JPIA-BulSU I.

Expense method in prepaid expenses

Basic Financial Accounting and Reporting II. Income method in unearned revenues
Main Exercise III. Asset method in prepaid expenses
IV. Liability method in unearned revenues
1. Which of the following is/are economic entities?
a. I and II only
I. San Miguel Corporation
b. III and IV only
II. Golden Acres, a home for the aged
c. I and III only
III. University of the East, a stock
d. II and IV only
corporation
IV. Rotary International, a civic organization 9. Which of the following is considered a prime
cost?
a. I, II, III and IV
b. I and III only a. factory supervisor’s salary
c. II and IV only b. glue in making wooden tables
d. I, III and IV only c. strawberries in creating ice cream
d. depreciation of factory equipment
2. Debit always means
10. S1: The work-in-process inventory is debited
a. Right side of an account
when materials are now subject to conversion.
b. Increase
S2: Gross profits denotes income from producing
c. Decrease
and selling the products.
d. None of these
S3: Finished goods are credited after a product has
3. A trial balance may prove that debits and credits finished its conversion process.
are equal but
a. Only one statement is incorrect
a. an amount could’ve been entered in a wrong b. Two statements are incorrect
account. c. All statements are incorrect
b. a transaction could’ve been entered twice. d. None of the foregoing choices are correct
c. a transaction could’ve been omitted.
11. Discounting of notes receivable with recourse
d. all of these
does not
4. Which is an example of a nominal and contra
a. imply that the discounted note is a liability
account?
regardless whether the maker of the note dishonors
a. Freight in it or not.
b. Sales discount b. result to a loss if the discount rate is higher than
c. Purchases its stated rate.
d. Allowance for bad debts c. credit a “note receivable discounted” account.
d. bear any loss if the maker dishonors the note.
5. Accumulated depreciation is an example of
12. The voucher system is used to control
a. Nominal and adjunct account transactions involving
b. Adjunct and real account
c. Adjunct and contra account a. cash receipts
d. Contra and real account b. cash disbursements
c. cash receipts and disbursements
6. A subsidiary ledger is d. cash equivalents
a. a listing of all components of the account 13. When the allowance method of recognizing bad
balances. debts is used, the entry to record recovery of
b. a backup system to protect against record accounts previously written-off would increase
destruction.
c. a listing of all account balances just before a. Accounts receivable
closing entries are prepared. b. Allowance for bad debts
d. a listing of accounts of a subsidiary company. c. Net income
d. Working capital
7. Which of the following is not found in a post-
closing trial balance 14. Which of the following cannot be shown as part
of cash and cash equivalents in the current asset
a. Sales section of the balance sheet?
b. Accrued expense
c. Allowance for bad debts a. Customer’s check of past due account
d. Share premium b. Cash in special checking account for payroll
c. Redeemable preference shares demandable
8. Which of the following adjusting entries need within the year
reversals d. Six-month outstanding customer check
15. Which of the following transactions is an
example of a deferral?
a. debit salaries expense and credit salaries
payable
b. debit interest receivable and credit interest
income
c. debit unearned revenue and credit service
revenue
d. debit depreciation expense and credit
accumulated depreciation
16. Which of the following statements in relation to
the cash short or over account is true?
a. It would be impossible to have cash shortage or
overage if employees were paid in cash rather than
by check
b. The entry to account for daily cash sales for
which a small amount of cash shortage existed
would include a debit to cash short or over account
c. If the cash short or over account has a debit
balance at the end of the period it must be debited
to an expense account
d. A credit balance in a cash short or over account
should be considered a liability because the short
change customer will demand return of this
amount.
Customer check returned NSF 124,000
Depositor’s note charged to account 500,000
What is the adjusted cash in bank on December 31,
2011?
a. 3,150,000
b. 2,130,000
c. 2,150,000
d. 2,650,000
20. An entity reported inventory on December 31,
2015 at P6,000,000 based on a physical count at
cost and before any necessary year-end
adjustments relating to the following:
• Included in the physical count were goods
billed to a customer FOB shipping point on
December 30, 2015. These goods had a cost of
P125,000 and were picked up by the carrier on
January 7, 2016.
• Goods shipped FOB shipping point on
December 28, 2015 from a vendor to the entity
were received on January 4, 2016. The invoice cost
was P300,000.
What amount should be reported as inventory on
December 31, 2015?

17. If the cash balance shown on entity’s bank a. 5,875,000

statement is less than the correct cash balance and b. 6,000,000
neither the entity nor the bank has made any c. 6,175,000
errors, there must be d. 6,300,000

a. Deposits credited by bank but not yet recorded 21. An entity budgeted the following sales.
by entity June July August
b. Deposits in transit Sales on 1,800,000 1,840,000 1,900,000
c. Outstanding checks account
d. Bank charges not yet recorded by entity Cash 180,000 200,000 260,000
sales
18. The following data pertain to Clamor Company
All merchandise is marked up to sell at
on December 31, 2011:
invoice cost plus 20%. Merchandise inventory at
Checkbook balance 3,000,000 the beginning of each month is 30% of that month's
Bank statement balance 3,750,000 projected cost of goods sold. What is the amount of
Check drawn on Clamor Company, payable to anticipated purchases for July?
supplier dated December 31, 2011 but
a. 1,632,000
mailed on January 15, 2012 375,000
b. 2,076,000
Cash in sinking fund 1,500,000
c. 1,700,000
On December 31, 2011, how much should be d. 1,730,000
reported as cash under current assets?
22-23. From inception of operations, an entity
a. 3,375,000 provided for uncollectible accounts expense under
b. 4,125,000 the allowance method and provisions were made
c. 2,675,000 monthly at 2% of credit sales. No year-end
d. 4,875,000 adjustments to the allowance account were made.
The balance in the allowance for doubtful accounts
19. In an audit of Keicy Company on December 31, was P1,000,000 on January 1, 2015. During 2015,
2011, the following data are gathered: credit sales totaled P20,000,000, interim provisions
Balance per book 2,000,000 for doubtful accounts were made at 2% of credit
Bank charges 6,000 sales, P200,000 of bad debts were written off, and
Outstanding checks 470,000 recoveries of accounts previously written off
Deposit in transit 600,000 amounted to P50,000. An aging of accounts
Customer note collected by bank 750,000 receivable was made for the first time on December
Interest on customer note 30,000 31, 2015 with the given uncollectible % as follows:
November – December 6,000,000 10% c. 13,000,000
July – October 2,000,000 20% d. 14,000,000
January – June 1,500,000 30%
What is the cost of goods in process inventory
Prior to January 1, 2015 500,000 50%
destroyed by fire?
Based on the review of collectability of the account
a. 3,500,000
balances in the “prior to January 1 2015” aging
b. 3,800,000
category, additional accounts totaling P100,000 are
c. 2,500,000
to be written off on December 31, 2015. Effective
d. 1,500,000
December 31, 2015, the entity adopted the aging
method for estimating the allowance for doubtful 28-29. January 1, 2015, an entity disclosed the
accounts. following balances:
What is the year-end adjustment to the allowance Land 4,000,000
for doubtful accounts on December 31, 2015? Buildings 20,000,000
a. 900,000 debit During the current year, the following transactions
b. 900,000 credit occurred:
c. 500,000 debit
d. 500,000 credit - A tract of land was acquired for P2,000,000 cash
as a building site.
What is the net realizable value of accounts - A plant facility consisting of land and building was
receivable on December 31, 2015? acquired in exchange for 200,000 shares of the
entity. On the acquisition date, each share had a
a. 9,900,000
quoted price of P45 on a stock exchange. The plant
b. 8,250,000
facility was carried on the seller’s books at
c. 8,350,000
P1,600,000 for land and P5,400,000 for the building
d. 8,200,000
at the exchange date. Current appraised values for
24-27. On December 31, 2015, a fire damaged the the land and the building, respectively, are
warehouse and factory of an entity completely P2,000,000 and P8,000,000. The building has an
destroying the goods in process inventory. There expected life of forty years with a P200,000 residual
was no damage to the raw materials, finished value.
goods and factory supplies. The physical inventory
What is the total cost of land on December 31,
revealed the following.
2015?
January 1 December 31
a. 7,800,000
Raw materials 1,700,000 2,000,000 b. 7,600,000
Goods in process 4,300,000 0 c. 8,000,000
Finished goods 6,000,000 4,500,000 d. 6,800,000
Factory supplies 500,000 400,000
What is the total cost of buildings on December 31,
The gross profit margin historically approximated 2015?
30% of sales. The sales for the year amounted to
a. 28,000,000
P20,000,000. Raw material purchases totaled
b. 25,400,000
P4,000,000. Direct labor costs for the year
c. 27,200,000
amounted to P5,000,000, and manufacturing
d. 27,000,000
overhead has been applied at 60% of direct labor.
30. On July 1, 2019, Bernard Company sold
What is the cost of raw materials used?
equipment to Jojo Company for 500,000. Bernard
a. 5,700,000 accepted a 10% note receivable for the entire sales
b. 3,700,000 price. On December 31, 2019, the entity discounted
c. 3,800,000 the note at a bank at an interest rate of 12%. What
d. 3,600,000 is the amount received from the discounting of note
receivable?
What is the total manufacturing cost?
a. 484,000
a. 13,000,000
b. 493,500
b. 11,800,000
c. 503,500
c. 11,700,000
d. 517,000
d. 11,600,000
END
What is the cost of goods sold?
a. 12,000,000
b. 16,000,000