1st year Fundamentals of Accounting PDF

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Basic Accounting Which of the following adjusting entries may a reversing entry be used? a. Debit insurance expense, credit prepaid insurance. b. Debit interest receivable, credit interest income. c. Debit unearned rental income, credit rental income. d. Debit depreciation expense, credit accumulate...

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Basic Accounting 1. Which of the following adjusting entries may a reversing entry be used? a. Debit insurance expense, credit prepaid insurance. b. Debit interest receivable, credit interest income. c. Debit unearned rental income, credit rental income. d. Debit depreciation expense, credit accumulated depreciation.

2. Which of the following is likely to be an incorrect closing entry? a. Debit dividends, Credit retained earnings. b. Debit sales revenue, Credit income summary. c. Debit income summary, Credit rent expense. d. Debit income summary, Credit retained earnings. 3. Its function is to provide quantitative information, primarily financial in nature about economic entities that is intended to be useful in making economic decisions. a. Mathematical economics. c. Accounting. b. Quantitative methods. d. Mathematics of finance 4. The branch of accounting that focuses of the general purpose reports on the financial position and reports of operations a. Financial accounting. c. Auditing. b. Managerial accounting. d. Accounting system 5. It is a part of internal control that deals particularly with the accounting activities of a business, c. Internal accounting control. a. Accounting system. b. Check and balance principle. d. Internal audit. 6. A listing of all the enterprise’s general ledger accounts in a systematic form. a. Subsidiary ledger. c. Voucher. b. Chart of accounts. d. Accounts. 7. Balance sheet accounts that are not eliminated in the closing process are called a. Nominal.c. Permanent. b. Positive. d. Real. 8. The mechanical process of recording transactions and events on the books of accounts in a chronological sequence in accordance with established accounting rules and procedures a. Summarizing. c. Journalization. b. Reporting. d. Classification. 9. The recording phase of financial accounting covers the following steps, except a. Business documents are received and prepared. b. Transactions are journalized. c. Transactions are posted to the ledger. d. Financial statements are prepared. 10.

Adjusting entries, closing entries and reversing entries are recorded in the

a. General journal. b. Sales journal, cash receipts journal, purchases journal, cash disbursement or cash payments journal. c. Cash receipts journal as appropriate. d. Sales journal as required. 11. An accrued expense can best be described as an amount a. Paid and currently matched with earnings. b. Paid and not currently matched with earnings. c. Not paid and not currently matched with earnings. d. Not paid and currently matched with earnings. 12. Which among the following accounts has a normal balance which may be increased when debited? a. Mortgage payable. c. Owners’ equity. b. Depreciation. d. Sales. 13. Which of the following may not be made? a. Recording entries. c. Reversing entries. b. Adjusting entries. d. Closing entries. 14. A purchase should be recognized in the accounting records when a. Payment is made for the item purchased. b. The purchase requisition is sent to the processing department. c. The buyer receives the seller’s bill. d. Title transfer from the seller to the buyer. 15. You received a bill for magazine advertising services which was to be paid in 15 days, P250. Your entry will be a. Debit Advertising Expense, P250. Credit Cash, P250. b. Debit Cash, P250. Credit Advertising Revenue, P250. c. Debit Advertising Expense, P250. Credit Accounts Payable, P250. d. Debit Accounts Receivable, P250. Credit Advertising Revenue, P250. 16. The trial balance of a company taken at the end of 2020 showed a debit total which exceeded the credit total by P8,100. Which of the following is probably responsible for this situation? a. The balance of P89,000 in the Accumulated Depreciation for Buildings account was entered in the trial balance as P80,900. b. The balance of P4,050 in the advertising expense account was entered as credit. c. The balance of P9,000 in the Office Equipment account was entered as a debit of P900 in the trial balance. d. The balance of P16,200 in the Unexpired Insurance account was entered as a credit in the trial balance. 17. The balancing figure in the worksheet is net income or net loss. There is net loss if a. The total of the credits exceeds the total of the debits in the income statement columns. b. In the balance sheet columns the total debits exceeds the total of the credits. c. The total of the credits is the same as the total of the debits in the income statement columns.

d.

In the balance sheet columns, the total of the credits exceeds the total of the debits.

18. Entries prepared, as a step in the accounting process, to bring the books and accounts up to date, is known as a. Closing entries. c. Opening entries. b. Adjusting entries. d. Reversing entries. 19. The Burgos Trading Co. borrowed P12,000 for six months at 12% on August 1, interest payable at the maturity of the loan. Assuming that the accounting period ends on December 31, the adjusting entry required on that date is a. Interest expense 72 Accrued interest 0 72 payable 0 b. Interest expense 72 Cash 0 72 0 c. Interest expense 60 Cash 0 60 0 d. Interest expense 60 Accrued interest 0 60 payable 0 20.

On November 1, 1996, Georgetown Co. paid P360,000 to renew its insurance policy for three years. At December 31, 1996, Georgetown’s unadjusted trial balance showed a balance of P9,000 for prepaid insurance and P411,000 for insurance expense. What amounts should be reported for prepaid insurance and insurance expense in Georgetown’s December 31, 1996 financial statements? (M) d. a. b. c. Prepaid P349,000 P340,000 P330,000 P340,000 insurance Insurance P101,000 P120,000 P120,000 P110,000 expense

Questions 21 through 26 are based on the following information. The following is an extract from the worksheet of the Cashmere Company for the year ended December 31, 2020.

Cash Accounts receivable

Unadjusted

Adjusted

Dr.

Dr.

Cr.

P 6,000 3,200

Cr.

P 6,000 3,000

Allow. for doubtful accounts Accrued service revenue Supplies on hand

P 140

P 190

400

250

Land

4,000

4,000

Buildings

21,00

21,000

100

0 Accum. Depreciation – buildings Equipment

6,000 5,600

Accum. Depreciation – equipment Accounts payable

7,000 5,600

1,400

2,000

500

500

Accrued expenses

350

Revenue received in advance Mortgage payable

1,500

1,200

5,100

5,100

W. Fraser, Capital

13,700

13,70 0

W. Fraser, Drawings Revenue from Services Salaries expense Advertising expense

7,000

7,000 32,560

10,70 0 1,000

3,960 11,000 1,000

Supplies expense

150

Depreciation – building Depreciation equipment Bad debts expense

1,000

Travel expense

600 250 1,800

1,800

Interest expense 200 P60,9 00

. P60,90 0

21.

The unadjusted working capital is c. P7,460 a. P30,660 b. P18,890 d. P2,360

22.

The adjusted working capital is c. P7,110 a. P28,710 b. P16,910 d. P2,010

23.

The working capital decreased by a. P13,750 c. P1,950 b. P1,980 d. P350

24.

The unadjusted net income is a. P30,660 c. P2,360 b. P18,890 d. P18,860

250 P63,00 0

. P63,0 00

25.

The adjusted net income is a. P28,710 c. P7,110 d. P16,910 b. P2,010

26.

The net income a. Increased by P1,980 b. Decreased by P1,980

c. d.

Decreased by P13,750 Decreased by P1,950

27. The following errors were made in preparing a trial balance: the ₱1,350 balance of Inventory was omitted; the ₱450 balance of Prepaid Insurance was listed as a credit; and the ₱300 balance of Salaries Expense was listed as Utilities Expense. The debit and credit totals of the trial balance would differ by a. ₱1,350. b. ₱1,800.

c. d.

₱2,100.

₱2,250.

28.At January 1, a sole proprietorship's assets totaled ₱210,000, and its liabilities amounted to ₱120,000. During the year, owner investments amounted to ₱72,000, and owner withdrawals totaled ₱75,000. At year-end, assets totaled ₱270,000, and liabilities amounted to ₱171,000. The amount of net income for the year was (E) A. ₱0 C. ₱9,000

B. ₱6,000

D. ₱12,000

29 .The list price and term of a merchandise purchased is P8,000 less 15%, 10%, 5%, 2/10, n/30. The payment within the discount period is (E) a. P5,697.72 c. P5,488. b. P5,654.00 d. P7,840 30. Utley Retailers purchased merchandise with a list price of ₱30,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. Utley should record the cost of this merchandise as (E) a. ₱21,000. b. ₱21,600.

c. d.

₱23,400. ₱30,000.

31. An enterprise purchased 1,000 gross amount of inventory on account with terms of 2% discount if paid within 10 days. The seller was responsible for delivery to the shipping point, with freight of 30 prepaid by the seller. The enterprise records purchases at the net amount. The journal entry to record payment 8 days after the invoice date is A. B.

C.

D.

Accounts payable Cash Accounts payable Freight-in Cash Purchases Freight-in Accounts payable Purchases Freight-in Accounts payable

1,010 1,010 980 30 1,010 1,000 30 1,030 980 30 1,010

32.Davis Hardware Company, uses a perpetual inventory system. How should Davis

record the sale of merchandise costing ₱620 for ₱960 on account? A.

B.

C.

D.

Inventory Accounts receivable Sales Revenue from sales

620

Accounts receivable Sales revenue Cost of goods sold Inventory

960

Inventory Gain on sale Sales revenue

620 340

Accounts receivable Sales revenues Gain on sale

960

S, S & T

620 960 960 960 620 620

960 620 340

33. Beginning and ending Accounts Receivable balances were ₱28,000 and ₱24,000, respectively. If collections from clients during the period were ₱80,000, then total services rendered on account were apparently (E) a. ₱76,000. b. ₱84,000.

c.

₱104,000. d. ₱108,000.

34.Melissa Company sold an item on credit for P5,000,000 less multiple trade discounts of 20 and 5. The sale is subject to VAT. Which entry to record this sale is correct? A. Debit Accounts Receivable for P5,500,000 and Trade Discount for P1,200,000 and credit Sales for P5,000,000, Output Tax for P500,000 and Allowance for Sales Discount for P1,200,000. B. Debit Accounts Receivable for P4,125,000 and credit Sales for P3,750,000 and Output Tax for P375,000. C. Debit Accounts Receivable for P4,180,000 and credit Sales for P3,800,000 and Output Tax for P380,000. D. Debit Accounts Receivable for P5,500,000 and credit Sales for P5,000,000 and Output Tax for P500,000. Partnership and Corporation 35. The Matt and Jeff partnership agreement provides for Matt to receive a 20% bonus on profits before the bonus. Remaining profits and losses are divided between Matt and Jeff in the ratio 2:3, respectively, which partner has a greater advantage when the partnership has a profit or when it has a loss? A. B. C. D. Profit Jeff Jeff Matt Matt Loss Jeff Matt Jeff Matt 36. In the Rom-Rol partnership, Rom and Rol had a capital ratio of 3:1 and a profit and loss ratio of 2:1, respectively. The bonus method was used to record Rod's admittance as a new partner. What ratio would be used to allocate, to Rom and Rol, the excess of Rod's contribution over the amount credited to Rod's capital account? A. Rom and Rol's old capital ratio B. Rom and Rol's old profit and loss ratio C. Rom and Rol's new relative capital ratio

D. Rom and Rol's new relative profit or loss ratio 37. The interest of the withdrawing, retiring, or deceased partner shall be adjusted for which of the following? I. His share of any profit or loss up to the date of his withdrawal, retirement or death, if he withdraws, retires or dies during the year II. His share of any revaluation gains or losses as at the date of his withdrawal, retirement, or death A. I only C. I or II B. II only D. I and II 38. When Mill retired from the partnership of Mill, Yill and Lill, the final settlement of Mill's interest exceeded Mill's capital balance. Under the bonus method, the excess A. Was recorded as goodwill B. Was recorded as an expense C. Reduced the capital balances of Yill and Lill D. Had no effect on the capital balances of Yill and LiLI 39. State the proper order of partnership liquidation. I. Outside creditors II. Owners' interests III. Inside creditors A. I, II and III C. II, I and III B. I, III, II D. III, I and II 40. A simple partnership liquidation requires A. Creditors be paid in an orderly manner B. Periodic payments to partners as cash becomes available C. Periodic payments to creditors and partners determined by a safe payment schedule D. Partnership assets be converted into cash with full payment made to outside creditors before remaining cash is distributed to partners in a lump sum payment 41. An A. B. C.

advance cash distribution plan is prepared Each time a partnership asset is sold in an installment liquidation Each time cash is distributed to partners in an installment liquidation To determine the order and amount of cash each partner will receive as it becomes available for distribution D. None of these

42. Under cash priority program, when all of the priorities are paid, any remaining cash distribution is A. allocated to the partners based on their pre-computed priorities. B. allocated to the partners based on their respective profit or loss ratios. C. allocated to the partners based on the relative values of their capital balances D. allocated to the partners based on the balances in their capital accounts after allocation of losses.

Questions 43 & 44 are based on the following information. The FOREVERMORE PARTNERSHIP started operation on January 2, 2013 with the following capital balances: Xander P 88,000 Agnes 64,000 Kate 90,000

Their profit and loss agreement provide the following provisions • Xander will be given an annual salary of P16,000 and Kate, P8,000. • All partners will be given interest at 10% of beginning capital balances every year. • The balance of the profit, or the (loss) will be divided on a 5:2:3 to Xander, Agnes, and Kate, respectively. • Each partner is allowed to withdraw up to P8,000 every year. In 2013, partnership operations resulted in a net loss of P16,000, while in 2014 it was a net profit of P32,000. All partners withdrew the maximum amount of P8,000 each year. 43.

Calculate the balance of Xander's capital at the end of 2013 C. P72,700 A. P 49,600 B. P64,900 D. P77,600

44. Calculate the balance of Agnes' capital at the end of 2014. A. P44,076 C. P81,760 B. P 77,600 D. P82,080 45. The MORICATA PARTNERSHIP has the following capital structure and profit and loss ratio at August 1, 2014: Mora, capital (30%) P 129,750 Rico, capital (30%) 108,750 Cara, capital (20%) 80,000 Tano, capital (20%) 71,500 Totals (100%) P390,000 Cara has decided to withdraw from the partnership and by agreement of all the partners was paid P90,000 from partnership cash. Immediately after Cara's retirement, the capital ratio to Mora, Rico, and Tano, respectively will be A. B. C. D. Mora 33-1/3% 40% 37.5% 42% Rico 33-1/3% 34% 37.5% 35% Tano 33-1/3% 26% 25.0% 23% 46.

The partnership ABC is currently liquidating and on February 15, 2015, the following balances in capital and their profit and loss (P&L) ratios are shown: Ariston, capital(P&L - 50%) P19,000 Bernardo, capital (P&L 30%) 18,000 Conrado, capital (P&L 20%) (12,000) Assume non-cash assets have been all disposed and Conrado has promised to pay his deficiency in a week's time. Calculate the amount to be received by one of the partners if cash is paid immediately on February 15, 2015. A. Ariston, P11,500 C. Bernardo, P12,000 B. Ariston, P13,000 D. Bernardo, 14,000

47. Claudia, Petra, Mona, and Hilda are partners who share profits and losses at 40%, 30%, 20%, and 10%, respectively. Since two of them have given intention to withdraw, they have decided to liquidate the partnership instead. At this point, the capital balances of the partners are as follows: Claudia P48,000 Petra 21,600

Mona 34,400 Hilda 16,000 Which of the following statements is true? A. The first available P1,600 will go to Hilda. B. The first available P2,400 will go to Mona. C. Claudia will be the last partner to receive any available cash. D. Claudia will collect a portion of any available cash before Hilda receives anything. 48. On August 30, 2014, Robert Alat, Roy Anghang, and JayR Tamis who share earnings at 5:3:2, respectively, decided to liquidate their partnership. At this time, their condensed balance sheet follows: Cash P 62,500 Accounts payableP 75,000 Non-cash assets 312,500 Robert Alat, capital100,000 Roy Anghang, capital112,500 . JayR Tamis, capital 87,500 Total P375,000 Total P 375,000 The first sale of assets with a carrying value of P187,500 realized only P150,000. Roy Anghang received P60,000 from the initial cash distribution to partners. Compute the amount of expected liquidation expenses retained from the cash distribution. A. P12,500 C. P25,000 B. P18,750 D. P50,000 49. Partners Alex and Zander, who share profits and losses at 60% and 40%, respectively, have the following balances at December 31, 2014. Cash P 96,000 Accounts payableP137,600 Accounts receivable 80,000 Accumulated depreciation 6,400 Merchandise inventory112,000 Alex, capital 112,240 Equipment 64,000 Zander, capital 95,760 Total P352,000 Total P352,000 They agreed to incorporate their partnership, with the new corporation absorbing the net assets after the following adjustments to reflect their fair values: (All shares are to be issued at P100 par value per share.) a. Additional allowance for bad debts P8,000 b. Understatement of merchandise inventory 16,000 c. Additional depreciation on the equipment 2,400 The number of shares received by Zander from the corporation is A. 980 shares C. 1,156 shares B. 1,165 shares D. 1,615 shares 50. On January 1, 2016, Regina, Jessica, and Nataly formed a partnership with profit or loss sharing agreement of 2:3:5. Regina contributed a land with assessed value from city assessor in the amount of P1,000,000. The land is subject to a real estate mortgage which is annotated to the title of the land in the amount of P800,000. The appraised value of the land is P2,400,000. Jessica contributed a building with a cost of P2,000,000 and accumulated depreciation of P1,500,000. The fair value of the building is P800,000. Nataly contributed investment in trading securities with historical cost of P6,000,000. The trading securities have quoted price in the active market of P3,000,000.

The partners decided to bring their capital balances in accordance with their profit or loss sharing agreement. The total agreed capitalization of the new partnership is P10,000,000. Which of the following statements is correct? A. The agreed capital of Nataly is P500,000. B. Nataly is entitled to withdraw in the amount of P1,000,000. C. Regina should contribute additional capital in the amount of P1,800,000. D. Jessica should contribute additional capital in the amount of P2,200,000. 51. In the absence of profit or loss agreement in the articles of co-partnership, which of the following statements is incorrect? A. As for the profits, the share of each capitalist partner shall be in proportion to what h...