POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Bataan Branch

DIAGNOSTIC EXAMINATION IN BASIC ACCOUNTING

Instruction: Answer the examination honestly in order for it to serve its purpose. Work on
your own. Dig your stock knowledge.

A.Shade A if the statement is correct and shade B if the statement is incorrect.

The terms of bookkeeping and accounting are synonymous.

1.
Under the business entity principle, the owner and the business that he formed are
2. considered as one inseparable entity.

Receiving payments on an account receivable increases both equity and assets.

3.
An equipment purchased at the beginning of the year 10 years ago costing P
4. 500,000 with an annual depreciation rate of 5% will be shown on the balance sheet
at the end of this year as “Equipment-P 500,000 and Accumulated Depreciation-P
250,000”.

If the net income for a business was P 175,000 for a period of time, withdrawals
5. were P 40,000 in cash during the same period, and the owner made no investment
during the period, the owner’ equity increased P 215,000 during that same period.

Recording the expiration of a prepaid asset results in the reduction of the asset
6. account and an increase in the related expense account.

Increases in asset and decreases in revenue accounts should be entered on the left
7. side of a T account.

The use of an asset which is depreciated over time is an example of an internal

8. transaction.

All adjusting entries involve one entry to an income statement account and another
9. entry to a balance sheet account.

10 In the trial balance, the equality of the debit and credit totals provides a complete
. proof that no error has been committed.

B. Shade the letter of the correct answer.

11 The revenue recognition concept:

a. is in not in conflict with the cash method of accounting
b. determines when revenue is credited to a revenue account
c. states that revenue is not recorded until the cash is received
d. controls all revenue reporting for the cash basis of accounting

12 Using accrual accounting, expenses are recorded and reported only

. a. when they are incurred, whether or not cash is paid
b. when they are incurred and paid at the same time
c. if they are paid before they are incurred
d. if they are paid after they are incurred

13 A trial balance is
. a. prepared before the posting process is completed
b. a list of income statement accounts with their balances
c. a list of balance sheet accounts with their balances
d. a list of all accounts with their balances

14 If the debit amount of an entry to record the purchase of supplies on account was
. not posted:
a. liabilities would be understated c. assets would be overstated
 b. liabilities would be overstated d. assets would be
understated

15 Proceeds from selling of productive assets, proceeds from collecting the principal
. amount of loans, payments to purchase property, plant and equipment are included
in the cash flows from what activity?
a. operating b. investing c. financing
d. lending

16 Celtics Company has P 40,000 in revenues, P 88,000 in expenses, P 24,000 in

. owner investment, P 6,000 in owner’s withdrawals, and P 30,000 in liabilities paid
off. Owner’s equity changes by:
a. P 30,000 decrease b. P 48,000 decrease c. P 24,000 decrease
d. P 60,000 decrease

17 The net income reported on the income statement is P 90,000. However, adjusting
. entries have not been made at the end of the period for supplies expense of P
2,500 and accrued salaries of P 3,400. Net income, as corrected, is:
a. P 84,100 b. P 96,600 c. P 90,000 d. P
97,500

18 Lakers Company received a 12% 90 day note from Knicks Company amounting to
. 300,000 in settlement of an account. The note is dated Nov. 11, 2018. Lakers
Company’s adjusting entry to record accrued interest on December 31, 2018:
a. Interest expense 5,000 c. Interest receivable
5,000
Interest payable 5,000 Interest revenue
5,000
b. Interest expense 9,000 d. Interest receivable
9,000
Interest payable 9,000 Interest revenue
9,000

19 Blazers Company reported total revenues of P 252,000 for 2018; total liabilities as
. of December 31, 2018, P 420,000; net loss for 2018, P 54,000 and 2013 total cash
payments of P 222,000. The company’s total expenses must have been
a. 198,000 b. 222,000 c. 306,000 d.
372,000

20 Houston Company just opened its business on June 1, 2018 and had the following
. transactions: (1) cash investment of P 50,000; (2) equipment purchased for cash, P
30,000; (3) collected P 24,000 from a customer for services rendered; (4) paid
salaries to employees, P 18,000; and (5) Borrowed P 40,000 from a bank. After
these transactions were completed, the total assets, total liabilities, and total
owner’s equity of the business are:
a. 126,000; 70,000; 56,000 respectively c. 96,000; 64,000; 32,000
respectively
b. 96,000; 40000; 56,000 respectively d. 96,000; 46,000; 56,000
respectively

On June 1, 2016, Parker Company purchased a delivery equipment for P 250,000

with an estimated life of 25 years and a salvage value of P 10,000. Parker Co.
decided to use the straight line method of depreciation.

21 How much will be the depreciation expense on December 31, 2016?

. a. 10,000 b. 9,600 c. 5,600 d.
4,800

22 How much will be the accumulated depreciation on December 31, 2023?

. a. 67,200 b. 9,600 c. 72,800 d.
76,800

23 How much will be the book value of the delivery equipment on December 31, 2018?
. a. 225,200 b. 215,200 c. 24,800 d.
221,200

24 The Gilinggiling Company used the asset method in recording the payment of Rent
. amounting to P42,732.00 applicable for the period October 1, 2018 up to April 30,
 2019. How much would be the difference between the adjusted balances of the
Prepaid Rent account using the Asset method against that using the Expense
method for the year ended December 31, 2018?
a. P 7,122.00 b. P 28,488.00 c. P 0.00 d. P
21,366.00

25 The Unearned service revenue account shows an adjusted end-of-year balance of P

. 300,000. The adjusting entry to Unearned service revenue indicated P 400,000 in
Service revenue was earned during the accounting period. What was the balance
of the Unearned service revenue account before the adjusting entry was recorded?
a. P 100,000 credit b. P 100,000 debit c. P 700,000 credit
d. P 700,000 debit

26. On August 7, 2018, JPIA purchased merchandise from JFINEX costing P50,000, FOB
shipping point, 2/10 n/30. How much should JPIA pay to JFINEX assuming the seller paid
for the transportation cost of P900 and payment was made on August 16, 2018?
a. P49,000 b. P49,900 c. P50,000 d. P9,882

27.The following data are available for the month of March and April of the current year:
March April
Inventory, beginning P 7,000 P ?
Inventory, end 6,500 7,500
Purchases 26,000 25,400
Purchase discount 6,500 6,900
Freight-out 5,000 6,000
Net sales 42,000 45,700
Sales return 4,000 4,200
Sales discount 2,000 3,000
Operating expenses 18,500 19,250
Administrative expenses 12,350 12,350

The cost of goods sold for the month of April is

a. P17,500 c. P23,500 d. Indeterminable
b. P18,000 .

28.The December 31, 2017 balances of the selected accounts of Toni Company and
pertinent information are shown below:
Inventory, January 1, 2018 P2,800,000
Purchases 7,500,000
Purchase returns 500,000
Sales returns 75% of net
income
Inventory on December 31, 2016 2,000,000
Gross profit rate on net sales 20%
Operating expense 550,000

What is the amount of gross sales for the current year?

a. P7,000,000
b. P7,750,000
c. P8,500,000
d. P9,125,000

29.Provided here is an excerpt from the worksheet of Adrian Company’s fourth month of
operations:
Trial Balance Adjusted Trial Income
Debit/(Credit) Balance Statement
Debit/(Credit) (Debit)/Credit
Cash 320,000 320,000
Accounts Receivable 124,000 124,000
Office Supplies Inventory 10,000 8,000
Prepaid Insurance 42,000 30,000
Prepaid Rent 24,000 20,000
Equipment 542,000 542,000
Accumulated Depreciation- (11,583) (17,375)
Equipment
Salaries Payable (53,000) (58,000)
Service Revenue 159,000
Commission Revenue 12,000
 Other operating expenses amount to P65,000. How much is the company’s net income
for the fourth month?
a. P106,00 b. P70,208 d. P82,208
0 c. P72,208

30.On December 31 of the current year, Bunjoi Company’s bookkeeper made an entry
debiting Supplies Expense and crediting Supplies on Hand for P126,000. The Supplies
on Hand account had a P153,000 debit balance on January 1. The December 31 balance
sheet showed Supplies on Hand of P114,000. Only one purchase of supplies was made
during the month, on account. The entry for that purchase was
a. Debit Supplies Expense, P87,000, and credit Accounts Payable, P87,000.
b. Debit Supplies on Hand, P165,000, and credit Accounts Payable, P165,000.
c. Debit Supplies on Hand, P87,000, and credit Accounts Payable, P87,000.
d. Debit Supplies on Hand, P87,000, and credit Cash, P87,000.

= End of Examination =

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