Accounting PLUS FAR101 Test bankdfbhtdh PDF

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ACCOUNTING PLUS (FAR101)NAME: PERMITNO:TEST I. MULTIPLE CHOICE Which of the following statements regarding the trial balance is most likely to be invalid? a. The purpose of preparing a trial balance is to determine whether the total debits and total credits in the ledger are equal. b. If total debit...

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ACCOUNTING PLUS (FAR101) NAME: NO:

PERMIT

TEST I. MULTIPLE CHOICE 1. Which of the following statements regarding the trial balance is most likely to be invalid? a. The purpose of preparing a trial balance is to determine whether the total debits and total credits in the ledger are equal. b. If total debits and credits are not equal, an error surely exists in the accounts. c. The trial balance is a prerequisite in preparing financial statements. d. The preparation of the trial balance creates a starting point for the preparation of the financial statements. 2. This trial balance is prepared before adjusting entries are made. a. Unadjusted trial balance b. Adjusted trial balance c. Post-closing trial balance d. Pre-closing trial balance 3. The heading of a trial balance does not include which of the following? a. Name of the business b. Title of the report c. Type of activity that the business is engaged with d. Date of the report 4. Accounts are listed in the trial balance in this sequence. a. Asset, Liabilities, Equity, Expense, and Income b. Asset, Equity, Liabilities, Expense, and Income c. Asset, Liabilities, Equity, Income, and Expense d. Asset, Expense, Liabilities, Equity, and Income 5. The purpose of adjusting entries is I. to take up unrecorded income and expense of the period. II. to split mixed accounts into their real and nominal elements. III. to transfer financial data from the journal to the ledger. a. I only b. I, II, and III c. I and II d. II and III 6. A worksheet is prepared primarily to facilitate the preparation of the financial statements. 7. In the income statement columns of the worksheet, if total debits exceed total credits, there is profit. 8. Closing entries are prepared at the end of the accounting period to “zero out” the balances of all nominal accounts in the ledger.

9. The amounts in the “post-closing trial balance” represent the beginning balances of accounts in the next accounting period. 10. All adjusting entries can be reversed. 11. The trial balance is the end product of the accounting process. 12. Accounts receivable is an example of a real account. 13. Worksheets are prepared only in the classroom. They are not prepared in real life. 14. The financial statements are prepared only after adjusting entries are made. 15. The unexpired portion of an item of expense that was paid in advanced is recognized as expense. 6-15 1. TRUE 2. FALSE 3. TRUE 4. TRUE 5. FALSE 6. FALSE (financial statements) 7. TRUE 8. FALSE 9. TRUE 10. FALSE

II. COMPUTATIONAL 1. If debits do not equal credits, the first step to find the error is to a. call your manager and ask for advice. b. add the debit and credit columns again. c. review the journal entries for errors. d. make correcting entries rather than adjusting entries. 2. Entity A has a beginning inventory of ₱280,000. During the period Entity A purchased inventories costing ₱890,000. Freight paid on the purchase totaled ₱30,000. If the ending inventory is ₱220,000, how much is the cost of goods sold? a. 1,360,000 b. 980,000 c. 950,000 d. 920,000 3. Entity A has gross purchases of ₱360,000. Freight paid on the purchases amounted to ₱50,000. Purchase discounts totaled ₱20,000 while purchase returns totaled ₱15,000. How much is the net purchases?

a. b. c. d.

375,000 390,000 410,000 445,000

4. Entity A has a beginning inventory of ₱340,000. During the period Entity A purchased inventories costing ₱990,000. Freight paid on the purchase totaled ₱40,000. The ending inventory was ₱360,000. If the net sales were ₱1,200,000, how much is the gross profit? a. 1,010,000 b. 1,200,000 c. 190,000 d. 260,000 5. Entity A has a beginning inventory of ₱140,000. During the period Entity A purchased inventories costing ₱790,000. Freight paid on the purchase totaled ₱10,000. The ending inventory was ₱60,000. Gross sales were ₱1,800,000 while sales returns and discounts totaled ₱220,000. How much is the gross profit? a. 680,000 b. 700,000 c. 780,000 d. 880,000

Solutions: 1. B 2. B 280,000 + 890,000 + 30,000 – 220,000 = 980,000 3. A 360,000 + 50,000 – 20,000 – 15,000 = 375,000 4. C 340,000 + 990,000 + 40,000 – 360,000 = 1,010,000 Cost of goods sold; 1,200,000 – 1,010,000 = 190,000 gross profit 5. B 140,000 + 790,000 + 10,000 – 60,000 = 880,000 Cost of goods sold; 1,800,000 – 220,000 = 1,580,000 Net sales – 880,000 = 700,000 Gross profit

III.

PROBLEMS

1. The accounts of Entity A on December 31, 20x1 show the following balances:

Gross sales

5,800,0 00

Sales returns

116,000

Sales discounts

1,160,0 00

Gross purchases

2,200,0 00

Freight-in

110,000

Purchase discounts

66,000

Purchase returns

22,000

Inventory, beg.

460,000

Inventory, end.

320,000

Requirement: Prepare a statement of cost of goods sold and gross profit. SOLUTION: Entity A Statement of Cost of goods sold and Gross profit For the period ended December 31, 20x1 ₱5,800, 000 (116,0 00) (1,160,0 00) 4,524,0 00

Gross sales Less: Sales returns and discounts Less: Sales discounts Net sales Cost of goods sold: Inventory, beg. Gross purchases Freight-in Purchase discounts Purchase returns Total goods available for sale Less: Ending inventory Gross profit

₱460,0 00 2,200,0 00 110,0 00 (66,0 00) (22,0 00) 2,682,0 00 (320,0 00)

(2,362,0 00) ₱2,162 ,000

2. Entity A started operations during the period. The following were the transactions: a. Mr. A, the sole owner of Entity A, invested ₱1,000,000 to the business. b. Equipment costing ₱250,000 was acquired for cash. c. Inventory costing ₱180,000 was acquired on credit. Entity A uses the perpetual inventory system. d. Inventory costing ₱120,000 was sold for ₱400,000 on credit. e. Accounts payable of ₱160,000 was settled. f. Accounts receivable of ₱340,000 was collected. g. Utilities expense of ₱60,000 was paid. h. Salaries expense of ₱280,000 was paid. i. Owner’s drawings during the period totaled ₱70,000. j. Depreciation expense on the equipment for the period was ₱25,000. Requirements: a. Journalize the transactions above. Be sure to provide a brief description for each journal entry. b. Post the transactions to the general ledger. Use T-accounts for this purpose. Arrange your T-accounts in the following order: Assets, Liabilities, Equity, Income and Expenses. c. Prepare the unadjusted trial balance of Entity A on December 31, 20x1. Be sure to provide a proper heading for the trial balance. SOLUTION: Requirement (a): Journal entries

(a)

Cash Owner’s capital

1,000,000 1,000,000

to record the owner’s initial investment to the business

(b)

Equipment Cash

250,000 250,000

to record the acquisition of equipment

(c)

Inventory Accounts payable

180,000 180,000

to record the acquisition of inventory on credit

Accounts receivable Sale (d)

400,000 400,000

to record credit sale

Cost of sale (or Cost of goods sold) Inventory

120,000 120,000

to charge the cost of inventories sold as expense

(e)

Accounts payable Cash

160,000 160,000

to record the settlement of accounts payable

(f)

Cash

340,000

Account receivable

340,000

to record the collection of accounts receivable

(g)

Utilities expense Cash

60,000 60,000

to record the payment for utilities expense

(h)

Salaries expense Cash

280,000 280,000

to record the payment for salaries expense

(i)

Owner’s drawings Cash

70,000 70,000

to record the temporary withdrawals of the owner

(j)

Depreciation expense Accumulated depreciation - Equipment to record the depreciation expense for the period

25,000 25,000

Requirement (b): Posting ASSETS

LIABILITIES

EQUITY

INCOME

EXPENSES

Requirement (c): Unadjusted Trial Balance

Entity A Unadjusted Trial Balance

Cash

December 31, 20x1 Dr. 520,000

Accounts receivable Inventory Equipment Accumulated depreciation equipment

60,000 60,000 250,000 25,000

Accounts payable

20,000

Owner's capital Owner's drawings

1,000,000 70,000

Sales

400,000

Cost of sales Utilities expense

120,000 60,000

Salaries expense Depreciation expense

280,000 25,000

Totals

Cr.

1,445,000

1,445,000...