Generally Accepted Accounting Principles and Stock

Satisfactory Essays
Accountancy Department
College of Business and Accountancy
Notre Dame University
Cotabato City, Philippines

CPA – MOCK BOARD EXAMINATION

AUDITING PROBLEMS MR. RONALD GERMO MAMARIL
INSTRUCTION: Select the correct answer for each of the following questions. Mark only one answer for each item by shading the box corresponding to the letter of your choice on the sheet provided. STRICLY NO ERASURES ALLOWED. Use pencil no. 1 only.

CASE 1: STOCK INVESTMENT IN SAN MIGUEL

1. The Stock Investment showed the following details during year 2008

STOCK INVESTMENT IN SAN MIGUEL

Debit Credit
Jan. 1 Audited balance 4,000shares P80,000
Feb. 28 Cash dividend 2,000
Mar. 31 Bought shares 9,000
Apr. 1 Sale of rights 6,000
June 30 Sale of shares 10,000

1. A cash dividend of P0.50 per share were received on Feb. 28. The adjusting entry (assuming the use of the cost method) is:

a. Stock Investment 2,000 Dividend income 2,000 b. Retained earnings 2,000 Dividend income 2,000 c. Dividend Income 2,000 Stock investment 2,000 d. Cash 2,000 Dividend income 2,000

2. On March 15, stock rights were received entitling shareholders to purchase one share for every five held at P15 per share. Market values on this date were: shares, P20; rights, P5. The adjusting entry to recognize the cost allocated to the rights is:

a. Stock rights 16,000 Stock investment 16,000
b. Stock rights 20,000 Stock investment 20,000
c. Stock rights 10,000 Stock investment 10,000
d. Stock rights 30,000 Stock investment 30,000

3. On March 31, 600 shares were purchased with the partial exercise of these rights. The adjusting entry, after the adjustment in No. 7 above has been given effect, is

a. Stock investment 18,000 Stock rights 18,000 b. Stock investment 12,000 Stock rights 12,000 c. Stock rights

You May Also Find These Documents Helpful

  • Powerful Essays

    Generally Accepted Accounting Principles (United States) In the U.S., generally accepted accounting principles, commonly abbreviated as US GAAP or simply GAAP, are accounting rules used to prepare, present, and report financial statements for a wide variety of entities, including publicly-traded and privately-held companies, non-profit organizations, and governments. Generally GAAP includes local applicable Accounting Framework, related accounting law, rules and Accounting Standard. Similar to…

    • 1498 Words
    • 6 Pages
    Powerful Essays
  • Better Essays

    Generally Accepted Accounting Principles September 2, 2013 NUR/571 Generally accepted accounting principles (GAAP) is the term “used to describe the body of and requirements that shape the preparation of the four primary financial statements (Cleverley & Cameron, 2007).” These statements include the balance sheet, the statement of revenues and expenses, statement of cash flow, and statement in changes of net assets (Cleverley & Cameron, 2007). These statements track financial information and…

    • 753 Words
    • 4 Pages
    Better Essays
  • Better Essays

    “Generally Accepted Accounting Principles (GAAP) is the methods, rules, practices and other procedures that have evolved to govern the preparation of financial statements” Justify the statement with suitable examples. Accounting is the language of business and it is used to communicate financial information. In order for that information to make sense, accounting is based on some fundamental concepts. Transactions are recorded in accounts, following certain fundamentals concepts and conventions…

    • 1145 Words
    • 5 Pages
    Better Essays
  • Better Essays

    Part I. A. Generally Accepted Accounting Principles. GAAP is not a fixed set of rules. It is a guideline or more precisely a group of objectives and concepts that have evolved over 500 years from the basic concepts of Luca Pacioli set forth in the 1400s. It governs how financial statements are prepared and presented in the United States. The Financial Accounting Standards Boards (FASB), the American Institute of Certified Public Accountants and the Securities and Exchange Commission (SEC)…

    • 1268 Words
    • 6 Pages
    Better Essays
  • Good Essays

    Generally Accepted Accounting Principles HCS/571 July 11, 2011 Generally Accepted Accounting Principles Generally Accepted Accounting Principles, or GAAP, is an accounting language of business used in health care facilities that have specific policies they must abide by when making choices for the direction of the institution. The Financial Accounting Standards Board, also known as FASB, developed these rules to guide them in recording and reporting financial information. Organizations use…

    • 917 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Generally Accepted Accounting Principles Healthcare is continually evolving and has become a business and an economic force in current society. Historically, stakeholders such as physicians and other health care professionals are adept at making clinical and health-related decisions. However, they often lack the ability to make informed financial decisions. Many have come to realize financial criteria and cost-effective health care delivery is paramount to the success of modern healthcare systems…

    • 635 Words
    • 3 Pages
    Good Essays
  • Better Essays

    Generally Accepted Accounting Principles Stephanie R. Stewart HCS/571 September 24, 2012 Anne Harney Finlon Generally Accepted Accounting Principles Generally Accepted Accounting Principles (GAAP) are important ideas to understand when discussing finances of any kind. It is important for all nurses, especially those in management roles, to understand financial concepts and be involved in the budgetary process. This paper will help to create an understanding of GAAP, the purpose of the principles…

    • 1226 Words
    • 5 Pages
    Better Essays
  • Good Essays

    set of accounting criteria used to develop medical centers financial statements are known as generally accepted accounting principles (GAAP). GAAP are a mixture of respected criteria created by Securities and Exchange Commission (SEC) and accountants. The SEC has authority granted by The Securities Act of 1933 and the Securities Exchange Act of 1934, to determine reporting and disclosure requirements. Oversight is the general functions of the SEC, granting the Governmental Accounting Standards…

    • 844 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    Accountants use generally accepted accounting principles (GAAP) to guide them in recording and reporting financial information. GAAP comprises a broad set of principles that have been developed by the accounting profession and the Securities and Exchange Commission (SEC). Two laws, the Securities Act of 1933 and the Securities Exchange Act of 1934, give the SEC authority to establish reporting and disclosure requirements. However, the SEC usually operates in an oversight capacity, allowing the FASB…

    • 1303 Words
    • 6 Pages
    Powerful Essays
  • Satisfactory Essays

    How should goodwill, properly recorded on the books, be written off in accordance with generally accepted accounting principles? Goodwill is recorded in the accounts only under the circumstances that is is acquired through a purchase of another business or combination of businesses. According to Generally Accepted Accounting Principle under these circumstances where goodwill is acquired through a purchase by another business that it is recognized as having indefinite…

    • 2553 Words
    • 11 Pages
    Satisfactory Essays