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SELF EVALUATION ACTIVITY ACTIVITY 1: MULTIPLE CHOICE 1. Which of the following is an incorrect way of handling a voucher system? a. Purchases are recorded in the voucher register at gross by debiting purchases and crediting vouchers payable b. Payment of purchases with discounts is recorded in the check register by debiting vouchers payable at gross and crediting respectively cash in bank and purchase discount c. In case there are purchase returns and allowances, there is no need to cancel the original voucher ad the issuance of a new one for the lower amount because adjusting entries could later be prepared d. When instalments or other payments are made on an invoice, a separate voucher is prepared for the amount of each check issued Theta prepares its financial statements for the year to 30 April each year. The company pays rent for its premises quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The annual rent was P84,000 per year until 30 June 2000. It was increased from that date to P96,000 per year. 2. What rent expense and end of year prepayment should be included in the financial statements for the year ended 30 April 2001? Expense Prepayment a. 93,000 8,000 c. 94,000 8,000 b. 93,000 16,000 d. 94,000 16,000 3. In preparing a worksheet and the entity is profitable in the current period, the total of the statement of financial position credit column will be a. Larger than the total of the statement of financial position debit column b. Smaller than the total of the statement of financial position debit column c. Larger than the total of the income statement debit column d. Larger than the total of the income statement credit column On March 1, a company received P3,000 cash from a client as an advance for 12 months’ worth of delivery services. The company initially recorded this receipt as a debit to cash and a credit to delivery service revenue. 4. The adjusting entry made at December 31, would include a: a. debit to delivery service revenue, P2,500. b. credit to unearned delivery service revenue, P500. c. credit to delivery service revenue, P500. d. No adjusting entry was required because the delivery service was for a oneyear period exactly. 5. On August 1, a corporation received cash of P12,000 for one year's rent in advance and recorded the transaction on that day as a credit to rent revenue. The December 31 adjusting entry is: a. Rent revenue P5,000 Unearned rent revenue P5,000 b. Rent Revenue P7,000 Unearned rent revenue P7,000 c. Unearned rent revenue P5,000 Rent revenue P5,000 d. Unearned rent revenue P7,000 Rent revenue P7,000

A corporation received a cash of P24,000 on August 1,for one year's rent in advance and recorded the transaction on that day as a credit to an unearned rent revenue for the full amount. 6. The December 31 adjusting entry is: a. Rent revenue P10,000 Unearned rent revenue P10,000 b. Unearned rent revenue P24,000 Rent revenue P24,000 c. Rent revenue P14,000 Unearned rent revenue P14,000 d. Unearned rent revenue P10,000 Rent revenue P10,000 On July 1, a company paid a P600 premium for a three-year property insurance policy; insurance expense was debited in full for the P600. 7. The adjusting entry made at the end of the year was: a. Prepaid insurance P1,000 Insurance expense P1,000 b. Prepaid insurance P 500 Insurance expense P 500 c. Prepaid insurance P 100 Insurance expense P 100 d. Prepaid insurance P 500 Insurance expense P 500 8. In preparing a 10-column worksheet a. The beginning inventory is extended as a credit in the income statement columns b. The beginning inventory is extended as a credit in the statement of financial position columns c. The ending inventory is extended as a debit in the income statement columns and as a credit in the statement of financial position d. The ending inventory is extended as a credit in the income statement columns and as a debit in the statement of financial position columns. 9. A company paid its property taxes on April 1 for the period April 1, Year 1 to March 30, Year 2. When the payment was made the company debited property taxes expense and credit cash for P12,000. The adjusting entry made at the end of the year 1 was: a. prepaid property tax P9,000 property tax expense P9,000 b. prepaid property tax P3,000 property tax expense P3,000 c. property tax expense P3,000 prepaid tax expense P3,000 d. property tax expense P9,000 prepaid tax expense P9,000 On the May 1, a company purchased a six-month subscription to an investment analysis service publication. The P300 cash payment was debited to subscription expense at the time. 10. The adjusting entry made at June 30, the end of the company's fiscal year, was:

a. subscription expense

P100

subscription payable b. prepaid subscriptions

P100

subscriptions expense c. prepaid subscription

P100 P100 P200

subscription expense P200 d. No adjusting entry was required because the subscription was for only six months not a full year. 11. A sole trader took some goods costing P800 from inventory for his own use. The normal selling price of the goods is P1,600. Which of the following journal entries would correctly record this? a. Drawings account 800 Inventory account b. Drawings account

800 800

Purchases account c. Sales account

1,600

800

Drawings account 1,600 d. None of these 12. A company paid its property taxes on October 1 for the period October 1, year 1 to September 30, year 2. When the payment was made the company debited property taxes expense and credited cash for P8,000. The adjusting entry at December 31, year 1 would include which of the following: a. debit prepaid property taxes, P6,000. b. credit prepaid property taxes, P6,000. c. credit property tax expense, P2,000. d. debit property tax expense, P6,000. 13. The purpose of adjusting entries is to a. Prepare revenue and expense accounts for recording the transactions of the next period b. Apply the realization principle and the matching principle to transactions affecting two or more accounting periods c. Adjust daily the balances in asset, liability, revenue and expense accounts for the effects of business transactions d. Adjust the capital account for the revenue, expense and withdrawal transactions which occurred during the year At the end of the current year, the prepaid insurance account showed a debit the balance of P5,000; the balance at the beginning of the year was P6,000, and during the year the insurance premiums paid amounted to P8,000. 14. Assuming insurance premium payments are initially entered in the prepaid insurance account, the adjusting entry at the end of the year would include: a. debit prepaid insurance P9,000 b. credit prepaid insurance P1,000 c. debit insurance expense P7,000 d. debit insurance expense P9,000 15. What is the net effect of the under mentioned errors on the trial balance of a firm? I. Total of sales was taken as P58,726 instead of P58,762.

II. A discount of P52 allowed to Mr. X was not posted in the discount account. III. Sale of old furniture of P130 was credited to Machinery account. IV. A credit sale of P250 to Mr. Y was posted twice in his account. a. Credit total of trial balance will be more than that of debit total by P234 b. Debit total of trial balance will be more than that of credit total by P234 c. Credit total of trial balance will be more than that of debit total by P104 d. Debit total of trial balance will be more than that of credit total by P264 e. Debit total of trial balance will be more than that of credit total by P286 16. Which of the following is not true of a worksheet? a. Is included as part of the published financial statements b. Provides a place where adjusting entries can be made Informally before they are journalized and posted c. Provides a balancing mechanism that helps uncover accounting errors d. Helps facilitate the preparation of financial statements Kat Company was incorporated on January 1, 2003, with P4,000,000 from the issuance of stock and borrowed funds of P 1,000,000. During the first year of operations, net income was P3,000,000. On December 15, Kat paid a P2,000,000 cash dividend. No additional activities affected owners’ equity in 2005. At December 31,2005, Kat’s liabilities had increased to P 2,000,000. 17. In Kat’s December 31 2005, balance sheet, total assets should be reported at c. 7,000,000 a. 4,000,000 d. 6,000,000 b. 9,000,000 The trial balance prepared at December 31, did not balance. Debit total was P1,592,500 and credit total was P1,532,000. In determining the cause of the difference, you discovered the following errors: a credit to Cash of P6,500 was not posted; a P20,000 credit to be made to Sales account was credited to the Accounts Receivable account instead; the wages payable account balance of P93,000 was listed in the trial balance as P39,000. 18. What is the correct trial balance total? c. P1,612,500 a. P1,592,500 d. P1,586,000 b. P1,606,000 19. The balancing figure in the worksheet is net loss if a. The total of the credits exceeds the total of the debits in the income statement columns b. In the statement of financial position columns, the total of the 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 statement of financial position columns, the total of the credits exceeds the total of the debits The account balances for Villash Corp. as of December 31, 2003 follow: Accounts payable - P100,000; Accounts receivable - P120,000; Building P400,000; Capital stock - P760,000; Cash - P60,000; Equipment - P160,000; Land - P50,000; Notes payable - P280,000; Retained earnings - P100,000 20. In a trial balance prepared on December 31, 2003, the sum of the debit column is: a. P860,000 c. P790,000 b. P1,440,000

d. P1,240,000

An analysis of the records of Wall Company disclosed the changes in an account balances for the current year and the supplementary data listed below: Cash P600, 000 increase Accounts receivable 350, 000 decrease Merchandise inventory 1, 320, 000 increase Accounts payable 560, 000 increase Accrued expenses 90, 0000 decrease During the year Wall borrowed P2, 000, 000 from the bank and paid off P1, 750, 000 plus interest of P200, 000. Interest of P50, 000 is accrued on December 31. There was no interest payable from the beginning. Furthermore, Wall transferred equity securities to the business which were sold for P900, 000 to finance the acquisition of merchandise. Wall made weekly withdrawals in the current year o P15, 000. 21. The net income for the current year is: a. 580, 000 b. 680, 000 c. 730, 000 d. 930, 000

Chapter 1 ACTIVITY 1 1C 2D 3D 4A 5B 6D 7B 8D 9B 10 C 11 B 12 A 13 B 14 D 15 B 16 A 17 C 18 B 19 B 20 D 21 D...