Simulated Midterm Exam. Far1.pdf

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS SIMULATED MIDTERM EXAMINATION FINANCIAL ACCOUNTING AND REPORTING 1

THEORIES 1. Statement 1 : Financial statements are structured financial representation of the financial position of and the transactions undertaken by an enterprise. Statement 2: Maria Castro records his revenue only upon collection from patients and expenses when he issues a check as payment. Maria Castro uses the accrual basis of accounting. a. Both are true b. Both are false c. Only statement 1 is true d. Only statement 1 is false e. Neither statement 1 nor 2 2. Statement 1: Accrual accounting recognizes revenues when they are earned and expenses when they are incurred regardless of cash flow. Statement 2: In cash basis accounting, revenues and expenses are accounted for only when cash are actually received and paid. a. Both are true b. Both are false c. Only statement 1 is true d. Only statement 1 is false e. Neither statement 1 nor 2 3. Statement 1 : Liabilities are deducted from the assets to get the Owner’s equity, therefor Liabilities are contra-asset account. Statement 2: Prepaid insurance, notes receivables mortgage payable, and unearned revenues are nominal account. a. Both are true b. Both are false c. Only statement 1 is true d. Only statement 1 is false e. Neither statement 1 nor 2 4. Statement 1: The ledger is called the book of final entry while the general journal is book of knowledge. Statement 2: IFRS means International Financial Reporting System. a. Both are true b. Both are false c. Only statement 1 is true d. Only statement 1 is false e. Neither statement 1 nor 2 5. All of these are terms of shipment except __________. a. FOB Shipping Point b. FOB Destination c. Cost, Insurance and Freight d. Delivery Expense e. Free Along Side

6. These are ground rules that provide the general framework in determining the information to be included in financial statements, and how to present this information. a. Articles of incorporation b. Board of accountancy c. Generally Accepted Accounting Principles d. Accounting cycles 7. These are accounts with balances that are not carried forward from year to year because they are reported only for a period of time. a. Real accounts b. Permanent accounts c. Balance sheet accounts d. Nominal accounts 8. The bookkeeper of Kim Oliveria Company recorded the payment of credit customer as a debit a cash and credit to credit to accounts payable. This erroneous recording transaction would result to: a. Understatement of account accounts receivable and accounts payable b. Overstatement of accounts receivable and understatement accounts payable c. Understatement of accounts receivable and overstatement accounts payable d. Overstatement of accounts receivable and accounts payable 9. A debit total greater than credit total under the income statement portion of the worksheet would mean __________. a. Mistakes were made in the preparation of the adjusted trial balance b. The company had a profitable year c. The income Summary account will have a credit balance after the nominal accounts, are closed d. The company had a loss this year 10. The accounting equation must remain in balance __________. a. Only when journal entries are recorded b. Only at the time the trial balance is prepared c. Throughout each step in the accounting cycle d. Only when formal financial statement are prepared 11. When total credit exceeds total debits in the income statement columns of the worksheet, this indicates __________. a. Net Loss b. Net Income c. Zero Profit d. No meaningful amount 12. Adjusting involves __________. a. Only real accounts b. Only nominal accounts c. Only permanent accounts d. One real and one nominal accounts 13. The advanced receipt of rental fee is recorded by having Unearned Rent as credits, this approach of recording is known as __________. a. Asset Method b. Expenses Method c. Liability Method d. Income Method 14. Which of the following concepts determines that expenses related to revenue be report at the same time revenue is reported?

a. b. c. d.

Business entity concept Continuity concept Materiality concept Matching concept

15. Which of the following does not appear in post-closing trial balance? a. Cash b. Bryan, Drawing c. Bryan, Capital d. Unearned revenues 16. __________ entries are prepared to bring all the balances of nominal accounts to zero. a. Journalizing b. Adjusting c. Reversing d. Post-closing 17. An accrued expense can be described as an amount __________. a. Paid and matched with earnings for the current period b. Not paid and matched with earnings for the current period c. Paid and not matched with earnings for the current period d. Not paid and not matched with the earnings for the current period 18. Each subsidiary ledger is represented in the general ledger by summarizing account called a __________. a. Sundry account b. Dominant account c. Controlling account d. Subsidy account 19. If the effect of the debit portion of a specific adjusting entry is to increase an asset account, the credit portion of the entry would be to __________. a. Decrease an asset account b. Increase in a liability account c. Decrease in a liability account d. Decrease in expense account 20. The process of analyzing the accounts receivable and classifying them according to various age groups, with the date being the base point for determining age. a. Allowance method b. Direct write-off method c. Aging of accounts receivables d. Number of day’s sales in receivables 21. The major expense of a merchandising business is __________. a. Selling Expenses b. Purchases c. Cost of Sales d. General and Administrative Expenses e. Income Tax Expense 22. A loss incurred for failure to collect a receivable. a. Depreciation Expense b. Allowance for Bad Debts c. Bad Debts Expense

d. Amortization Expense e. None of the above 23. It is used for all the outflows by the business. a. Cash Receipts Journal b. Cash Disbursement Journal c. Sales Journal d. Purchases Journal e. Subsidiary Ledger 24. An Uncollectible Account Expense is an example of __________. a. Administrative Expenses b. Selling Expenses c. General Expenses d. Other Expenses e. Operating Expenses 25. Account not included in the computation of Cost of Sales. a. Transportation Expenses b. Freight-Out c. Net Purchases d. Beginning Inventory e. Purchase Allowances 26. All of the following are adjusting entries that need to be reversed except __________. a. Adjustment for Accrued Expenses b. Adjustment for Accrued Revenue c. Adjustment for Prepaid Expenses when asset method was used d. Adjustment for Prepaid Expenses when expense method was used e. Adjustment for Unearned Revenue when revenue method was used 27. Net Income from operations is the difference between the __________ and operating expenses. a. Net income Before Tax b. Net income After Tax c. Gross Income d. Cost of Goods Sold e. Gross Sales 28. Overstatement in Ending Inventory will result to __________. a. Understatement in Sales b. Understatement in Net Purchases c. Overstatement in Beginning Inventory d. Overstatement in Gross Profit e. Overstatement in Operating Expenses 29. Which is classified as adjunct account? a. Sales returns and allowances b. Purchase discount

c. Merchandise Inventory d. Freight-In e. Freight-Out 30. An example of nominal and contra account is __________. a. Sales return b. Accumulated Depreciation c. Freight out d. Freight in PROBLEMS 31. The supplies on hand account balance at the beginning of the period was P6,000. Supplies totaling P12,825 were purchased during the period and debiting to supplies on hand. A physical count shows P3,825 of supplies on hand at the end of the period. The proper journal entry at the end of the period is __________. a. Debit Supplies on Hand and credit supplies expense for P9,000 b. Debit Supplies Expense and Credit Supplies on Hand for P12,825 c. Debit Supplies on hand and credit Supplies Expense for P15,600 d. Debit Supplies Expense and credit Supplies on Hand for P15,000 32. Avengers company received P6,900 on April 1, 2019 for one year’s rent in advance and recorded the transaction with a credit to a nominal account. The Dec. 31, 2019 adjusting entry is __________. a. Debit Rent Income and credit Unearned Rent Income for P2,400 b. Debit Rent Income and credit Unearned Rent Income for P1,725 c. Debit Unearned Rent Income and credit Rent Income P7,200 d. Debit Unearned Rent Income and credit Rent Income for P2,400 33. A 3-year insurance policy was purchased on October 1, 2019 for P6,000 and prepaid insurance was debited. Assuming a Dec. 31, year-end, what is the reversing entry at the beginning of the next accounting period. a. None b. Prepaid Insurance 6,500 Insurance expense 6,500 c. Insurance expense 500 Prepaid insurance 500 d. Prepaid insurance 500 Insurance expense 500 34. The beginning of the year total capital for a firm was P40,000. During the year, the owner invested additional P20,000, earned net income is P20,000 and withdrew P5,000 for personal use. If ending total liabilities are P100,000, how much is the ending total assets? a. P165,000 b. P 45,000 c. P175,000 d. P100,000 35. From the list of account balances, calculate the total credit column for the post-closing trial balance; Cash, P15,000; Accounts receivable, P3,000; Prepaid Rent, P2,000; Building, P30,000; Accumulated Depreciation, P13,000; Accounts payable, P6,000; Unearned revenue, P1,000; Moirla, Capital, P30,000 a. P69,000 b. P50,000 c. P45,000

d. P20,000 36. The assets of Nathalie Company amounted to P810,000 on December 31, 2019, but increased to P1,305,000 by December 31, 2020. During the same period, liabilities increased by P270,000. Owner’s equity on December 31, 2019 amounted to P495,000. What was the amount of the Owner’s equity on December 31, 2020? a. P585,000 b. P720,000 c. P1,305,00 d. P1,620,000 37. Jane Company purchased P1,450,000 of land with a P500,000 cash down payment and the balance taken as a note payable. How much did the total assets change? a. P1,450,000 increase b. P 950,000 increase c. P 930,000 decrease d. P 500,000 increase 38. The prepaid rent account shows a balance of P46,350 representing 9-month rent paid on July 31, 2019. Adjusting entry on Dec. 31, 2019 would be __________. a. Dr. Prepaid Rent Cr. Rent Expense for P27,073,50 b. Dr. Rent Expense and Cr. Prepaid Rent for P19,312.50 c. Dr. Prepaid Rent and Cr. Rent Expense for P25,750.00 d. Dr. Rent Expense and Cr. Prepaid Rent, P25,750.00 39. The following data were taken from the Naruto Fastfood Assets, beg. P435,000 Assets, end. P501,000 Liabilities, beg. P100,500 Liabilities, end. P 95,000 Withdrawals P 25,000 How much was the net income for the period? a. P46,500 b. P96,500 c. P66,000 d. P71,500 40. Patrick trading received a 6% 60-day promissory note from Bryan amounting to P90,000 on May 27, 2019. Forty-three days later, Patrick trading discounted the note to the Eugene bank at a rate of 6.5%. How much proceeds would Patrick received from Eugene bank? a. P90,717 b. P90,000 c. P90,194 d. P90,621 41. Kadenang Ginto paid for the following insurance policy premiums: Policy Amount Paid Life of Policy 1 P54,000 3 years 2 P3,000 6 months 3 P24,000 1 year

Date of Purchased Feb. 01, 2013 March 01, 2015 August 1, 2015

Kadenang Ginto uses nominal account method. The adjusting entry on Dec. 31, 2015 would show a debit of __________. a. Prepaid Insurance P62,500

b. Prepaid Insurance P15,500 c. Prepaid Insurance P30,500 d. Insurance Expense P62,500 42. Probinsyano Company show the following balances as of the beginning of the year. Assets, P550,000; Liabilities, P175,000. During the year, the company rendered services for cash amounting to P50,000 and on account for P45,000. Additional investments totaled P60,000 while withdrawals were at P2,000 at the end of every month. Net Loss for the year was P3,000. How much is the total operating expenses for the year? a. Incomplete data b. P92,000 c. P98,000 d. P39,000 43. Payment of rent was made in advance amounting to P54,666 for 6 months lease on a store room. The company made this payment on November 1, 2019 and it uses the nominal method. The initial entry will be __________. a. Dr. Prepaid Rent and Cr. Rent Expense for P18,222 b. Dr. Rent Expense and Cr. Prepaid Rent for P18,222 c. Dr. Prepaid Rent and Cr. Rent Expense for P36,444 d. Dr. Rent Expense and Cr. Cash for P54,666 44. Magandang Buhay was unable to record the adjusting entries (1) on the accrual of interest on Notes Payable amounting to P3,000 and (2) on supplies consumed worth P2,500. The effect on the Net Income by these omissions would be __________. a. Overstated by P5,500 b. Understated by P5,500 c. No effect d. Overstated by P500 45. An old equipment was purchased on September 01, 2007 amounting to P300,000 with an estimated salvage value of P30,000 and an estimated useful life of 10 years. The financial statements for the year ended December 31, 2012 would show balances Depreciation Expense a. b. c. d. e.

P30,000 P36,000 P 9,000 P27,000 P30,000

Accumulated Depreciation P162,000 P144,000 P162,000 P144,000 P144,000

46. The accounting records of Showtime Company show the following as of the year 200Z: Assets

Liabilities

December 31, 200Y

P423,000

P215,000

December 31, 200Z

P515,000

P280,000

During the year, owner’s investment amounted to P43,000 while withdrawals totaled P18,000. How much was the net income(loss) during the year? a. b. c. d.

(P2,000) P26,500 P 2,000 P25,000

47. A store equipment worth P50,000 was purchased on March 01, 2019. It has an estimated scrap value at P5,000 with a useful life of 10 years. Depreciation expense for the ending year would be credited by a. P4,500 b. P 375 c. P3,750 d. P 0 48. Salaries expense of P25,000 was erroneously credited while prepaid rent was understated by P3,300. The total. The total debits in the trial balance was P340,000. After correcting the trial balance, the total debits in the trial balance will be __________. a. P393,300 b. P368,300 c. P340,000 d. P343,300 49. The following are summaries of balance sheet and income statement data for Hazel enterprise for the year 2019: Capital, December 31, 2019 P23,000 Liabilities, January 1, 2019 18,000 Liabilities, December 31, 2019 12,000 Net Loss for the year 7,000 Owner’s investment 6,000 Owner’s withdrawal 2,000 How much is the Total Assets of January 01, 2019? a. P44,000 b. P26,000 c. P 8,000 d. P70,000

50. Dana has the following balances from the adjusted trial balance as of December 31, 2019 Advertising Expense P 8,990 Accounts Receivable 76,000 Accounts Payable 33,000 Accumulated Depreciation 7,900 Cash 90,925 Depreciation Expense 2,300 Equipment 75,000 Interest Expense 3,000 Dana, Drawing 15,000 Notes Payable 211,000 Prepaid Rent 72,500 Service Revenue 96,230 Supplies 1,200 Supplies Expense 8,200 Unearned Service Revenue 2,300 Utilities Expense 7,000 Wages Expense 48,700 The statement of changes in the owner’s equity of Dana would show an ending capital of? a. P46,424

b. P64,465 c. P61,425 d. P104,000 51. FINEST Company purchased merchandise, the invoice for P75,430, P5,908 for freight and terms 5/15, n/30. Merchandise with the amount of P12,500 was returned, and balance of the invoice was paid within the discount period. By what amount did FINEST Company disbursed in full settlement of the account? a. P72,150.00 b. P65,691.50 c. P66,242.00 d. P60,023.00 e. P68,838.00 52. Given the information below, how much is Cost of Goods Sold? Sales P 175,000 Operating Expenses 28,000 Net Income 62,000 a. b. c. d. e.

P75,000 P80,000 P85,000 P90,000 P95,000

53. On August 8, 2019, Remy Trading purchased goods from a supplier for an invoice price of P113,600 with credit terms 2/10, 1/15, n/30; shipment terms FOB shipping point, freight prepaid. Freight charges amounted to P1,530. On August 21, Remy settled its account in full. On Remy’s cash payments journal, how much should appear as credit to “Cash” relating to the transaction? a. P113,600.00 b. P115,130.00 c. P113,978.30 d. P112,464.00 e. P113,994.00 54. On December 31, 2018, Castro Company has P3,500,000 accounts receivable. 5% of it is deemed to be uncollectible. The company estimates that only 60% of the outstanding receivables will be collectible. How much is the net realizable value on December 31, 2018? a. P1,330,000 b. P1,995,000 c. P2,100,000 d. P1,925,000 e. P1,575,000 55. S Company sold merchandise to B Company on cash basis. List price is P50,000 subject to trade discounts of 5% and 7%, inclusive of 12% VAT. Which of the following is correct? a. S Company would debit Purchases of P39,442 b. S Company would debit Sales of P39,442 c. B Company would credit an Output Tax of P4,733

d. B Company would debit a Cash of P44,175 e. B Company would debit an Input Tax of P4,733

56. Given the following data: Sales Salaries Expense Office Salaries Expense Rent Expense Insurance Expense Uncollectible Account Expense Store Supplies Expense Depreciation Expense – Store Equipment

P 37,625 22,575 15,000 3,750 5,625 3,775 2,500

What is the total Selling Expenses? a. P64,525 b. P41,325 c. P43,900 d. P46,950 e. P49,525 57. Using the following data: Sales Gross Profit Operating Expenses

P2,755,000 60% of Sales 15% of Gross Profit

How much is the Cost of Goods Sold? a. P 247,950 b. P 413,250 c. P1,102,000 d. P1,653,000 e. P1,405,050 58. The cost of goods sold is P67,350. Beginning and ending inventory is P22,500 and P33,750, respectively. If freight-out is P3,000 and purchase returns is P5,000, what is the amount of net purchases? a. P81,600 b. P83,600 c. P78,600 d. P86,600 e. P48,100 59. If the ending inventory is P225,750, Cost of Goods Available for Sale is P300,000, and the Net Purchases is P78,250, how much is the increase or decrease in merchandise inventory? a. P304,000 increase b. P152,500 increase c. P152,500 decrease d. P 4,000 increase e. P 4,000 decrease

60. Uncollectible accounts expense is equal to 4.25% of credit sales. If the credit sales were P250,000, which of the following will be part of the adjusting entry for uncollectible account expense? a. Debit Allowance for Uncollectible Accounts, P10,625 b. Debit Uncollectible Accounts Expense, P10,625 c. Debit Sales Returns and Allowances, P10,625 d. Debit Accounts Receivable, P10,625 e. No Entry 61. Just before adjusting entries are made at year end, JPIAs FINEST Company’s Accounts Receivable balance P375,000 and Allowance for Uncollectible Accounts has a credit balance of P3,400. An aging of accounts receivable results in P38,600 estimate of uncollectible. Using the aging of account receivable method, the bad debts expense for the year is __________. a. P35,200 b. P38,600 c. P42,000 d. P39,600 e. P43,000 62. Christian Company purchased merchandise on account, P75,000 with credit terms of 2/10, n/30, on April 3, 2019. On April 11, he returned P4,000 worth of goods purchased. If he paid within the discount period, which of the following is correct? a. Under Periodic System, Christian Company will debit Accounts Payable, P69,580 b. Under Periodic System, Christian Company will credit Purchase Discount, P1,420 c. Under Periodic System, Christian Company will credit Cash, P73,500 d. Under Perpetual System, Christian Company will credit Accounts Payable, P71,000 e. Under Perpetual System, Christian Company will credit Merchandise Inventory, P69,580 63. At the end of the first month of operations, Liway company’s bookkeeper prepared financial statements which showed assets of P4,000,000, liabilities of P1,500,000 and net income of P500,000. In preparing the statements, the bookkeeper overlooked the accrued wages at month-end of P30,000. The correct owner’s equity at month-end is __________. a. P2,970,000 b. P2,530,000 c. P2,470,000 d. P1,970,000 64. The Capital Account had an ending balance of P5,000 and a beginning balance of P2,000. If withdrawals were P1,000, then, before closing, the income summary account had a balance of a. P4,000 debit b. P4,000 credit c. P3,000 debit d. P3,000 credit 65. Samson Publishing has total assets amounting to P400,000 at the beginning of the year. During the year, capital increased by P23,000 while liabilities decreased by P9,000. How much would be the total assets at the end of the year? a. Cannot be computed b. P432,000 c. P400,000 d. P414,000