
b. Dr. Cash; Cr. Deferred asset
c. Dr. Share capital; Cr. Cash
d. Dr. Share capital; Cr. Deferred asset

40. The fact that salaries paid to partners are not a component of partnership income is indicative of
a. a departure from generally accepted accounting principles
b. being characteristic of the entity theory
c. being characteristic of the proprietary theory
d. partnerships are characterized by unlimited liability

41. Which of the following best characterizes the bonus method of recording a new partner's investment in a
partnership?
a. Net assets of the previous partnership are not revalued
b. The new partner's initial capital balance is equal to his or her investment
 c. Assuming that recorded assets are properly valued, the book value of the new partnership is
equal to the book value of the previous partnership and the investment of the new partner
d. bonus always results in an increase to the previous partners' capital balances

42. All of the following are true for both general and limited partnership, except
a. must have at least one general partner
b. All partners have the right to participate in the profits of the business
c. All partners are liable for all debts of the firm
d. Both are easily dissolved

43. If the partnership agreement does not specify how income is to be allocated, profit or loss should be
distributed
a. Equally
b. In proportion to the weighted average capital invested during the period
c. Equitable so that partners are compensated for the time and effort expended on behalf of the
partnership
d. In accordance with their capital contributions

44. Which of the following is not considered a legitimate expense of a partnership

a. paid to partners based on the amount of their invested capital
b. Depreciation on assets contributed to the partnership by partners
c. Salaries for management hired to run the business
d. Supplies used in the partners' offices

45. The fair market value of a partnership can be implied by

a. adding the incoming partner's market value of consideration to the book value of the existing
partnership.
b. the tax basis of the old partner's assets added to the incoming partner's consideration.
c. The incoming partner's market value of consideration divided by the incoming partner's
percentage share in profit and loss.
d. The incoming partner's market value of consideration divided by the incoming partner's
percentage ownership share in the new partnership.

46. One who is designated to wind up or settle the affairs of the partnership after dissolution
a. Dormant partner
b. Liquidating partner
c. Silent partner
d. Secret partner

47. not take active part in the business and is not known as partner
a. Managing partner
b. Silent partner
c. Secret partner
d. Dormant partner

48. One who contributes money or property to the common fund

a. partner
b. Limited partner
c. Capitalist partner
d. Managing partner

49. Who is liable to the extent of his separate property after all the assets of the partnership are exhausted?
a. Limited partner
 b. General partner
c. Industrial partner
d. Managing partner

50. One which has failed to comply with all the legal requirements for its establishment
a. De Facto Partnership
b. General Partnership
c. De Jure Partnership
d. Limited Partnership

51. Partners contribute everything except personal things

a. Particular Partnership
b. Limited Partnership
c. General Partnership
d. Universal Partnership

52. A partnership that is established and organised in accordance with all legal requirements is called
a. De Facto Partnership
b. Universal Partnership
c. De Jure Partnership
d. Limited Partnership

53. ABC Corporation is launching a new nanotech product. They have invited many people, seeing this as a
good platform, Diether, a director of ABC corp. told his wife, Lucy, to bring her catering business there.
What will happen to Echo?
a. He will be liable for damages.
b. He is not entitled to salary or other compensation
c. Both a and b
d. None of the foregoing

54. Statement a: In corporations organized under the code, there is citizenship requirement demanded for
the members of the board of directors.
Statement b: A director or trustee can attend or vote by proxy at board meetings.
a. Both are true
b. Both are false
c. Only statement a is true
d. Only statement b is true

55. Statement 1: the election must be by ballot if requested by any voting stockholder or member.
Statement 2: the failure to hold the annual meeting is disastrous because the directors or trustees can
hold-over.
a. Both are true
b. Both are false
c. Only statement 1 is true
d. statement 2 is false

56. One which is in reality not a partnership but considered as a partnership only in relations to those who by
their conduct or omission are precluded to deny or disapprove its existence.
a. Partnership by Ordinary
b. Partnership by Estoppel
c. Partnership by Fixed Term
d. Partnership by Will
57. Takes active part in the partnership and know to the public as a partner in the partnership whether or not
he has an actual interest in the firm
a. Ostensible partner
b. Liquidating partner
c. Nominal partner
d. Managing partner

58. The liability of partners extends beyond their interest in the partnership.
a. Limited Liability
b. Unlimited Liability
c. Partial Liability
d. None of the above

59. It is entered into by two or more persons and the right and obligations arising there from are always
reciprocal.
a. Onerous
b. Preparatory
c. Bilateral
d. Nominate

60. It is an artificial being created by operation of law.

a. Cooperative
b. Sole proprietorship
c. Partnership
d. Corporation

61. A partner who has financial interest in the firm and takes active part in the business but he is not known
to the public as a partner.
a. Dormant partner
b. Secret partner
c. Nominal partner
d. Liquidating partner

62. One whose existence is made known to the public by the partners of the firm.
a. Secret partnership
b. Facto partnership
c. Open partnership
d. De Jure partnership

63. One which has for its object determinate things, their use or fruits, or a specific undertaking, or exercise
of a profession or use vocation. (Under Object of the partnership)
a. Universal Partnership
b. Particular Partnership
c. Limited Partnership
d. General Partnership

64. It is a partnership formed by one or more general partners with one or more limited partners. There must
be at least one general partner who will assume the unlimited liability of the partnership.
a. Limited Partnership
b. General Partnership
c. Universal Partnership
d. Trading Partnership
65. A written agreement which will govern the formation, operation and dissolution of the partnership.
a. Articles of Co-Partnership
b. Articles of Partnership
c. Articles of Corporation
d. None of the above

66. In the statement of cash flows, partners’ withdrawals shall fins under which of the following:
a. Cash flows from operating activities
b. Cash flows from investing activities
c. Cash flows from financing activities
d. Cash flows from partners’ activities

67. Partners C and D share profits in a 2:1 ratio, respectively. Each partner receives an annual salary
allowance of P10,000. If the salaries are recorded in the accounts as a partnership expense rather than
treated as a division of net income, the total amount allocated to each partner for salaries and net income
would be:
a. Less for both C and D
b. Unchanged for both C and D
c. More for C and D
d. Less for C and D

68. Which of the following will not result to the dissolution of a partnership?
a. Incorporation the partnership
b. Assignment of an existing partner’s interest to a third person
c. Admission of a new partner in an existing partnership
d. Retirement of a partner

69. If a new partner acquires a partnership interest directly from the partners rather than from the
partnership itself
a. No entry is required
b. The partnership assets must be revalued
c. The existing partners’ capital accounts should be reduced and the new partner’s account
increased
d. partnership must be liquidated

70. It refers to the process of converting the non-cash assets of the partnership and distributing the total cash
to the creditors and the remainder to the partners
a. Dissolution
b. Termination
c. Liquidation
d. Operation