UP JPIA Sample Exam

BA 99.1 (First Exam)

Theory:
1. Statement I: A proprietorship is a business owned by one person who is often the manager/operator of the
business.
Statement II: The Stockholders of a corporation enjoy unlimited liability.
A. Only Statement I is true
C. Both Statements I and II are true
B. Only Statement II is true
D. Both Statements I and II are false
2. Continuation of an accounting entity in the absence of evidence to the contrary is an example of:
A. Economic Entity Assumption
C. Going Concern Principle
B. Monetary Unit Assumption
D. Time Period Assumption
3. JPIA Company has total assets of P291 million at year end and owners equity of P129 million. How much does
JPIA owe its creditors?
A. P420 million
C. P162 million
B. P129 million
D. insufficient data
4. Assume JPIA sold merchandise for P100,000 on account. How would this transaction affect JPIAs accounting
equation?
A. Increase both assets and liabilities by P100,000
B. Increase both assets and owners equity by P100,000
C. Increase both liabilities and owners equity by P100,000
D. No effect on the accounting equation because the effects cancel out
5. Balance sheet reports
A. Financial position on a specific date
B. Results of operation on a specific date
C. Financial position for a specific period
D. Results of operation for a specific period
6. Income statement reports
A. Financial position on a specific date
B. Results of operation on a specific date
C. Financial position for a specific period
D. Results of operation for a specific period
7. Which sequence of actions correctly summarizes the accounting process?
A. Prepare the trial balance, journalize transactions, post to accounts
B. Post to accounts, prepare the trial balance, journalize transactions
C. Journalize transactions, post to accounts, prepare the trial balance
D. Journalize transactions, prepare the trial balance, post to accounts
8. Statement I: Assets are resources controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity.
Statement II: Assets are recognized only when it is probable that the future economic benefits will flow to the
entity and the cost or value can be measured reliably
A. Only Statement I is true
C. Both Statements I and II are true
B. Only Statement II is true
D. Both Statements I and II are false
9. Financial Statements are under the responsibility of the:
A. Management
C. Finance Department
B. Accounting Department
D. Board of Directors

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10. Ivy Bookstore recorded a cash collection on account by debiting Cash and crediting Accounts Payable. What will
the trial balance show for this error?
A. Overstatement of liabilities
C. Trial balance will not balance
B. Overstatement of assets
D. Both A and B
11. The weekly payroll of Justin Coffee Shop is P10,000. December 31, the end of the year, falls on a Tuesday and
Justin will pay staffs on Friday for a 5 day work period. The adjusting entry will be:
A. Salary Expense
2000
Cash
2000
B. Salary Expense
2000
Salary Payable
2000
C. Salary Payable
2000
Cash
2000
D. Salary Payable
2000
Salary Expense
2000
12. Which of the following is false with regard to a general journal?
A. It provides a chronological record of transactions.
B. It discloses in one place the complete effect of a transaction.
C. It helps prevent errors since the debit and credit amounts in an individual entry can be readily compared.
D. It tracks the increases and decreases in an individual account.
13. Which of the following describes the process of identifying the economic events of an organization?
A. Keeping a chronological diary of particular events in an orderly and systematic manner.
B. Selecting the economic events relevant to a particular organization.
C. Preparing accounting reports, including financial statements.
D. Quantifying events in pesos and centavos.
14. What are the features of accrual accounting and cash-basis accounting?
A. Accrual accounting records all transactions.
B. Cash-basis accounting records only cash receipts and cash payments.
C. Accrual accounting is superior because it provides more information.
D. All of the above are true.
15. The revenue recognition principle says
A. Record revenue only when you receive cash.
B. Measure revenues and expenses in order to compute net income.
C. Record revenue only after you earned it.
D. Divide time into annual periods to measure revenue properly.
16. Adjusting the accounts is a process of
A. Recording the transactions as they occur during the period
B. Subtracting expenses from revenues to measure net income
C. Zeroing account balances to prepare for the next period
D. Updating the accounts at the end of the period
17. Statement I: Before the adjusting entries are recorded in the general journal, they are recorded in the adjustments
column of the work sheet.
Statement II: In a work sheet, if a credit is needed to balance the income statement columns, a debit will be
needed to balance the balance sheet columns.
A. Only Statement I is true
C. Both Statements I and II are true
B. Only Statement II is true
D. Both Statements I and II are false
18. The inexperienced accountant of EnR Pizza forgot to make the proper adjusting entries at year end for EnRs
advance rent payment. This error would
A. Understate net income
C. Understate total assets
B. Overstate net income
D. No effect on net income

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19. A store paid P1000 for supplies and purchased additional supplies on account for P300. The store paid P500 of
the accounts payable. What is the balance of the Supplies account?
A. P1000
C. P800
B. P1300
D. P1800
20. If accounts receivable increases during the period, then:
A. Cash collection from customers is equal to the sales revenue.
B. Sales Revenue is less than cash collection from customers.
C. Cash flow from investing activities increases.
D. Sales Revenue is greater than cash collection from customers.
21. Assume Bebemon Restaurant gains a client who prepays P1500 for a package of five meals. Bebemon collects
the P1500 in advance and will provide the meals later. After providing 3 meals, what should Bebemon report on
the income statement?
A. Cash of P1500
C. Service Revenue of P1500
B. Service Revenue of P900
D. Unearned Service Revenue of P600
22. What does closing entries accomplish?
A. Transfer revenues expenses and other withdrawals to the capital accounts
B. Zero out the revenues, expenses and other withdrawals to prepare these accounts for the next period
C. Bring the capital account to its correct ending balance
D. All of the above
23. Assets and liabilities are listed on the balance sheet in order of their
A. Purchase date
C. Liquidity
B. Magnitude
D. Market Value
24. Which of the following is correct in describing the statement of cash flows?
A. The principal purpose of a statement of cash flows is to measure profitability of a business that uses the cashbasis accounting.
B. In the long run, it is more important for a business to generate positive cash flows from investing activities
than from operating activities.
C. The statement of cash flows shows the sources and uses of cash during the period.
D. A statement of cash flows is organized into two statements: cash receipts and cash payments.
25. Which of the following statements is true?
A. Reversing entries is a required step in accounting.
B. Alternative adjusting entries apply to both deferrals and accruals.
C. Both A and B
D. Neither A nor B
Short Problems:
1. Terry Company has trouble keeping its debits and credits equal. Last month, Terry Company, in journalizing a
receipt of cash for service revenue, debited cash for P90 instead of the correct amount P900. Terry created
service revenue for 90, the incorrect amount. What would be the net effect of this error in the trial balance?
2. Roxy Company sells magazine subscriptions for one to three year subscriptions. Cash receipts from subscribers
are credited to Unearned Magazine Subscriptions. This account had a balance of P6,500,000 at December 31
2010, before adjustment. Outstanding subscriptions at December 31, 2010 expire as follows:
During 2011 2,800,000
During 2012 2, 400, 000
During 2013 3,900,000
In its December 31, 2010 balance sheet, what amount should Roxy report as unearned magazine subscriptions?
3. Aileen Car Wash needs to compute the following summary information from the accounting records:
a. Net income for the month of March
c. Cash collections from customers during March

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b. Total cash paid during March

Some data from Aileens ledger:
Balance
Account
Feb. 28
Mar.31
Aileen, Capital
P9,000
P15,000
Cash
7,000
2,000
Accounts Receivable
24,000
26,000
Note Payable
11,000
16,000

d. Cash paid on a note payable during March

Additional Information for the month
of March
Withdrawals, P7,000
Cash receipts, P61,000
Revenues on account, P76,000
New borrowing on a note payable, P7,500

4. Erv Motor Repair wage expense for 2011 was P82,500. Accrued Wage Payable on December 31, 2011 was
P10,200 and P12,100 on December 31, 2010. Compute for the amount of cash paid for salaries in 2011.
5. If interest received for the year amounted to P40,200 and the interest receivable account began the year with a
balance of P5,250 and ended the year with a balance of P7,500, what was the interest revenue reported on the
income statement for the year?
6. Eirene Pharmacy paid P60,000 on July 1, 2010 for rent for the next two years. Eirenes accountant recognizes
expense when incurred. What would be the amount of Prepaid rent on the balance sheet on December 31, 2011?
7. Ivy Company collected P12,350 in interest during 2011. Ivy showed P1,850 in interest receivable on its December
31, 2011 balance sheet and P5,300 on December 31, 2010. Compute for the interest revenue on the income
statement for 2011.
8. Lisa Beach Resort reported salary expense of P65,000 on its 2011 income statement. Cash payments to
employees amounted to P57,500 in 2011. The ending 2011 balance in the salary payable account was P12,000.
What was the beginning 2011 balance in the salary payable account?
9.

Doraemon Company
Beginning:
Assets..
P105,000
Liabilities.
50,000
Ending:
Assets...
160,000
Liabilities.
70,000
Owners Equity:
Investments by owner.
?
Withdrawals by owner....
100,000
Income Statement:
Revenues.
430,000
Expense..
320,000

Mojacko Company
P110,000
60,000
?
80,000
10,000
70,000
400,000
300,000

10. Justin Jewelry Stores fiscal year ended on November 30, 2010. The balance in the prepaid insurance account as
of November 30, 2010 (before adjustment) and consisted of the following policies:
Policy Number
Date of Purchase
Date of Expiration
Balance in Account
157249
July 01, 2010
June 30, 2011
P 14,400
319628
December 01, 2009
November 20, 2010
9,600
In its November 30, 2010 balance sheet, what amount should Justin report as the balance of prepaid insurance?
Long Problems
1. Presented is the trial balance of Tweety Company
Tweety Company
Trial Balance
July 31, 2011
Cash
Accounts Receivable
Prepaid Rent

P 2,145
P 11,980
2,700

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Equipment
Supplies
Accounts Payable
Unearned Revenue
Tweety, Capital
Service Revenue
Salaries Expense
Utilities Expense

19,500
2,000
10,500
5,700
8,800
19,475
4,640
1,450 a
P 38,135

m
P 50,755

According to Tweetys ledger:

1. All accounts have normal balances.
2. Transposition errors on Accounts Receivable and Sales Revenue accounts. According to postings made, the
correct amounts are P11,890 and P19,745.
3. The Prepaid Rent account is not yet adjusted for the month of July. The term of the contract is for nine months
starting July 1, 2011.
4. Equipment bought on account was recorded as: Dr. Supplies 2000 ; Cr. Cash 2000
5. A cash collection of P200 was recorded as debit to Cash, P200 and credit to Accounts Payable, P200.
6. Tweetys Drawing of P1,500 was recorded as: Dr. Tweety, Capital 1500; Cr. Cash 1,500
7. Payment of salary for P400 was recorded as: Dr. Cash 40; Cr. Salary Expense 40.
Required:
1.
2.

Prepare the correcting and adjusting entries.

Prepare the correct trial balance for Tweety Company.

2. Trial Balance figures are normal balances and adjustment information at September 30, 2011 is shown below for
EnR Stage and Theater. The company follows a policy of adjusting and closing its accounts at the end of each
month.
Cash....P25,500
Prepaid film rental.... 65,000
Land 75,000
Building.. 210,000
Accumulated Depreciation- Building. 6,125
Projection equipment 90,000
Accumulated Depreciation- Equipment. 7,500
Notes Payable200,000
Accounts Payable. 8,500
Unearned admissions revenue.. 5,200
EnR, Capital...200,925
Admissions Revenue 76,750
Salaries Expense.. 21,250
Light and power Expense. 7,750

Film rental expense for the month is P42,275, all of which had been paid in advance.
The building is being depreciated over a period of 20 years.
The projection equipment is being depreciated over a period of 5 years.
No entry has been made to record interest payable accrued during September. At September 30, accrued
interest totals P1,800
When tickets are sold to future performances, EnR credits its Unearned Admissions Revenue account. No
entry has been made recording that P3,650 of the advance ticket sales for performances during
September.
EnR receives a percentage of the revenues earned by JPIA Popcorn, the concessionaire operating snack
bar. For popcorn sales in September, JPIA owes P6,200 payable on October 10. No entry has been made
to record this revenue.
Salaries earned by employees, but unpaid as of September 30, amount to P3,750. No entry has been
made to record this transaction.

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EnR, the proprietor of the theater, is paid P10,500 every month for his service in the the company.

Required:
1. Prepare the necessary adjusting and closing entries, income statement and balance sheet for EnR Stage
and Theater.
2. Assume EnR uses the alternative method for adjustments. Prepare the adjusting entries and the
reversing entries if needed.

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