SET B

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NAME___________ _____________ ________ ______ SECTION ___________

I. TRUE-FALSE (10 points) – Shade “A” if th e statement is true and “B” if the stat ement is
false.

1. A credit entry will decr eas e the norm al balan ce of the acco unts Prepaid Insur ance and Pr epaid
Expenses, and Ins urance Expens e.

2. A credit entry will increas e the normal balance of the gener al ledger account that reports the
amount owed as of bal ance sheet date fo r a fi rm’s accru ed exp enses.

3. When the balan ce sheet is pres ented v erticall y, i.e. the assets accounts followed by liabilit ies
accounts and equities accounts, it is called an account fo rm balan ce sh eet.

4. Closing the Dividends account requi res an o f fsetting entry to the In come Summary A ccou nt.

5. The Incom e Summary Account has a debit balan ce of ₱50,000 after rev enu e and exp en se
accounts are closed, th e bal ance of the In come Summary account should be d ebited to
Retained Earnings.

6. Under the accru al basis of accounting, reven ues ar e recognized in the accounting period in
which cas h is received.
7. Adequ ate disclosur e requir es that financial statements include any inform ation that users
need to interp ret the fin anci al statements pr o perly.

8. The accounting method that will result in financi al statements that report a more compl ete
picture of the fi rm’s finan cial position and a better measur e of profitability during the r ecent
accounting year is th e Cash Method, because the liquidity and solven cy o f the fi rm is alw ays
known at any point during the pe riod.

9. A debit entry will increas e the normal balances found in the accounts Accumul ated
Depr eci ation and Allowance for Doubt ful Accounts.

10. The notes to the fin anci al statem ents ar e co nsidered to be an integ ral part of the finan cial
statements.

II. MULTIPLE CHOICE THEORIES (10 points) - Shade the best choi ce.

11. What type of acco unts ar e Prepaid Ins urance, Prepaid Advertising and Prep aid Expens es?
A. Asset
B. Liability
C. Equity
D. Revenue

12. What type of acco unts ar e Def er red Rev enues and Unearned Rev enues?
A. Asset
B. Liability
C. Equity
D. Revenue

13. The adjusting entry hat redu ces the bal ance in Prepaid Insur ance will also include which of
the following?
A. Credit to Cash
B. Credit to Insuran ce Exp ense
C. Debit to Insuran ce Pay able
D. Debit to Insuran ce Exp ens e
 SET B
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14. All of the following statements are corr ect, except:

A. The fin anci al statem ent’s stru ctur e that is clo sest to that of th e basi c accou nting equ ation
is the Balance Sheet.
B. The Statem ent of Ch anges in Sto ckholders Eq uity is a fin anci al statem ent that will in clude
the changes in equity due to revaluation of fixed assets and the effect of foreign exch ang e
translation
C. Significant Accounting Policies is usually presented first in the notes to the finan cial
statements.
D. The amount of stockholder ’s equity report ed in the balance she et is intended to show the
fair market valu e of the firm.

15. Which type of journal entries ar e made at the end of each accounting period so that the
financi al statements bett er r efle ct a compl ete pictur e of a firm’s fin anci al position and
profitability?
A. Adjusting entries
B. Closing entries
C. Reversing entries
D. None of the abo ve

16. Which of the following will most likely not be disclosed in notes that accompany the fin anci al
statement?
A. Pending lawsuit
B. Significant ev ents aft er the bal ance sheet dat e.
C. Firing, death, or r esignation of a k ey executi ve
D. Governm ental investig ations into the pricing practices of th e company

17. On Decemb er 1 a firm bo rro wed ₱100,000 at 12% p er y ear. The int erest will be p aid
quarte rly, with the first payment due on March 1. What journal entry should the firm reflect
in the books?
A. Adjusting entry for a def er ral of interest.
B. Adjusting entry for an accru al of inter est.
C. Closing entry and rev ersing ent ry for interest payment.
D. None, the interest is p ayabl e in the 1st qu art er of the n ext accounting period. Includ e this
in the notes to financial stat ement.

18. Total manuf acturin g costs incur red durin g the year do not include
A. Direct Materi als used.
B. Factory Supplies used.
C. Direct Labor.
D. Work in Process inventory, beginning.

19. Which type of adjusting entry is o ften rev ers ed on the fi rst day of th e next accounting p erio d?
A. Depr eci ation
B. Def er ral
C. Accrual
D. None of the abo ve

20. Typically an adjusting entry will include whi ch of the following?

A. At least one Balan ce Sheet Acco unt and at least one Incom e Statement Account
B. Two Balance Sheet A ccounts
C. Two Incom e Statement Accounts
D. Cannot be determined, not enough inform atio n
 SET B
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III. MULTIPLE CHO ICE PROBLEMS (15 points, 1.5 point s each) Sh ow your soluti on
in good form and double rule your final answer. NO SOLUTION, NO CREDIT plus
MINUS (-) one for every number shaded without sol ution.

21. At the beginning of the year, a business had a two-year, ₱1,200 insurance policy on its office
equipment. On July 1, it purchased a three-y ear, ₱1,800 policy on a newly constructed
building. The Decemb er 31, year- end, adjusti ng entry would be:
A. Debit: Insuran ce Exp ense, ₱3,000; Credit: Prep aid Insur ance, ₱3,000.
B. Debit: Insuran ce Exp ense, ₱1,200; Credit: Prep aid Insur ance, ₱1,200.
C. Debit: Insuran ce Exp ense, ₱1,000; Credit: Prep aid Insur ance, ₱1,000.
D. Debit: Insuran ce Exp ense, ₱900; Credit: Prepaid Insur anc e, ₱900.
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22. A tenant rented space in the firm’s office building on September 1 at ₱450 per month, paying
six months' rent in advance. The bookkeep er recogni zed a cur rent liability of ₱2,700. The
December 31, year -end adjusting entry would be
A. Debit: Unearned Rent, ₱1,800; Credit: Rent Revenue, ₱1,800
B. Debit: Unearned Rent, ₱1,350; Credit: Rent Revenue, ₱1,350
C. Debit: Rent Revenue, ₱900; Credit: Unearn ed Rent, ₱900
D. Debit: Cash, ₱2,700; Credit: Rent Revenue, ₱1,350; Credit: Unearn ed Rent, ₱1,350
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23. Regice I nc uses di rect labor -hou rs in its predetermin ed overhead r ate. At the beginnin g of
the year, the tot al estimat ed manu facturing o verh ead was ₱221,100. At the end o f the y ea r,
actual dir ect labo r-hou rs for the ye ar were 14, 400 hours, manufactu ring over head for the year
was overapplied by ₱21,500, and the actual manufactu ring overhead was ₱216,100. The
pred etermin ed ove rhe ad rat e for the y ear mus t have been closest to:
A. ₱15.01 C. ₱15.35
B. ₱17.73 D. ₱16.50
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24. The Fix ed Assets Sch edule o f a comp any in dicated th at Dep reciation on equipm ent amo unt
to ₱100,000. Of this amount ₱88,000 was on equipment used in factory operations; the
remaining w as used on equipment used in selling and administrative activities. The year-end
adjusting entry would be:
A. Debit: Depr eci ation Expens e-Equipm ent, ₱100,000
Credit: Accumul ated D epr eciation – Equipment, ₱100,000
B. Debit: Manuf acturing Ov erh ead ₱88,000; Debit: Depr eciation Exp ense, ₱12,000
Credit: Accumul ated D epr eciation – Equipment, ₱100,000
C. Debit: Accumul ated D epr eciation – Equipment, ₱100,000
Credit: Depr eci ation Expens e-Equipm ent, ₱100,000
D. Debit: Depr eci ation Expens e-Equipm ent, ₱100,000
Credit: Equipment, ₱100,000
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25. Prepaid M ainten ance Servi ces contr act ed expi red du ring the y ear, ₱ 20,000 ; 90% were rel ated
to factor y oper ations, and the rem aining were related to administr ative ass ets. The year-end
adjusting entry would be:
A. Debit: Maintenan ce Services Expens e, ₱20,000
Credit: Prepaid Maint enan ce Ser vice, ₱20,000
B. Debit: Prepaid Maint enan ce Ser vice, ₱20,000
Credit: Maintenan ce Services Expens e, ₱20,000
C. Debit: Manuf acturing Ov erh ead ₱18,000;
Debit: Maintenan ce Services Expens e, ₱2,000
Credit: Prepaid Maint enan ce Ser vice, ₱20,000
D. Debit: Maintenan ce Services Expens e, ₱20,000
Credit: Cash, ₱20,000
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 SET B
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26. Employee Salaries and wag es were accru ed as follows: direct labor, ₱ 200,000, indirect
labor, ₱8 2,000, and selling and administrative salaries. ₱ 90,000. The adjusting ent ry
would include:
A. Debit: Work in Process, ₱200,000; Debit: Factory Ov erh ead, ₱82,000
Debit: Salaries Exp ense, ₱90,000; Credit: Salaries and Wages Payabl e, ₱372,000
B. Debit: Salaries Exp ense, ₱372,000; Credit: Salaries and Wages Payabl e, ₱372,000
C. Debit: Salaries and Wag es Payable, ₱372,000; Credit: Cash, ₱372,000
D. Debit: Salaries Exp ense, ₱372,000; Credit: Cash, ₱372,000.
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27. Registeel Inc uses a job-ord er cost system and applies overhead on the basis of direct labor
cost. At the end of A ugust, Registeel h ad one job still in process. The job cost sh eet fo r th is
job contained the f ollowing inform ation:
Direct materi als . . . . . . . . . . . . . . . . . . . . ₱480
Direct labor . . . . . . . . . . . . . . . . . . . . . . . 150
MOH applied . . . . . . . . . . . . . . . . . . . . . . 600
An additional ₱ 1 00 of l abor was n eed ed in S eptember to compl ete this job. For this job, h ow
much should Registeel have tr ansf er red to finished goods inventory in September wh en it was
completed?
A. ₱1,330 C. ₱1,230
B. ₱1500 D. ₱1,730
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28. Marow ak Manuf actu ring Company uses a job order cost system. At the beginning of Feb ruary,
Rio only had one job in process, Job #594. The direct costs assign ed to this job at that time
wer e ₱800 of materials and ₱650 of labor. Job #594 was finished during February incu rri ng
additional direct costs of ₱120 for materials and ₱370 for labor. Job #595 was started and
finished du ring Febru ary. Th e dir ect costs as signed to this job were ₱310 for m ateri als and
₱190 for labor. Job #596 was started during Feb ruary but was not finished by the end of the
month. The direct costs assigned to this job wer e ₱740 for mat erials and ₱300 for lab or. Rio
applies manu facturing ov erh ead to its produ cts at a rat e of 200% o f direct labor cost. W hat
is Rio's cost of goods manufactu red fo r Febr uary?
A. ₱2,440 C. ₱4,860
B. ₱3,750 D. ₱6,500
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Nos. 29 & 30 are based on the following info rmation:
At the beginning of the current year, Goldeen Corporation estimated that its manufactu ri ng
overh ead would b e ₱70,000 and the activity level would be 10,000 machin e-ho urs. The lev el
of activity at cap acity is 14,000 machine-ho urs. The actual manu facturing overhead for t he
yea r was ₱63,300 and the actu al level of acti vity was 10,100 machine-h ours.
29. If the company b ases its p red etermin ed ove r head rate o n estimated machin e-ho urs, then its
overh ead fo r the year would hav e been:
A. ₱12,800 overapplied C. ₱7,400 overapplied
B. ₱12,800 underapplie d D. ₱7,400 underapplied
30. If the comp any bases its pred ete rmined overh ead r ate on estimated machine-hou rs at cap aci ty,
then its overhead for th e year would have ref lected unus ed capacity amounting to:
A. ₱700 C. ₱6,700
B. ₱7,400 D. ₱12,800
 SET B
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IV. PROBLEMS SOLVING (15 point s). Schedule of the Cost of Goods Manufactured,
Cost of Goods Sold, Incom e Statem ent. Superior Company p rovided th e following accou n t
balan ces fo r year end ed De cember 31. (all raw materials ar e direct materials):
Selling Expenses . . . . . . . . . . . . . . . . . . . . ₱140,000
Purchas es of raw mat erials. . . . . . . . . . . . . . 290,000
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . ?
Administrative Exp enses. . . . . . . . . . . . . . . . 100,000
Manuf acturing ov erh ead applied. . . . . . . . . . . 285,000
Total actu al manuf acturin g overh ead costs 270,000
Inv entories Beginning of year End of Year
Raw Materi als. . . . . . . . . . . . . ₱40,000 ₱10,000
Work in process. . . . . . . . . . . . ? ₱35,000
Finished goods. . . . . . . . . . . . . ₱50,000 ?
The total manufactu ring costs for the year were ₱683,000; the cost of goods available for
sale total ed ₱740,000; unadjusted cost of goods sold totaled ₱660,000; and th e net
oper ating income was ₱30,000. Over or under applied overhead is closed entir ely to Cost
of Goods Sold.
Required:
(1) Prepare an In come Statem ent (5 pts)
(2) Prepare Schedule of Cost of Goods Sold (5 pts)
(3) Prepare a Sch edule of Cost of Goods Manuf actured (5 pts)

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