ACCOUNTING QUIZ BEE EASY 1. Profit is the difference between a. assets and liabilities b.

the incoming cash and outgoing cash c. the assets purchased with cash contributed by the owner and the cash spent to operate the business d. the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services. ANS: D 2. All of the following are general-purpose financial statements except: a. Statement of financial position b. Income statement c. Statement of owners equity d. Cash budget ANS: D Within the Philippines, the dominant body in the primary development of accounting principles is the a. Philippine Institute of Certified Public Accountants (PICPA) b. Philippine Accounting Association (PAA) c. Financial Reporting Standards Council (FRSC) d. Institute of Management Accountants (IMA) ANS: C The business entity concept means that a. the owner is part of the business entity b. an entity is organized according to state or federal statutes c. an entity is organized according to the rules set by the FASB d. the entity is an individual economic unit for which data are recorded, analyzed, and reported ANS: D Goods purchased on account for future use in the business, such as supplies, are called a. prepaid liabilities b. Revenues c. prepaid expenses d. Liabilities ANS: C The year-end balance of the owner's capital account appears in a. both the statement of owner's equity and the income statement b. only the statement of owner's equity c. both the statement of owner's equity and the balance sheet d. both the statement of owner's equity and the statement of cash flows ANS: C In which of the following types of accounts are decreases recorded by credits? a. liabilities b. owner's capital c. drawing d. revenues ANS: C The account type and normal balance of Unearned Revenue is a. revenue, credit b. expense, debit c. liability, credit d. asset, debit ANS: C Using accrual accounting, revenue is recorded and reported only a. when cash is received without regard to when the services are rendered b. when the services are rendered without regard to when cash is received c. when cash is received at the time services are rendered d. if cash is received after the services are rendered ANS: B

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4.

5.

6.

7.

8.

9.

10. Adjusting entries always include a. only income statement accounts. b. only balance sheet accounts. c. the cash account. d. at least one income statement account and one balance sheet account. ANS: D

MODERATE 1. Which of the following best describes accounting? a. records economic data but does not communicate the data to users according to any specific rules. b. is an information system that provides reports to users regarding economic activities and condition of a business. c. is of no use by individuals outside of the business. d. is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements. ANS: B 2. If total liabilities decreased by P55,000 during a period of time and owner's equity increased by P60,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is a. P115,000 increase b. P5,000 increase c. P5,000 decrease d. P115,000 decrease ANS: B Which of the following is not a characteristic of a corporation? a. Corporations are organized as a separate legal taxable entity b. Ownership is divided into shares of stock. c. Corporations experience an ease in obtaining large amounts of resources by issuing stock. d. A corporations resources are limited to their individual owners resources. ANS: D Allen Marks is the sole owner and operator of Great Marks Company. As of the end of its accounting period, December 31, 2011, Great Marks Company has assets of P940,000 and liabilities of P300,000. During 2012, Allen Marks invested an additional P65,000 and withdrew P45,000 from the business. What is the amount of net income during 2012, assuming that as of December 31, 2012, assets were P995,000, and liabilities were P270,000? a. P 65,000 b. P 50,000 c. P105,000 d. P370,000 ANS: A Which of the following is not true of accounting principles? a. Financial accountants follow generally accepted accounting principles (GAAP). b. Following GAAP allows accounting information users to compare one company to another. c. A new accounting principle can be adopted with stockholders approval. d. The Financial Accounting Standards Board (FASB) has primary responsibility for developing accounting principles. ANS: C A summary of selected ledger accounts appear below for Albertos Plumbing Services for the current calendar year end. Alberto, Capital 8,500 1/1 12/31 Alberto, Drawing 3,500 12/31 5,000 Income Summary 15,000 12/31 18,500

3.

4.

5.

6.

12/31

6,500 18,500

6/30 11/30

8,500

12/31 12/31

33,500

Net income for the period is a. P16,500 b. P33,500 c. P18,500 d. P15,000 ANS: C 7. How does receiving a bill to be paid next month for services rendered affect the accounting equation? a. assets decrease; owner's equity decreases b. assets increase; liabilities increase c. liabilities increase; owner's equity increases d. liabilities increase; owner's equity decreases ANS: D

8.

The journal entry to close the Fees Earned, P275, and Rent Revenue, P200, accounts on December 31st during the closing process would be: a. Dec 31 Fees Earned 275 Rent Revenue 200 Income Summary 475 b. Dec 31 Income Summary 475 Fees Earned 275 Rent Revenue 200 c. Dec 31 Revenues 475 Income Summary 475 d. Dec 31 Income Summary 475 Revenues 475 ANS: A Which of the following is not a business transaction? a. Erin deposits P15,000 in a bank account in the name of Erins Lawn Service. b. Erin provided services to customers earning fees of P600. c. Erin purchased hedge trimmers for her lawn service agreeing to pay the supplier next month. d. Erin pays her monthly personal credit card bill. ANS: D

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10. The post reference columns are used to trace transactions from the journal to the accounts. What will be posted on the post reference column of (a) the journal and (b) on the account? a. (a) the amount of the debit or credit (b) the journal page number b. (a) the journal page number (b) the date of the transaction c. (a) the journal page number, (b) the account number d. (a) the account number, (b) the journal page number ANS: D DIFFICULT 1. The accounts in the ledger of Monroe Entertainment Co. are listed in alphabetical order. All accounts have normal balances. Accounts Payable 1,500 Fees Earned 3,000 Accounts Receivable 1,800 Insurance Expense 1,300 Investment 2,000 Land 3,000 Cash 2,600 Wages Expense 1,400 Drawing 1,200 Capital 8,800 Prepare a trial balance. The total of the debits is a. P13,300 b. P9,400 c. P9,100 d. P9,600 ANS: A 2. The balance in the office supplies account on June 1 was P6,300, supplies purchased during June were P3,100, and the supplies on hand at June 30 were P2,500. The amount to be used for the appropriate adjusting entry is a. P3,700 b. P11,900 c. P5,700 d. P6,900 ANS: D Stockton Company provides you with the following adjusted trial balance: Stockton Company Adjusted Trial Balance For the Year ended December 31, 20XX Cash Accounts Receivable Prepaid Expenses Equipment Accumulated Depreciation Accounts Payable Notes Payable Bob Steely, Capital Bob Steely, Withdrawals Fees Earned Wages Expense Rent Expense Utilities Expense Depreciation Expense Miscellaneous Expense Totals P 6,030 2,100 700 13,700 P 1,100 1,900 4,200 12,940 790 8,750 2,500 1,960 775 250 85 P28,890

3.

P28,890

Determine the Owners Equity ending balance for the period. a. P12,150 b. P15,330 c. P16,120 d. P12,940 ANS: B 4. After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals of the debit and credit columns are P37,875 and P32,735, respectively. What is the amount of net income or net loss for the period? a. P5,140 net income b. P37,875 net loss c. P5,140 net loss d. P32,735 net income ANS: A Using the following information, what is the amount of gross profit? Purchases P32,000 Purchases discounts Merchandise inventory 5,700 Merchandise inventory September 1 September 30 Sales returns and 910 Sales allowances Purchases returns and 1,200 Freight In allowances a. P34,870 b. P31,880 c. P27,460 d. P62,090 ANS: B

5.

P960 6,370 63,000 1,040

6.

A sales invoice included the following information: merchandise price, P5,000; freight, P900; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of P700 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller? a. P5,157 b. P4,300 c. P4,257 d. P4,950 ANS: A Selling price 5,000 - return 700 = 4,300. 4,300 x .99 (1 minus the discount allowed) = 4,257. 4,257 + prepaid shipping 900 = 5,157. Emma Co. sold Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for P25,000. Emma Co. prepaid the P500 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record payment of the merchandise if Isabella Co. pays within the discount period? a. Accounts Payable-Emma Co., debit P25,000; Freight In, credit P500; Cash, credit P24,500 b. Accounts Payable-Emma Co., debit P25,500; Merchandise Inventory, credit P500; Cash, credit P25,000 c. Accounts Payable-Emma Co., debit P25,000; Freight In, debit P500; Cash, credit P25,500 d. Accounts Payable-Emma Co., debit P25,500; Merchandise Inventory, debit P500; Cash, credit P26,000 ANS: B If the physical count of the inventory revealed P72,000 of merchandise on hand and the inventory records reported P73,200, what would be the necessary adjusting entry to record inventory shortage? a. Merchandise inventory debit P72,000; Cost of Merchandise Sold credit P72,000. b. Merchandise inventory debit P1,200; Cost of Merchandise Sold credit P1,200. c. Cost of Merchandise Sold debit P73,200; Merchandise Inventory credit P72,000. d. Cost of Merchandise Sold debit P1,200; Merchandise Inventory credit P1,200. ANS: D The inventory data for an item for November are: Nov. 1 Inventory 20 units at P19 4 Sold 10 units 10 Purchased 30 units at P20 17 Sold 20 units 30 Purchased 10 units at P21 Using a perpetual system, what is the cost of the merchandise sold for November if the company uses FIFO? a. P610 b. P600 c. P590 d. P580 ANS: D

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10. Thompson Company developed the following reconciling information in preparing its October bank reconciliation: Cash balance per bank, 10/31 P17,000 Note receivable collected by bank 4,800 Outstanding checks 6,500 Deposits-in-transit 3,000 Bank service charge 50 NSF check 2,300 Using the above information, determine the cash balance per books (before adjustments) for the Thompson Company. a. P11,050 b. P19,450 c. P15,950 d. P11,150 ANS: A CLINCHER 1. All of the following occur with a double-entry accounting system except: a. The accounting equation remains in balance. b. The sum of all debits is always equal to the sum of all credits in each journal entry. c. Each business transaction will have only two entries. d. Every transaction affects at least two accounts. ANS: C 2. Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means a. all of the information from the journal was correctly transferred to the ledger b. all accounts have their correct balances in the ledger c. only the journal is accurate; the ledger may be incorrect d. only that the debit dollar amounts equal the credit dollar amounts ANS: D 3. Which of the following is not true regarding depreciation? a. Depreciation allocates the cost of a fixed asset over its estimated life. b. Depreciation expense reflects the decrease in market value each year. c. Depreciation is an allocation not a valuation method. d. Depreciation expense does not measure changes in market value. ANS: B 4. Allowance for Doubtful Accounts has a debit balance of P500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net credit sales are P600,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is a. P24,500 b. P23,500 c. P24,000 d. cannot be determined ANS: C 5. Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had a credit balance of P2,400. During 2010, Abbott wrote-off accounts receivable totaling P1,800 and made credit sales of P100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry, the December 31, 2010, balance in the Bad Debt Expense would be a. P1,200 b. P3,000 c. P3,600 d. P7,200 ANS: B

FINAL ROUND THEORIES 1. This is a branch of accounting that refers to the critical and systematic examination or review of accounting reports, documents, records, procedures, and controls, for the purpose of determining whether they conform with prescribed criteria, or to enable the expression of an opinion on the propriety of the financial statements. [A] Financial Accounting [B] Management Advisory Services [C] Accounting Systems Installation [D] Auditing [E] Cost Accounting Answer: D 2. Which of the following is an appropriate reconciling item to the balance per bank in a bank reconciliation? [A] Bank service charge. [B] Outstanding Checks [C] Bank interest. [D] Chargeback for NSF check. Answer: B 3. It refers to the time span during which cash is used to acquire goods and services, which in turn are sold to customers, who in turn pay for their purchases with cash. [A] Cycle time [B] Normal operating cycle [C] Throughput [D] Queue time Answer: B 4. In which account are postage stamps classified? [A] Cash [B] Prepaid Expenses [C] Receivables [D] Inventory. Answer: B 5. Which of the followings statements about a journal is false? [A] It is the book of final entry. [B] It provides a chronological record of transactions. [C] It helps to locate errors because the debit and credit amounts for each entry can be readily compared. [D] It discloses in one place the complete effect of a transaction. Answer: A PROBLEMS A. Zany Delivery Service is owned and operated by Joey Bryant. The following selected transactions were completed by Zany Delivery Service during February: (1) Received cash from owner as initial investment, P150,000 (2) Paid advertising expense, P9,000 (3) Purchased supplies on account (which were all consumed during February), P6,000 (4) Billed customers for delivery services on account, P90,000 (5) Received cash from customers on account, P55,000 (6) Withdrew cash for personal use, P10,000 Required: How much is the capital balance as of the end of February? Answer: P215,000 Initial investment P150,000 Advertising expense ( 9,000) Supplies expense ( 6,000) Service revenue 90,000 Withdrawal ( 10,000) Ending capital P215,000 B. The assets and liabilities of Express Travel Service at June 30, 2010, the end of the current fiscal year, and its revenue and expenses for the year are herein: Accounts payable P12,000; Accounts receivable P32,000; Supplies used P6,000; Cash P78,000; Fees earned P475,000; Land, P150,000; Miscellaneous expense P8,000; Office expense 111,000; Wages expense P239,000. The capital of the owner, Janis Paisley, was P125,000 at July 1, 2009, the beginning of the current year. Required: Compute for the net income for the period. Answer: P111,000 Fees earned P475,000 Miscellaneous exp ( 8,000) Office expense (111,000) Supplies used ( 6,000) Wages expense (239,000) Net Income P111,000 The following account balances were deduced from the records of Valiente Co. on December 31, 2011: Cash in bank (current account) P5,000,000; Cash in bank (payroll account) P1,000,000; Cash on hand P 500,000; Cash in bank restricted for building construction P3,000,000; Money market placements P2,000,000. The cash on hand includes a P200,000 check payable to Valiente, dated January 15, 2012. What should be reported as cash on Dec. 31, 2011? Answer: 5,000,000 + 1,000,000 + 300,000 = 6,300,000

C.

D. Johnny Bebe acquired an equipment on June 30, 2007, at a cost of P504,000. It has an estimated useful life of 12 years with a scrap value of P42,000. The firm uses straight line method of depreciation. Required: What is the carrying amount of the equipment to be presented in the statement of financial position as of December 31, 2010? Answer: P369,250 Cost P 504,000 Accumulated Depreciation (504,000 42,000) / 12 x 3 134,750 Book value P 369,250 E. In preparing its August 31, 2011 bank reconciliation, Myra Company has made available the following information: Balance per bank statement P1,805,000; Deposit in transit P 325,000; Return of customers check for insufficient fund P60,000; Outstanding checks P275,000; Bank service charge for August P10,000. On August 31, 2011, what is the adjusted cash in bank? Answer: P1,855,000 (P1,805,000 + 325,000 275,000) An accountant prepared the following post-closing trial balance La Jolla Billards Co. Post-closing trial balance October 31, 2010

F.

Debit Credit Cash 13,200 Accounts receivable 29,350 Supplies 1,850 Equipment 130,600 Accumulated Depreciation 43,500 Equipment Accounts Payable 15,800 Salaries Payable 1,500 Unearned Rent 6,000 Trisha Valentino, Capital 108,200 Totals 216,050 133,950 Required: Assuming that all accounts have normal balances, how much should the total debits be in the corrected post-closing trial balance? Answer: P175,000 Debit Credit Cash 13,200 Accounts receivable 29,350 Supplies 1,850 Equipment 130,600 Accumulated Depreciation 43,500 Equipment Accounts Payable 15,800 Salaries Payable 1,500 Unearned Rent 6,000 Trisha Valentino, Capital 108,200 Totals 175,000 175,000 G. The records of Jenny Company shows the following data: Inventory, July 31, 2010 P140,000; Purchases P975,000; Purchase returns and allowances P12,000; Purchase discounts P8,000; Freight-in P13,500; Inventory, August 1, 2009 P125,000; Freight out P10,000. Required: Compute for the Cost of goods sold as of July 31, 2010 Answer: P953,500 Inventory, August 1, 2009 P 125,000 Purchases 975,000 Purchase returns and allowances ( 12,000) Purchase discounts ( 8,000) Freight-in 13,500 Goods Available for Sale P 1,093,500 Inventory, July 31, 2010 ( 140,000) Cost of goods sold P 953,500 H. A retailer is considering the purchase of 100 units of a specific item from either of two suppliers. Their offers are as follows: Retailer A: P200 a unit, 2/10, n/EOM, FOB Destination. Retailer B: P195 a unit, 1/10, n/EOM, FOB Shipping Point. A freight of P400 is usually charged to the appropriate entity for this order quantity. Required: What is the TOTAL advantage of choosing Retailer A over Retailer B? Answer: P105 Retailer A (P200 x 0.98 x 100) P 19,600 Retailer B (P195 x 0.99 x 100 + 400) 19,705 Difference P 105 I. The adjusted trial balance of Homeland Security Services Co. shows the following balances: Accounts Payable 18,000 Accounts Receivable 44,000 Accumulated Depreciation 4,000 Cash 6,000 Equipment 20,000 Land 50,000 Mortgage Payable 40,000 Noah, Capital 45,000 Prepaid Insurance 1,000 Supplies 1,000 Wages Payable 2,000 Required: Compute for the companys working capital (Current Assets Current Liabilities) Answer: P32,000 Cash 6,000 Accounts Receivable 44,000 Supplies 1,000 Prepaid Insurance 1,000 Accounts Payable (18,000) Wages Payable (2,000)

Working Capital J.

32,000

An analysis of the records of Canyon Realty Co. shows the following: The firm pays weekly salaries of P37,500 on Friday for a five-day workweek ending that day. The accounting period ends on a Wednesday. The prepaid insurance account had a balance of P54,000 at the beginning of the year. The account was debited for P60,000 for premiums on policies purchased during the year. The amount of unexpired insurance applicable to future periods is P10,000. The total expenses prior to any adjustment is P288,000. Required: How much is the adjusted total expenses for the period? Answer: P414,500 Unadjusted balance of expenses P 288,000 Accrued salaries (37,500/5 x 3) 22,500 Insurance expense (54,000 + 60,000 10,000) 104,000 Adjusted balance of expenses P 414,500