QUIZ1

1. At January 1, 2019, ALLAN LAUNDRY SERVICES had a total assets of P500,000 and total
owner’s equity of P280,000. During 2019, total assets decreased P40,000, and total
liabilities decreased P22,000. What was the total owner’s equity at December 31, 2019?
P262,000

2. The ability of the business to pay for its long-term obligations is an indication that the
business is solvent. True

3. A customer brought his car to your repair shop and after the work was done he made a
cash payment of P10,000 representing 50% of the repair bill and then issued a note for the
balance of P10,000 promising to pay after one month. The accountant immediately
recorded P20,000 as revenue of the repair shop. This supports the principle Accrual

4. Who is primarily responsible for the financial statements? Company’s management

5. Income and expenses are the elements that relate to financial position. False

6. Unlike expenses, liabilities and owner’s equity are on the right side of the accounting
equation. Increases in expenses are recorded as debits and decreases are entered as
credits. True

7. The assets of the business at the start of the month is P1,000,000 and the owner’s equity is
P800,000. Equipment worth P500,000 were purchased during the month of which only
P150,000 were paid for. At the end of the month, owner’s equity will become P800,000

8. This problem contains 8 questions.

KJ Santos has just begun a new small repair business which he named KJ Car Repair
Shop, and the following were the transactions completed by the business in September,
2020.

Sept. 1 – Mr. Santos withdrew his personal bank deposit from Security Bank amounting to
P575,000 and began his business by investing the amount of P500,000.

3 – Purchased repair equipment costing P275,000 on account from Banawe

Trading.

6 – Purchase of office supplies, P7,000, on account.

8 – Completed repair work to customer, P50,000 and out of this amount, P30,000
has been collected.

12 – Completed repair work on credit for Jerry Musni, P50,700.

15 – Paid semi-monthly salary of Jun, KJ’s automotive specialist, P8,500.

18 – Partial payment of P137,500 for the September 3 purchase of repair

equipment.
 22 – Collection of P128,000 cash from various customers for repair services
rendered.

23 – Billed customers for services rendered amounting to P48,000.

25 – Mr. Santos withdrew P25,000 cash from the business to pay personal
expenses.

26 – Paid 50% of the September 6 purchase of office supplies.

27 – Collections from clients amounting to P23,250, for billings dated September

23.

28 – Receipt of billing from MERALCO, P21,000 for the utility expense of KJ Car
Repair Shop. The bill will be paid in October.

29 – Paid P8,000 for the monthly rental on the shop space.

30 – Paid September 16-30 salary of Jun amounting to P8,500.

Required:

Analyze the above business transactions to describe the effects on the accounting
equation. Use T-accounts and give the final balances of the accounting elements to answer
the questions.

Use the following accounts:

Cash, Accounts Receivable, Office Supplies, Repair Equipment, Accounts Payable, KJ

Santos, Capital, KJ Santos, Drawings, Service Income, Salary Expense, Utility Expense
and Rent Expense.

· How much is the total service income? 276700

· How much is the total assets of KJ Car Repair Shop as of September 30, 2020?
867700
· How much is the cash flows from operating activities? 152750
· How much is the profit for September? 230700
· What is the balance of cash account based on the foregoing transactions? 490250
· What is the balance of accounts receivable as of September 30, 2020? 95450
· What is the ending capital account of Mr. KJ Santos? 705700
· What is the balance of accounts payable as of September 30, 2020? 162000

9. Which of the following statements is associated with the accrual basis of accounting?
Revenues are recognized in the period they are earned, regardless of the time period
the cash is received
10. Payment of owner’s liability out of the cash of the business decreases both assets and
liabilities. False

11. The basic accounting equation principle dictates that a business owner’s personal expenses
should not be recorded on the books of the business. False

12. Government accounting encompasses the process of analyzing, classifying, summarizing

and communicating all transactions involving the receipt and disposition of government
funds and property and interpreting the results thereof. True

13. Income is increase in asset or decrease in liability that results in increase in equity other
than that relating to contribution from owner. True

14. At the beginning of the year, the liabilities of DGP Advertising amounted to P120,000 but it
decreased by P50,000 during the year. The assets increased by P160,000 during the year
and at the end of the year amounted to P360,000. The owner’s equity at the start of the
year is P80,000

15. The International Accounting Standards Board (IASB) issues accounting standards called
Philippine Financial Reporting Standards (PFRS) which include Philippine Accounting
Standards (PAS), Philippine Financial Reporting Standards (PFRS) and Philippine
Interpretations developed by the Philippine Interpretations Committee. False

16. Ben Watch Repair Services has a total assets in January 1, 2019 totaled P70,000, and its
liabilities amounted to P40,000. Net income for the period was P24,000 and owner’s
withdrawals amounted to P25,000. At December 31, 2019, assets totaled P90,000, and
liabilities amounted to P57,000.
What is the amount of additional investment during the period? P4,000

17. The following transactions occurred during the month of September:

· Paid P1,500 cash for store equipment.
· Paid P1,000 in partial payment of store supplies purchased 30 days previously.
· Paid October’s utility bill of P600.
· Paid P1,200 to owner of the business for his personal use
· Paid P1,400 salary of office employee for September

What was the amount of expenses during September? P2,000

18. The following statements relate to the scope of practice of accountancy. Which one
constitutes in public practice? A person who holds out himself or herself as one skilled
in the knowledge, science and practice of accounting, and as someone qualified to
render professional services as CPA.

19. A complete set of financial statements include: the statement of financial position, statement
of comprehensive income, statement of changes in equity, and statement of cash flows.
False

20. Bien D., had a capital balance of P12,300 on June 30, 2020 and P23,800 on July 31, 2020.
Net income for the month of July was P14,000. What were the owner’s withdrawals during
July? P2,500

21. The following data were extracted from the records of Zulueta Legal Consultancy:
· Owner, Capital, August 1, 2020 - -P57,000
· Total expenses during August - - P27,900
· Withdrawals during the month - -P15,750
 · Owner, Capital, August 31, 2020 -P63,300

How much was the total revenues during August, 2020? P49,950
22. If on September 1, 2020, Michael J. rendered services for a customer in exchange for
P7,500 cash. What would be the effects on the accounting equation?
Assets, P7,500 increase; Liabilities, no effect; Owner’s equity, P7,500 increase

23. Net income which increases owner’s equity is considered a recovery on capital while Cash
withdrawn by the owner is considered a recovery of capital. True

24. Prepaid expense is an example of a nominal account. False

25. A current liability is an obligation that: Is expected to require the use of current assets or
the creation of another current liability to liquidate it.

26. One of the following is found in the heading of an income statement:

For the year ended December 31, 2019

27. Additional information that is relevant to the needs of users about the items in the balance
sheet and income statement are presented on the face of the financial statements or in the
notes to the financial statements. True

28. Accounting is a profession mainly because of three attributes: mastery of a particular

intellectual skill; adoption of a common code of values or conduct; and acceptance of a duty
or responsibility to society. True

29. Referral Fee was given to a doctor for bringing his patients for laboratory exam at Medex
Laboratories. Referral Expense and Laboratory Fees are both recorded by Medex. The
method of recording expense and revenue supports the principle of Matching

30. Which of the following statements best describes the matching principle?
Expenses should be recognized in the same period that the related revenues are
recognized

31. Which of the following transactions does not affect the owner’s equity in a sole
proprietorship? Cash receipts for unearned revenues

32. Because of his book in 1494 entitled “Summa de Arithmetica, Geometria, Proportioni et
Proportionalita”, Friar Luca Pacioli was considered the father of Double-Entry Bookkeeping.
True

33. The normal balance is the usual balance of an account assuming proper accounting has
been made. It is normal that some of the asset accounts may have a credit balance at the
end of the accounting period. False

34. The financial structure may be stated in the following accounting equation, except Assets =
Liabilities
35. Bookkeeping is the procedural or mechanical aspect of accounting while Accounting is
conceptual that includes the interpretation of information recorded under bookkeeping. True

36. Credits are used to record increases in: Revenues, liabilities, owner’s equity

37. The owner of the grocery store took home a loaf of bread and a bottle of milk from the
grocery’s shelf was not recorded by the accountant. This will overstate assets and
owner’s equity
 38. A manufacturing business cannot be organized by a sole proprietor because sole
proprietorship may not have several employees. False

39. Debit refers to the left side of an account and credit means the right side. To debit means to
increase while to credit means to decrease. False

40. The objective of financial statements is to provide all the information that users may need in
making decisions. False

41. A transaction caused a P50,000 decrease in total assets. This could have been due to a
purchase of equipment for cash. False

QUIZ 2
1. Which of the following entries record the purchase of asset issuing a 60-day note?
Debit asset and credit notes payable.

2. The unadjusted Trial Balance of Gomez Consultancy Firm include the following account
balances on December 31, 2019:

The debit and credit columns of the Income Statement in the worksheet show total of
482,000

3. The company failed to record accrued interest income at the end of the accounting period.
Which of the following is not understated? Interest payable

4. After closing the revenue and expense accounts, Income Summary showed a credit
balance of P60,000. Which of the following statement is true? The company had a profit
of P60,000.

5. A debit of P1,000 to accounts receivable was posted to the debit side of the general ledger
as P100 will understate the accounts receivable by P900.

6. In which financial statement does the account Income Summary appear?

It does not appear in any financial statement
7. The accountant of Converge Company failed to make the adjustments on the following
items:
• Depreciation of office equipment, P12,000.
• Accrued utilities, P5,000
• Accrued revenues, P2,000
The overall effect of the above omissions to net income is 15,000 overstatement

8. Year-end net assets would be understated and current expenses would be overstated as a
result of failure to record which of the following adjusting entries?
Unexpired portion of insurance premiums paid

9. What function do general ledgers serve in the accounting process? Classifying

10. Problem B: (has 2 questions)

The adjusted trial balance of Pauper Company on its first year of operation, shows the
following balances as of December 31, 2019:

Note: If your answer is PHP10,000.75 it should be written as 10,001 (no peso sign, with comma, and
round-off to whole number).

What is the total of the debit and credit columns of the post-closing trial balance? 780,000

How much is the balance of Pauper Capital on the December 31, 2019 post-closing trial
balance? 690,000

11. Reymond Company has P9,000, 10% 90-day note receivable outstanding on December 31.
The note is dated December 1. An adjusting entry is made on the note at year end. The
correct reversing entry should be:
Debit Interest Revenue and credit Interest Receivable, 75.

12. The following transactions took place for Dizon Consultancy Firm for the month of
December 2019:
• The owner invested cash of P50,000 in the business.
• Purchase P6,800 worth of various equipment on account but paid P3,600 ten days
after.
• Rendered services receiving P12,000 cash and P8,500 note issued by the client
promising to pay within 30 days.
• Billed another client for P5,000 representing services rendered.
• Received P48,500 from a bank as proceeds of 90-day loan. This amount is net of
P1,500 services charges.
• Paid salaries of staff, P5,000.
 The above transactions resulted to: Increase in assets and liabilities of 122,200 and
53,200 respectively.

13. Problem A: (has 2 questions)

The books of Gomez Consultancy Firm showed the following unadjusted accounts’
balances as of December 31, 2019. All of the accounts have normal balances.

The following information were made available for the preparation of the adjusting entries as
of December 31.
a) Unused supplies at the end of the year is P850.
b) Uncollectible accounts are estimated to be equivalent to 15% of outstanding Accounts
Receivable.
c) Consultancy income received in advance in the amount of P25,000 was included in the
consultancy income account.
d) The equipment with a useful life of 10 years and with an estimated salvage value of
P65,000 was purchased on March 31 of the current year.
e) Prepaid Insurance represents the amount of a one-year premium expiring March 1,
2020.
f) The note was received from a customer on November 16, 2019 for 60 days at 20%
interest.
g) The payroll for the 5-day work week covering Dec. 29, 2020 to January 2,2020 is
P11,250.

Note: If your answer is PHP10,000.75 it should be written as 10,001 (no peso sign, with comma,
and round-off to whole number).

What is the total amount of adjusted Assets? 476,300

What is the total amount of adjusted Liabilities? 94,250

14. Coleen Company prepares a worksheet to facilitate the preparation of its financial
statements. The company's operations for the year 2019 resulted in a profit, if before
considering profit The total debits exceed total credits in the statement of financial
position columns.

15. On April 1, Venus Company received and paid a P700 bill for advertising done in March. In
addition to this bill, the company paid P6,100 during April for expenses incurred in that
month. On May 2, Venus Company paid a P4,600 payroll to employees for work done in
April. Based on the above data, total expenses for the month of April is: 10,700
16. At the beginning of the year, the balance of L. Ocampo, Capital is P150,000. During the
year, L. Ocampo invested additional P50,000 and withdrew P30,000. After closing the
nominal accounts, Income Summary Account showed a credit balance of P36,000. The net
increase(decrease) in the capital account is Increase of 56,000

17. After posting the closing entries, the income accounts, expense accounts and income
summary accounts have zero balance.

18. A laundry shop began operation in November with laundry supplies of P16,000. During the
month, the shop purchased laundry supplies of P29,000 and purchased another P35,000 in
December. On December 31, 2019, laundry supplies on hand is P18,500. The adjusting
entry on December 31, 2019 will result to supplies expense of: 61,500

19. The remaining steps in the accounting cycle performed at the end of the year are:
1. Closing entries
2. Reversing entries
3. Financial statements
4. Adjusting entries
5. Post- closing trial balance

The proper sequence is 4, 3, 1, 5, 2

20. A deferred revenue account balance represents an amount that is

collected but not yet earned

21. The bookkeeper of ABC Consultancy firm failed to recognize the following at the end of the
period:
• Earned Consultancy Fee but not yet collected, P3,000
• Unused supplies of P1,500
• Accrued expense of P3,800

The total effect of the above errors in the profit of ABC Consultancy Firm is
Profit is understated by P700

22. A business received cash of P30,000 for services that will be provided in the future. The
cash received was recorded as a debit to cash account and a credit to unearned service
income account, At the end of the year, P11,000 is still unearned. The adjusting entry for
this is:
Debit Unearned service income and credit Service income for 19,000.

23. The adjusted trial balance of Ghor Service Center on December 31, 2019 is given below:

S. Ghor Service Center

Adjusted Trial Balance
December 31, 2019
 The credit total of the statement of financial position column in the worksheet after
extending the net income is 817,500

24. Using the allowance method of recording doubtful accounts, the entry to collect an account
receivable which was previously written-off, will increase cash

25. Which of the following accounts is not closed during the closing process? Unearned
income

26. The Corona Corporation prepares reversing entries at the beginning of the accounting
period. Which of the following adjusting entries prepared by the entity will be reversed?
The entry to take up the unused supplies at the end of the period.

27. A tool used to summarize all information needed to make adjusting entries and facilitate the
preparation of the financial statements as well as the closing entries is called Worksheet

28. The trial balance is out of balance. This may be due to Sales posted as P400 should be
P450.

29. A journal consists of: A chronological record of individual business transactions.

30. A service vehicle, costing P1,000,000 of Union Company is being depreciated over 10-year
life with salvage value equal to 10% of its costs. After recording the depreciation on
December 31, 2019, the balance of the accumulated depreciation account is P315,000.
What is the age of the service vehicle as of December 31, 2019? 3.5 years

31. A reversing entry is not required

32. Velvet Corporation paid P24,900 in insurance premiums during 2019. Velvet showed
P3,600 in Prepaid Insurance on its December 31, 2018 statement of financial position and
P4,500 on December 31, 2019. The Insurance Expense on the statement of comprehensive
income for 2019 was 24,000

33. Tobby Company notified a client that it must pay P96,000 fee for professional services
provided. Tobby agreed to accept cash of P36,000, computer equipment worth P100,000
and assume the liability for P40,000 note payable related to the computer equipment. The
entry to record this transaction includes: Credit to Notes Payable of 40,000

34. What will be the result if the company failed to prepare adjusting entry to record an accrued
expense? Profit will be overstated

35. On December 1, 2019, the Accounts Receivable has a balance of P54,000. During the
month, collection amounting to P150,000 was recorded. If the Accounts Receivable is
 P42,000 at December 31, 2019, how much was debited to the account during December?
138,000

36. Which of the following statements regarding a trial balance is incorrect?

The trial balance is an assurance that all accountable events have been correctly
recorded

37. A debit entry of P6,750 was posted as P7,650. This error is called a Transposition

38. Corona Company recorded accrued salaries of P25,000 at December 31, 2018. During
2019, Corona Company paid salaries of P872,000. Unpaid salaries at December 31, 2019
amounted to P34,000. Corona prepares adjustments only at December 31, and also
reversing entries on January 1. The balance of the Salaries Expense account that would
appear in the post-closing trial balance at December 31, 2019 is 0

39. The post-closing trial balance does not include nominal accounts

40. A prepaid expense is not an Expired cost.

41. The statement of comprehensive income contains the following except Accumulated
Depreciation

42. Which of the following entries record the receipt of electric bill, scheduling it for payment on
the first week of the following month? Debit utilities expense and credit utilities payable

43. Problem C: Partial data from the unadjusted trial balance of ERM Clinic at December 31,
2019 are as follows:

Note: If your answer is PHP10,000.75 it should be written as 10,001 (no peso sign, with comma, and
round-off to whole number).

How much is the profit for the period? 100,100

UNCOORDINATED QUIZ1 (RCBC)

1. A small business reported these balances on their Wages Payable account at

the beginning of 2015 and end of 2015:

January 1, 2015 P11,000 December 31, 2015 14,000

If wages of P18,500 were paid in cash during the year, what amount would be
reported for Wages expense in 2015?

Solution:

Wages Payable
Paid 18,500 Jan. 1 11,000
Dec. 31 14,000 Exp. ? 21,500
32,500 32,500

2. On August 1, 2015, IRH Co. collected 8 months’ rent revenue of P142,000 in

advance. The Co. debited cash and credited Deferred Rent. Adjusting entry have
to be prepared on December 31, 2015. What is the liability account on December
31, 2015?

Solution:
Deferred Rent (P142,000 x 3/8) = P35,500

3. The Store supplies account had a P12,500 balance at the beginning of the year,
P56,000 of store supplies were purchased during the year, and an inventory of
unused store supplies at the end of the year totaled P15,000. How much is the
Store Supplies Expense for the year?

Solution:

Store Supplies
Beg. 12,500 Exp. ? 53,500
Purchased 56,000 End 15,000
68,500 68,500

4. The Company’s two office employees earn P350 per day and P400 per day
respectively. They were paid every Friday for 5 day work that begins on Monday.
This year, December 31 fell on a Tuesday, and the employees both worked on
Monday and Tuesday. How much salaries should be accrued on December 31?

Solution:
Daily salaries (350 + 400) = P750
Accrued salaries ( 2 days x P750) = P1,500
5. On September 30, 2015, Orange Company paid P180,000 for one year rental
covering the period from October 1, 2015 to September 30, 2016. The payment
was originally recorded as an expense account. How much rent expense is
reported in the statement of comprehensive income of Orange Company for the
year ended December 31, 2015?

Solution:
Rent expense (P180,000 x 3/12) P45,000

6. Tin- Tin Company acquired an equipment costing P480,000 on January 2, 2015.

The equipment is being depreciated using straight line method. It is estimated
to have a useful life of five years and a residual value of P30,000.
a. What is the accumulated depreciation balance that would be shown on
December 31, 2016?

Solution:
Accumulated depreciation, Dec. 31, 2016 [(P480,000 – P30,000)/5] x 2 years =
P180,000

b. Assuming the equipment will be sold on April 1, 2017 at P250,000, how

much is the gain or loss on sale of equipment?

Solution:

Cost P480,000
Less: Accum. Dep., Apr. 1, 2017 (P90,000 x 2.25 years) 202,500
Carrying Value, Apr. 1, 2017 P277,500

Selling price P250,000

Less: Carrying value, Apr. 1, 2017 277,500
Loss on P(27,500)

7. A machinery purchased for P585,000 on April 1, 2014 was sold on September

30, 2015 for P355,000. If the machinery has an estimated useful life of 8 years
and has a residual value of P25,000. How much is the gain (loss) on the sale of
machinery?

Solution:
Cost P585,000
Less: Acc. Dep., Sept. 30, 2015 [(P585,000 – P25,000)/8 x 1.5 years] 105,000
Carrying value, Sept. 30, 2015 P480,000

Selling price P355,000

Less: Carrying value, Sept. 30, 2015 480,000
Loss P125,000
8. Before year-end adjustments are made, the December 31, 2015 Trial Balance of
Alba Company contains revenue of P146,000 and expenses of P85,700.
Adjustments are necessary for the following items:
Fees earned in Year 2015, not yet billed to customers, P32,000;
Depreciation for Year 2015, P28,000;
Portion of prepaid insurance applicable to Year 2015, P18,400
Portion of fees collected in advance earned in Year 2015, P12,500

a. Compute for the correct revenue.

Revenue (P146,000 + P32,000 + P12,500) P190,500

b. Compute for the correct expenses.

Expenses (P85,700 + P28,000 + P18,400) P132,100

c. Compute for the correct profit for 2015.

Profit (P190,500 – P132,100) P58,400

9. Miguel Co. prepared an aging of its accounts receivable at December

31, 2015 and determined that the net realizable value of the receivable at that
date is P1,000,000. Additional information is available:

Accounts receivable, 12/31/14 P 960,000

Accounts receivable, 12/31/15 1,080,000
Allowance for doubtful accounts (12/31/14) credit 120,000
Accounts written off as uncollectible during 2015 100,000

a. Compute the doubtful account expense for 2015?

Solution:

Accounts receivable, Dec. 31, 2015 P1,080,000

Less: Net realizable value 1,000,000
Allowance for Doubtful Accts., Dec. 31, 2015 P 80,000

Allowance for Doubtful Accounts

Write-off 100,000 Jan. 1 120,000
Dec. 31 80,000 Exp. ? 60,000
180,000 180,000

b. How much is the allowance for doubtful account balance? P80,000

10. Clark Co. allowance for doubtful accounts had a credit balance of P12,000 at
January 1, 2015. Clark accrues doubtful account expense at 4% of outstanding
accounts receivable of P1,500,000. Uncollectible amounting to P48,000 were
written off. The aging of accounts receivable indicated that P50,000 allowance
for doubtful accounts was required at December 31, 2015.
a. Compute Clark’s Doubtful account expense for Year 2015.

Solution:

Allowance for Doubtful Accounts

Write-off 48,000 Jan. 1 12,000
Dec. 31 50,000 Exp. ? 86,000
98,000 98,000

b. How much is the balance of the allowance account on December 31, 2015?
P50,000

11. The following data were taken from the books of Aimee Co.
Rent paid during the period P187,000
Accrued rent expense, January 1, 2015 28,000
Accrued rent expense, December 31, 2015 15,000

Using the above data, how much would be the amount of rent that must be
reported in Year 2015.

Solution:

Accrued Rent Expense

Paid 187,000 Jan. 1 28,000
Dec. 31 15,000 Exp. ? 174,000
202,000 202,000

12. ABC receives a 90-day, 6 percent note receivable from a client for the repair of
a computer for P20,000. The repair was done on Sept. 16. ABC’s accounting
period ends on September 30. How much is the accrued interest income?

Solution:
Accrued interest income (P20,000 x 6% x 14/360) P47
13. A Rental Company reported these two different balances in their Unearned Rent
account at the beginning and end of Year 2015:
Jan. 1, 2015 =P26,000

Dec. 31, 2015 = P32,000

If rent revenue for Year 2015 was P263,000, how much cash was received by
the company as advance payments for rent due in Year 2015?

Solution:

Unearned Rent
Revenue 263,000 Jan. 1 26,000
Dec. 31 32,000 Cash ? 269,,000
295,000 295,000

14. On October 1, 2015, An investment bank loaned P300,000 to a small business

payable within 9 months at 12 percent. The bank’s accounting period ends on
December 31, 2015. What amount would be reported in the bank's 2015
statement of comprehensive income as Interest Revenue?

Solution:
Interest revenue (P300,000 x 12% x 3/12) P9,000

Multiple Choice:

1. On December 1, 2015, Yaman borrowed P25,000. Interest on the loan is 1% per

month and is due on Jan 1, 2016. Which of the following items would appear on
Yaman’s statement of financial position on December 31, 2015?

A. interest expense of P250,000. C. prepaid interest of P250.

B. unearned interest of P250. D. interest payable of P250.

Solution:
Interest expense (P25,000 x 1%) P250
2. The ABC Repairs Company reported the following data:

Salaries payable, 1/1/2015 P100,000

Salaries paid during 2015 800,000
Salaries expense for 2015 840,000

The balance in the ABC Repairs Company’s salaries payable account on December
31, 2015 must have been:
A. P 40,000. C. P 60,000.
B. P140,000. D. None of these.

Solution:

Salaries Payable
Paid 800,000 Jan. 1 100,000
Dec. 31? 140,000 Exp. 840,000
940,000 940,000

3. On December 1, 2015, Morning Dancer borrowed P500,000 from PNB. Interest on

this loan is 1% per month, and is due every June 1. Which of the following items would
appear on Morning Dancer’s December 31, 2015 statement o financial position?

A. Interest expense of P5,000. C. Prepaid interest of P5,000.

B. Unearned interest of P5,000. D. Interest payable of P5,000.

Solution:
Interest payable (P500,000 x 1%) P5,000

4. A company estimates that P20,000 of its P500,000 of accounts receivable will be

uncollectible. Its Allowance for Doubtful Accounts presently has a credit balance of
P8,000. The adjusting entry will include a ___________________ to the Allowance
for Doubtful Accounts.

A. Debit of P12,000 C. Debit of P28,000

B. Credit of P12,000 D. Credit of P28,000
Solution:
P20,000 – P8,000 = P12,000 (cr.)

5. A company estimates that P20,000 of its P500,000 of accounts receivable will be

uncollectible. Its Allowance for Doubtful Accounts presently has a credit balance of
P18,000. The adjusting entry will include a ____________________ to Bad Debts
Expense.

A. Debit of P2,000 C. Debit of P38,000

B. Credit of P2,000 D. Credit of P38,000
6. A company estimates that P20,000 of its P500,000 of accounts receivable will be
uncollectible. Its Allowance for Doubtful Accounts presently has a debit balance of
P3,000. The adjusting entry will include a _______________________ to Allowance for
Doubtful Accounts.
A. Debit of P23,000 C. Debit of P17,000
B. Credit of P23,000 D. Credit of P17,000

Solution:

Allowance for Doubtful Accounts

Bal. before adj. 3,000 Adj. 23,000
Dec. 31 20,000
23,000 23,000

7. Benny Company records the payment of insurance policies in the prepaid insurance
account. Information pertaining to 2015 follows:
Prepaid insurance, 1/1/2015 P30,000
Insurance expense 22,000
Prepaid insurance, 12/31/2015 36,000
The cost of insurance acquired during 2015 was:
A. P 6,000. C. P 8,000.
B. P28,000 D. P44,000.

Solution:

Prepaid Insurance
Jan. 1 30,000 Exp. 22,000
Acquired? 28,000 Dec. 31 36,000
58,000 58,000

8. Round Table Advertisers Company began operations on December 1, 2015, with

office supplies of P32,000. During the month, the firm purchased supplies of P58,000.
On December 31, a count of office supplies on hand totaled P42,000. Supplies
expense to be reflected on the statement of comprehensive income for the period
would be:

A. P90,000. C. P58,000.
B. P48,000. D. P42,000.

Solution:

Office Supplies
Dec. 1 32,000 Exp. ? 48,000
Purchased 58,000 Dec. 31 42,000
90,000 90,000
9. Cordova Company received cash of P6,000 in advance for revenue that will be earned
subsequently. The cash receipt entry debited cash and credited unearned revenues for
P6,000. At the end of the period, it was determined that P2,200 is still unearned. The
adjusting entry will:

A. debit unearned revenues and credit revenues for P3,800.

B. debit unearned revenues and credit revenues for P2,200.
C. debit revenues and credit unearned revenues for P3,800.
D. debit revenues and credit unearned revenues for P2,200.

Solution:
Earned (P6,000 – P2,200) P3,800

10. On December 1, 2015, a company received cash of P100,000 for services to be

rendered on January 31, 2016. The company debited cash and credited service fee
income. The adjusting entry related to this transaction would include a:

A. Debit to service fee income of P100,000 and a credit to unearned service fee
income of P100,000.
B. Debit to service fee income of P50,000 and a credit to unearned service fee
income of P50,000.
C. Debit to service fee income of P50,000 and a credit to cash of P50,000.
D. Debit to service fee income of P100,000 and a credit to cash of P100,000.

11. Alvarez purchased a delivery truck on May 1, 2015. The truck cost P600,000 and with
a 4-year service life. The adjusting entry that would be necessary on December 31,
2015 would include:
A. a debit to depreciation expense for P100,000
B. a debit to depreciation expense for 150,000
C. a debit to accumulated depreciation for P100,000
D. a credit to accumulated depreciation for 150,000

12. Chris Company acquired a delivery truck on August 1, 2015. The truck costs P590,000
and incidental costs of P10,000 were paid related to its purchase. Estimates reveal that
the useful life of this truck is five years. On December 31, 2015, the entry to record
depreciation on this truck would include:

A. A debit to depreciation expense for P118,000.

B. A credit to accumulated depreciation of P49,167.
C. A debit to depreciation expense of P120,000.
D. A credit to accumulated depreciation of P50,000.

Reference:

Beticon J., Hinayon M., Ireneo, S., Fundamentals of Accounting IFRS Based 2017 Edition
PRACTICAL EXERCISES 001 (RCBC)

Problem 1

Migs, proprietor, operated a laundry business. During 2015, he had received cash from
customers for P30,000 and rendered services on credit for P50,000. He incurred
expenses of P22,000 (of which P15,000 were still unpaid) and withdrew P15,000 cash for
personal use.

How much is Mig’s profit for 2015?

Answer:

Service Revenue (P30,000 + PP50,000) P80,000

Less: Expenses 22,000
Profit P58,000

Problem 2

Nelson Photography had the following data for December 2015:

• Income from walk in customers, P95,000

• Received cash of 20,000 for video coverage for two months which will start in
January, 2016.
• Paid five months worth of rent of building starting December 1, 2015, P50,000.
• Billed UST for photo coverage services rendered, P15,000
• Paid for utilities P5,000.

Questions:
1. How much is the gross income of Nelson Photography?

Answer:
Gross income (P95,000 + P15,000) P110,000

2. How much is the profit?

Answer:

Gross income P110,000

Less: Expenses
Rent expense ( P50,000 x 1/5) P10,000
Utilities expense 5,000 15,000
Profit P 95,000

Reference:

Beticon J., Hinayon M., Ireneo, S., Fundamentals of Accounting IFRS Based 2017 Edition
Problem 3

The Triple I Agency had the following transactions during the month of November,
2015:
1- Paid creditors on account P45,000.
8- Billed customers for services rendered on account P50,000
9- Withdrew P10,000 for personal use.
12- Received cash from customer on account P20,000.
14- The owner invested additional cash of P100,000.
25- Paid the rent for the month P8,000
28- Received cash from walk in customers, P20,000

Cash A/R A/P Owner’s Equity

1 (45,000) (45,000)
8 50,000 50,000
9 (10,000) (10,000)
12 20,000 (20,000)
14 100,000 100,000
25 (8,000) (8,000)
28 20,000 20,000
77,000 30,000 152,000

Questions:

1. How much is the net increase in accounts receivable?

Answer: P30,000

2. How much is the net increase in owner’s equity during the month?

Answer: P152,000

3. How much is the net increase in cash?

Answer: P77,000

Reference:

Beticon J., Hinayon M., Ireneo, S., Fundamentals of Accounting IFRS Based 2017 Edition
Problem 4
On January 1, 2015, Irwin Computer Repair Shop have the following assets and
liabilities:
Cash P150,000
Accounts Receivable 30,000
Repair supplies 10,000
Computer equipment 80,000
Accounts payable 75,000

After one month of operation, the shop received cash of P19,000 for services rendered
and a promissory note as payment for services rendered of P25,000, paid P8,000 rent,
utilities of P3,000 and P8,000 of its accounts payable, Unused supplies amount to P8,000.

Questions:
1. How much is the new assets? P293,000
2. How much is the new liabilities? P67,000
3. How much is the capital balance one month after? P226,000
4. How much is the net income for the month? (P19,000 + P25,000 – P13,000)
P31,000

Solutions:
Assets Liabilities Owner’s Equity
Beg. Bal. (A=L+OE) P270,000 P75,000 P195,000
Revenue - Cash 19,000 19,000
Revenue – A/R 25,000 25,000
Rent expense (8,000) (8,000)
Utilities expense (3,000) (3,000)
A/P (8,000) (8,000)
Supplies used (2,000) (2,000)
End. Bal. P293,000 P67,000 P226,000

Reference:

Beticon J., Hinayon M., Ireneo, S., Fundamentals of Accounting IFRS Based 2017 Edition
Problem 5

Smart Company has assets of P124,000 and liabilities of P58,000 at the beginning of the
year. During the year, assets decreased to P106,000 and total liabilities increased by
P23,000. Total revenues was P38,000. There were no additional investment nor
withdrawal during the year.

Questions:

1. What is the amount of expenses for the period? P79,000

2. If the total assets increased by P80,000, and total liabilities increased by P24,000
during the same period, what is the amount of (Increase/Decrease) in capital?
(P122,000 – P66,000) P56,000 (increase)

Solution:

Computation of ending balances:

Assets Liabilities Owner’s Equity

Beg. Bal. (A=L+OE) P124,000 P58,000 P66,000
End. Bal P106,000 P81,000 P25,000

Computation of expenses:

Capital, Beg. P 66,000

Additional investment 0
Profit (Loss) (extracted) (41,000)
Withdrawal 0
Capital, End P 25,000

Revenues P 38,000
Expenses (extracted) (79,000)
Loss P (41,000)

Solution for question 2:

Assets Liabilities Owner’s Equity

Beg. Bal. (A=L+OE) P124,000 P58,000 P66,000
End. Bal P204,000 P82,000 P122,000

Reference:

Beticon J., Hinayon M., Ireneo, S., Fundamentals of Accounting IFRS Based 2017 Edition
 Problem 6
Financial data of Mr. Michael are as follows
Jan 1 Dec. 31
Total Assets P314,000 P472,000
Total Liabilities 197,000 281,000

Mr. Michael made an additional investment of P204,000 and a cash withdrawal of

P76,000 during the year.

What is the profit/(loss) of Mr. Michael for the year? P(54,000)

Solution:

Capital, Beg, (P314,000 – PP197,000) P117,000

Additional investment 204,000
Withdrawal (76,000)
Profit (Loss) - extracted (54,000)
Capital, End, (P472,000 – P281,000) P191,000

Problem 7

The capital account of Irwin had a beginning balance of P140,000. During the period, the
business had profit of P160,000, and the owner invested an additional of P40,000. The
ending capital of Irwin was P280,000. How much withdrawal did Irwin make during the
year?

Solution:

Capital, Beg. P140,000

Profit 160,000
Additional investment 40,000
Withdrawal (extracted) (60,000)
Capital, end P280,000

Reference:

Beticon J., Hinayon M., Ireneo, S., Fundamentals of Accounting IFRS Based 2017 Edition