ACCOUNTING PRODIGY: BASIC ACCOUNTING 1

II. MULTIPLE CHOICE.

I. TRUE OR FALSE.
False 1.
False 2.
False 3.
False 4.
False 5.
True 6.

False 7.
True 8.
False 9.
False 10.
False 11.
False 12.
False 13.

False 14.

True 15.
False 16.

True 17,

True 18.
False 19.

The ledger is a chronological record of all

transactions.
In some transactions, the accounting
equation may not be maintained.
When a company hires a new employee, a
recordable event has occurred.
A debit means that an account has been
increased.
Liabilities are established with debits and
eliminated with credits.
Transposition errors are moving of the
decimal point while the slide is reversing the
order of numbers.
The T-account is sometimes called the book
of original entry.
A basic storage unit for accounting data is
the account.
Companies use the same standard set of
accounts.
The accounts in a chart of accounts are
normally listed in alphabetical order.
A credit has an unfavourable effect on an
account.
Another word for expense is debt.
Expenses represent the cash paid for goods
sold or services rendered in the process of
generating revenue.
Asset is a resource controlled by the
enterprise as a result of present events and
from which future economic benefits are
expected to flow to the enterprise.
The principle of objectivity includes the
concepts of verifiability.
The fundamental concepts of accounting are
entity concept, periodicity concept and
unstable monetary unit concept.
Financial reporting is only concerned the
information that is significant enough to
affect evaluations and decisions.
Goods should be recorded at their list price
less any trade discounts involved.
FOB shipping point means that the seller
incurs the shipping costs.

NATIONAL UNIVERSITY JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

1. If accounts payable ha a debit postings of

P170 000, credit postings of P140 000 and
a normal ending balance of P60 000, which
of the following was its beginning balance?
A.
B.
C.
D.

P 30 000 Cr.
P 30 000 Dr.
P 90 000 Cr.
P 90 000 Dr.

2. Obligations which are expected to be

liquidated through the use of existing
current assets or the creation of other
current liabilities are called:
A.
B.
C.
D.

Current assets
Current liabilities
Long term liabilities
Unearned revenue

3. The matching rule relates the least to:

A. Accrual accounting
B. Systematic and rational allocation
C. Cash basis
4. The carrying value of a depreciable asset
equals:
A. The estimated amount for which the
asset could be sold
B. The estimated cost to replace the asset
C. The original cost minus accumulated
depreciation
D. The original cost minus depreciation
expense for the current period
5. Which of the following transactions is the
most difficult to assign to specific time
periods?
A.
B.
C.
D.

The accrual of interest

The expiration of insurance
The incurrence of salaries
The use of equipment

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6. Financial statement time periods should be

of equal length.
A. And should correspond with the
calendar year
B. And should end during the peak season
C. To comply with loan agreements
D. To make comparison meaningful
7. Which of the following transaction results in
the recognition of an expense?
A. Expiration of usefulness of equipment
during the accounting period
B. Payment of the principal of a loan
C. Payment of accounts payable
D. Withdrawal of cash by the owner
8. Which of the following situations involves a
deferral?
A.
B.
C.
D.
9.

Recording accrued interest

Recording depreciation
Recording unrecorded revenue
Recording unrecorded salaries

Which of the following assets is not subject

to depreciation?
A.
B.
C.
D.

Art equipment
Computers
Land
Store fixtures

10. Which of the following accounts could not

be credited in an adjusting entry?
A.
B.
C.
D.

Interest Receivable
Office supplies
Prepaid rent
Service revenues

11. The
principal
difference
between
depreciation and most other types of
expense is that depreciation:
A. Can be avoided if the asset is in good
condition as when it was purchased.
B. Does not require an immediate cash
outlay
C. Is not deductible if it will cause a loss
D. Is
subject
to
more
precise
measurements

NATIONAL UNIVERSITY JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

12. Amount deducted from the catalog price for

an item of merchandise:
A.
B.
C.
D.

Customer discount
Purchases discount
Sales discount
Trade discount

13. The purchase of prepaid insurance policy

would initially be recorded as:
A.
B.
C.
D.

A deferred expense
A deferred revenue
An accrued expense
An accrued revenue

14. The accountant may spread the cost of a

building over many years primarily
because:
A.
B.
C.
D.

Fiscal year assumption

Going concern assumption
Periodicity assumption
Periodicity assumption and
concern assumption

going

15. If a P4 700 cash purchase of supplies is

recorded as a P5 700 debit to supplies
expense and a P5 700 credit to cash, the
result will be that:
A. Supplies expense will be overstated
and cash will be understated
B. The cash account will be overstated
C. The supplies account will be
understated
D. The trial balance will be out of balance
16. Which of the following errors will not cause
the debit and credit columns of the trial
balance to be unequal?
A. A debit entry was recorded in the wrong
account
B. A debit was entered in an account as a
credit
C. The account balance was carried to the
wrong column of the trial balance
D. The balance of an account was
incorrectly computed

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17. It is the ability to bring together for the

purpose of noting similarities and
dissimilarities.
A.
B.
C.
D.

Comparability
Cost and benefit
Materiality
Timeliness

18. It is the capacity of information to make a

difference by helping users evaluate past,
present, or future events, or confirming or
correcting their past evaluations.
A.
B.
C.
D.

III.

PROBLEMS.

1. A business pays weekly salaries of P200 000

on Friday for a five-day week ending on that
day. If the fiscal period ends on Wednesday,
the adjusting entry is:
Salary expense
P 120 000**
Accrued Salary payable
P120 000
**P200 000 x (3/5)
2.

Comparability
Relevance
Neutrality
Understandability

If accounts receivable has a debit postings of

P580 000, credit postings of P440 000 and a
normal ending balance of P480 000, what was
its beginning balance?

19. The accounting concept justifies the usage

of accruals and deferrals:

Beg.

Accounts Receivable
340 000
580 000

A.
B.
C.
D.

Consistency
Materiality
Going concern
Stable monetary unit

20. According to the conceptual framework, the

usefulness of providing information in
financial statements is subject to the
constraint of:
A.
B.
C.
D.

Consistency
Faithful representation
Cost
Timeliness

440 000

Ending 480 000

3.

XYZ
sells
one-year
and
two-year
subscriptions for its electronic book of the
month download business. Subscription are
collected in advance and credited to Sales. An
analysis of the recorded sales activity
revealed the following:

Sales
Less:
Cancellations

2013
P 420 000

2014
P 500 000

20 000

30 000

P 400 000

P 470 000

Subscription Expirations:
2013
P 120 000
2014
155 000
2015
125 000
2016

P 130 000
200 000
140 000

(A) In XYZ Dec 31, 2013 balance sheet, the

balance for unearned subscription revenues
should be:
2013 Sales, net of cancellations
P400 000
Less: 2013 Subscription expiration
120 000
Unearned Revenue, Dec 31, 2013 P280 000

NATIONAL UNIVERSITY JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

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(B) In XYZ Dec 31, 2014 balance sheet, the balance

for unearned subscription revenues should be:
Unearned Revenue, Dec 31, 2013
P280 000
Add: 2014 Sales, net of cancellations 470 000
Total
P 750 000
Less: 2014 Subscription Expirations
(P 155 000 + P 130 000)
285 000
Unearned Revenue, Dec 31 2014
P 465 000
4. An analysis of Joy Lopez Companys unadjusted
prepaid expense account at December 31, 2014
revealed the following:
An opening balance at P15 000 for Joy
Lopezs comprehensive insurance policy. Joy
Lopez paid an annual premium of P30 000 on
July 1, 2013.
A P32 000 annual insurance premium
payment made July 1, 2014.
A P20 000 advance rental payment for a
warehouse leased for one year beginning
January 1, 2015.

6. Julius Company owns an office building and leases

the office under a variety of rental agreements
involving rent paid in advance monthly or annually.
Not all tenants make timely payments of their rent.
Julius balance sheet contains the following data:

Rental Receivable
Unearned Rental

2014
P 248 000
480 000

During 2014, Julius Company received P1 600 000

from tenants. What amount of rental revenues
should Julius Company record for 2014?
Cash received 2014
Rental Receivable, Dec 31 2013
Unearned Rental, Dec 31 2013
Total
Rental Receivable, Dec 31 2014
Unearned Rental, Dec 31 2014
Rental Revenue for 2014
7.

In its Dec 31, 2014 balance sheet, what amount

should Joy Lopez report as prepaid expenses?

P1 600 000
( 192 000)
640 000
P2 048 000
248 000
( 480 000)
P1 816 000

Salaries payable were P3 500 at the end of

September and P2 800 at the end of October.
Salaries expense for October was P18 000. How
much cash was paid for salaries during October?

Prepaid Expense
Beg

2013
P 192 000
640 000

Salaries Payable

P15 000

P 3 500

P15 000 *
32 000

P 18 700

16 000 **

18 000

20 000

P 2 800
End

P36 000

(*) Insurance expense from Jan 1 to June 30, 2014

P 30 000 x (6/12)
(**) Insurance expense from July 1 to Dec 31, 2014
P 32 000 x (6/12)

8.

2013 end

2014 end

Oct, end

Office supplies were P 9 000 at the end of January

and P 11 400 at the end of February. During
February, Office supplies expense was P3 000.
How much cash was paid for office supplies during
February?
Office Supplies
Jan, end

5. Surfers Company has P1 500 of supplies on hand

at end of 2013. During 2014, P2 750 of supplies
were purchased. A count of supplies on hand at
the end of 2014 found an inventory of P875. What
was the amount of supplies expense for 2014?

Sept, end

P9 000
5 400

P3 000

Feb, end P11 400

Supplies
P1 500
P3 375
2 750
P 875

NATIONAL UNIVERSITY JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

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9. Unearned revenue was P6 000 at the end of

February and P7 500 at the end of March. Service
revenue was P42 000 for the month of March.
How much cash was received for services
provided during March?

The company received a P36 000

advance payment during the year on
services still to be performed. By the end
of the year, one fourth of the services had
been performed.

Unearned Revenue
Liability Method:
P 6 000

Feb, end

Unearned revenue
Service revenue

P 42 000

P9 000
P9 000

43 500
Revenue Method
P 7 500
IV.

March, end

Service revenue
P27 000
Unearned revenue
P27 000

ADJUSTING ENTRIES
The following information
ENYUDYEYPIYA Company.

pertains

to

Accrued interest on a note receivable

amounted to P1 000.

The companys supplies account showed

a beginning debit balance of P2 000 and
supplies purchased of P8 000; P3 000 of
supplies were on hand at year end.

Accrued Interest receivable P1 000

Interest Income
P1 000

Supplies expense
Supplies

P7 000
P7 000

A 1-year insurance policy was purchased

for P20 000. Three months have passed
since the purchase.
Asset Method:

Insurance expense
Prepaid Insurance

P5 000**
P5 000

Expense Method:

Prepaid Insurance
Insurance Expense

P15 000
P15 000

** P20 000 x (3/12)

On April 1 2012, the company bought a

building that costs P560 000 and with a
scrap value of P25 000. As of Dec 31
2014, the said building having an
economic life of 14 years, has been used
by the company for 2 3/4 years since it
was acquired. What is the depreciation for
2014?
Depreciation
P 38 214**
Accumulated Depreciation
P 38 214
** (P 560 000 25 000) / 14 years

NATIONAL UNIVERSITY JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

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