MIDTERM QUIZZES

The loss absorption balances represent the maximum loss that the partners could absorb without reducing their equity to zero. a. True b. False

B

The sale of shares by a shareholder to another affects the total contributed capital of the corporation. a. True b. False

B

When cash is insufficient to fully satisfy the cash requirements in a particular priority, then the available cash will be distributed using the profit and loss ratio. a. True b. False

B

Subscriptions Receivable collectible within one year should be presented in the statement of financial position as a: a. Non-current asset b. Retained earnings c. Share premium d. Current asset

D

A shareholder does not have the right to transact corporate business or to intervene in the management of the business. a. True b. False

A

Ordinary shares of stock may be issued with par value or no-par value. a. True b. False

A

The creditors of the partnership have priority in payments over those of the partners' separate creditors as regards the partnership properties. * a. True b. False

A

All incorporators are subscribers, but not all subscribers are incorporators. a. True b. False

A

An arbitrary amount assigned by the board of directors to each share of no-par value stock is the: a. Stated value b. Par value c. Redemption value d. Liquidation value

A

As of Nov. 30, 2020, partners Vic, Gary and Andy had capital balances of P40,000; P25,000 and P5,000, respectively, and their profit sharing ratio is 3:2:1. The partners decided to liquidate, and sold all the non-cash assets for P37,000. After payment of all liabilities of P12,000, they have P28,000 cash left for distribution. The loss on realization of the non-cash assets was: a. P42,000 b. P40,000 c. P45,000 d. P21,000 e. None of the above

A

If 100 ordinary shares of P100 par are subscribed for P120, the journal entry should include: a. Debit Subscriptions Receivable, P12,000 b. Debit Subscriptions Receivable, P10,000 c. Credit Subscriptions Receivable, P12,000 d. Credit Subscribed Share Capital, P12,000 e. None of the above

A

If a partner is insolvent, his personal properties shall first be distributed to: a. Partnership creditors b. The partners by way of additional contributions when the assets of the partnership are insufficient to settle all partnership obligations c. Partnership and separate creditors in the ratio of their loan exposures d. Separate creditors

A

If the liquidation of a partnership results in a negative balance in a partner's account, the partner must pay to the partnership the amount of his negative balance. a. True b. False

A

Issued shares are the a. Number of shares that have been distributed to the shareholders b. Total number of shares that can be issued by the corporation c. Number of shares that are in the hands of the shareholders d. Number of shares that the corporation reacquired

A

Legal capital is that portion of the contributed capital or the minimum amount of paid-in capital which must remain in the corporation for the protection of corporate creditors. a. True b. False

A

No-par value shares have a minimum stated value of P5 per share. a. True b. False

A

On Jan 1, 2021, partners Leng, Rica and Elan who share profits and losses in the ratio of 5:3:2, respectively, decided to liquidate their partnership. The account balances on this date are: Cash, P50,000; Other Assets, P250,000; Liabilities, P60,000; Capital balances: Leng, P80,000; Ricas, P90,000; and Elan, P70,000. On Jan 15, the first sale of other assets with a book value of P150,000 realized P120,000. Safe installment payments were made on the same date. How much cash should be distributed to the partners? a. Leng, P15,000; Rica, P51,000; Elan, P44,000 b. Leng, P40,000; Rica, P45,000; Elan, P35,000 c. Leng, P55,000; Rica, P33,000; Elan, P22,000 d. Leng, P60,000; Rica, P36,000; Elan, P24,000 e. None of the above

A

Restricted interests are provided for assumed non-sale of remaining non-cash assets and for assumed insolvency of deficient partners. a. True b. False

A

Shareholders of a corporation elect the board of directors, who in turn appoint the top officers of the corporation. a. True b. False

A

Stock corporations have their share capital divided into shares of stock, and are authorized to distribute to the holders of such shares dividends or allotments of the accumulated profits on the basis of the shares held. a. True b. False

A

The following is the priority sequence in which the liquidation proceeds will be distributed for a partnership: a. Partnership liabilities, partnership loans, partnership capital balances b. Partnership drawings, partnership liabilities, partnership loans, partnership capital balances c. Partnership liabilities, partnership loans, partnership drawings, partnership capital balances d. Partnership liabilities, partnership capital balances, partnership loans

A

The right of offset is the legal right of a partner to apply part or all of his loan account balance against a capital deficiency resulting from losses in the realization of the partnership assets. a. True b. False

A

The shareholders or members mentioned in the Articles of Incorporation originally forming and composing the corporation, and who are signatories thereof are the: a. Incorporators b. Corporators c. Promoters d. Subscribers e. None of the above

A

The use of safe payments schedule and cash priority program are alternatives which will yield the same ultimate cash distributions to the partners. a. True b. False

A

When no-par value shares are issued for cash, Share Capital is credited for an amount equal to the cash received a. True b. False

A

When shares with par value are sold for a price that is higher than the par value, Share Capital is credited only for the total par value of the shares sold. a. True b. False

A

A corporation can come into existence by mere agreement of the parties as in the case of a partnership. a. True b. False

B

A partner's free interest represents that portion of a partner's interest which should remain available to absorb possible future losses. a. True b. False

B

A partner's inability to meet his obligations at the time of liquidation relieves that individual of his liabilities to the other partners. a. True b. False

B

A partner's interest can be obtained by simply adding the partner's capital account and his loans to and from the partnership. a. True b. False

B

All corporations issue shares of stock and are either public or private corporations. a. True b. False

B

An individual shareholder may be personally held liable for all debts incurred by the corporation. a. True b. False

B

Authorized shares are the *= a. Number of shares that have been distributed to the shareholders b. Total number of shares that can be issued by the corporation c. Number of shares owned by the shareholders at balance sheet date d. Number of shares that the corporation has issued

B

Ely, Cam and Rio, partners, share profits and losses equally. The partnership is being liquidated, and after all assets are realized and liabilities are paid, there remained P52,000 cash available for distribution to the partners. Ely and Cam have capital balances of P40,000 and P30,000, respectively. Rio has a debit balance of P18,000 in his capital account. If Rio is personally insolvent, how much cash will Ely receive? a. P26,000 b. P31,000 c. P34,000 d. P40,000 e. None of the above

B

If 100 ordinary shares of P100 par are subscribed for P120, the journal entry should include a credit to: a. Subscribed Share Capital, P12,000 b. Subscribed Share Capital, P10,000; and Share Premium, P2,000 c. Subscribed Share Capital, P10,000; and Retained Earnings, P2,000 d. Subscriptions Receivable, P10,000; and Share Premium, P2,000

B

Partners Mat and May have a capital balance of P200,000 each and share profits and losses in a 3:2 ratio, respectively. Cash is P100,000; non-cash assets equal P600,000, and liabilities amount to P300,000. If the non-cash assets are sold for P250,000, and each partner is personally insolvent, then May eventually will receive cash of: a. P 0 b. P 50,000 c. P 60,000 d. P100,000 e. None of the above

B

The Corporation Code of the Philippines provides security to corporate creditors by requiring the corporation to set aside a minimum permanent investment which cannot be distributed to the shareholders during the lifetime or existence of the corporation. This fund is the: a. Authorized capital b. Legal capital c. Trust capital d. Fund theory

B

The board of directors is responsible for the formulation and implementation of the overall policies of the corporation. a. True b. False

B

The concept of legal capital exists to protect the corporation's assets for the shareholders of the corporation. a. True b. False

B

Which of the following is not a characteristic of the corporate form of organization? a. Limited liability b. Mutual agency c. Continuous existence d. Centralized authority e. None of the above

B

A corporation whose shares of stock can be purchased by anyone and is traded in the stock market is known as a/an: a. Government-owned corporation b. Close corporation c. Open corporation d. Not-for-profit corporation

C

A partner's loss absorption capacity is determined by a. Dividing the partner's capital balance by his percentage interest in capital. b. Multiplying distributable assets by the partner's profit sharing percentage. c. Dividing the partner's total interest by his profit sharing percentage. d. Multiplying the partner's total interest by his profit sharing percentage.

C

As of Nov. 30, 2020, partners Vic, Gary and Andy had capital balances of P40,000; P25,000 and P5,000, respectively, and their profit sharing ratio is 3:2:1. The partners decided to liquidate, and sold all the non-cash assets for P37,000. After payment of all liabilities of P12,000, they have P28,000 cash left for distribution. Assuming that all partners are insolvent, the share of Gary in the P28,000 cash for distribution was: a. P11,000 b. P14,000 c. P10,200 d. P 0 e. None of the above

C

Eda, Cas and Pal have capital balances of P40,000; P50,000 and P18,000, respectively, and share profits 4:2:1. If Eda received P26,000 upon liquidation, Pal received: a. P26,000 b. P18,000 c. P14,500 d. P14,000 e. None of the above

C

Jardy Corp. issued 10,000 of its P20 par value shares at P50 per share. The amount credited to Share Premium is: a. P200,000 b. P500,000 c. P300,000 d. P700,000 e. None of the above

C

Ordinary shares have all the following rights, except the right to: a. Share in the corporate profits b. Receive information about the corporation c. Receive part of the profit before other classes of shares d. Attend the annual shareholders' meeting

C

Outstanding shares are the a. Number of shares that have been distributed to the shareholders b. Total number of shares that can be issued by the corporation c. Number of shares that are owned by or in the hands of the shareholders d. Number of shares that the corporation has reacquired

C

Partners Mat and May have a capital balance of P200,000 each and share profits and losses in a 3:2 ratio, respectively. Cash is P100,000; non-cash assets equal P600,000, and liabilities amount to P300,000. If the non-cash assets are sold for P350,000, then Mat's capital account will: a. Decrease by P105,000 b. Decrease by P210,000 c. Decrease by P150,000 d. Increase by P210,000 e. None of the above

C

The par value of ordinary shares is: a. The amount received by the corporation when the shares were originally issued b. The amount at which the share is currently being traded in the stock market c. A designated peso amount per share stated in the articles of incorporation d. The book value of the ordinary shares

C

Under the journal entry method, the entry to record authorization includes a: a. Debit to Authorized Share Capital for the total par value of the authorized shares b. Debit to Unissued Share Capital for the issue price of the shares sold c. Credit to Authorized Share Capital for the total par value of the authorized shares d. Credit to Unissued Share Capital for the total par value of the unissued shares

C

When shares are sold on subscription, a. Subscriptions Receivable is used to record the par value of the shares issued b. The Share Capital account is credited when the subscription contract is signed and a down payment is received c. The Share Capital account is credited when the subscription price has been fully paid and the shares are issued d. The Share Capital account is not used. Shares issued on subscription are credited to Subscribed Share Capital, a shareholders' equity account.

C

After all non-cash assets have been sold in the liquidation of the partnership of Zon and Ron, the ledger contains the following account balances: Cash, P 47,000; Accounts Payable, P 32,000; Loan Payable to Zon, P15,000; Zon, Capital, (P7,000); and Ron, Capital, P7,000. Available cash should be distributed with P32,000 for payment of accounts payable and: a. P7,000 to Zon and P8,000 to Ron b. P7,500 each to Zon and Ron c. P8,000 to Zon and P7,000 to Ron d. P15,000 to the loan payable to Zon e. None of the above

D

As of Nov. 30, 2020, partners Vic, Gary and Andy had capital balances of P40,000; P25,000 and P5,000, respectively, and their profit sharing ratio is 3:2:1. The partners decided to liquidate, and sold all the non-cash assets for P37,000. After payment of all liabilities of P12,000, they have P28,000 cash left for distribution. Assuming that all partners are insolvent, the share of Vic in the P28,000 cash for distribution was: a. P19,000 b. P16,000 c. P18,000 d. P17,800 e. None of the above

D

Eda, Cas and Pal have capital balances of P40,000; P50,000 and P18,000, respectively, and share profits 4:2:1. If Eda received P8,000 upon liquidation, the total amount received by all the partners was: a. P108,000 b. P 56,000 c. P 24,000 d. P 52,000 e. None of the above

D

The following are the steps in the creation and organization of a corporation, except: a. Incorporation b. Promotion c. Formal organization and commencement of business operations d. None of the above

D

Which of the following statements is correct regarding a partner's capital deficiency? a. Partners who absorb another's capital deficiency have a legal claim against the deficient partner. b. The partner should contribute to reduce the debit balance to the extent possible. c. If contributions are not possible, the other partners with credit capital balances will be allocated a portion of the debit balance or the capital deficiency. d. All of the above statements are correct.

D

Which of the following terms are most likely to appear in the shareholders' equity section of a corporation's statement of financial position? a. Share capital, cash, and retained earnings b. Share capital, contributed capital in excess of par, and other assets c. Contributed capital, earned surplus, and unrealized gains and losses d. Share capital, share premium, and retained earnings

D

A corporation has the following attributes, except: a. An artificial being with a personality separate and distinct from its shareholders b. Created by operation of law c. Enjoys the right of succession d. Has the powers, attributes and properties expressly authorized by law or incident to its existence e. None of the above

D *

The top governing body of a corporation is/are the: a. Incorporators b. Shareholders c. Management d. Corporate officers e. Board of directors

E