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Chapter 1 QUIZ - Practice Reference

Bachelor of Science in Accountancy (Polytechnic University of the Philippines)

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REVIEW QUIZ BSA SRC 1-1

• T/F

1. The terms of bookkeeping and accounting are synonymous.

FALSE
*Bookkeeping is only one of the functions of accounting while accounting is a diversified profession.

2. Decreases in asset and decreases in revenue accounts should be entered on the left
side of a T account
TRUE (key to correction answer)
*False is my answer. The normal balance of Asset is debit which is on the left, so
when it decreases it will be entered on the right side (Credit) (opinion ko lang ito
hahaha, correct me if I’m wrong)

3. The bottom line of the trial balance indicates the profitability of the business
FALSE
* The preparation of the trial balance will mathematically prove the equality of the debit and credit
balances of each account but will not give the assurance that no errors have been made during the
journalizing and posting process in case the total debit and credit amounts are shown as equal.

4. Receiving payments on an account receivable increases only the assets.

FALSE
*Receiving payments on AR has no effect on assets. Ma de-decrease yung Ar then
increase yung Cash which is both asset accounts

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

6. The firm should use the same accounting method from period to period to achieve
comparability over time within a single enterprise
TRUE

7. Accounting is a service activity whose function is to provide quantitative

information about economic entities.
TRUE

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8. The accounting process consists of the recording phase and the summarizing phase.
TRUE

9. Double entry bookkeeping means that the accountant should reflect the dual effects
of a business transaction
TRUE

10. A buyer who acquires merchandise under credit terms of 1/10, n/30 has 10
days after the invoice date to take advantage of the cash discount.
TRUE

11. Cash purchase is both a purchase transaction and a cash payment transaction.
Thus, requires two separate entries
FALSE

12. The term freight prepaid or freight collect will dictate who will pay the
transportation costs.
TRUE

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

14. Accumulated depreciation and allowance for bad debts are examples of
contra assets
TRUE

15. Closing entries result in the transfer of profit or loss in to the owner’s
capital account
TRUE

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• Multiple Choice

16. Nina Ricci Company has just completed its first year of operation. Which
of the company’s financial statements cannot be prepared directly from the
adjusted trial balance?
D. ALL (Statement of Capital, SFS,SCI)

17. Which of the following complete description of a transaction is not

possible?
D. Increase asset; decrease equity

18. Adjusting entries are recorded because an entity

B. Uses the accrual basis of accounting

19. The bookkeeper of Benetton Company recorded the payment of a credit

customer as a debit to cash and credit to accounts payable. The erroneous
recording of transaction would result to
A. Overstatement of AR and AP
* Should be: Dr. Cash; Cr. AR

20. A trial balance is

D. A list of all accounts with their balances

21. Which of the following is not considered in computing net cost of

purchases?
B. Transportation cost paid on goods shipped to customers
Included: Transportation cost paid on purchased goods; purchase returns
and allowances; purchases

22. If revenues are greater than expenses, the income summary account will be
closed by
A. Debiting income summary and crediting capital account

23. Posting involves

A. The transferring of amounts from the journal to the appropriate accounts
in the ledger

24. Credit term expression 3/20; n/30 means

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B. A 3% discount is given if the invoice is paid within 20 days, otherwise, the

total invoice is due in 30 days

25. If a company collected its outstanding trade accounts receivable within the
discount period, the entry upon collection will include
A. Dr. sales discount

26. Operating Income will result if gross profit exceeds

A. Operating Expense

27. A device used to facilitate the preparation of the adjusting entries and the
financial statements is the
B. Worksheet

28. The following are closed to income summary except

B.Drawing
Included: Sales; Expenses; Purchases
* Closed to Capital Acc

29. Net Sales less Cost of Goods Sold will equal

C. Gross Margin

30. The inventory of a merchandising entity consists of goods bought for resale.
Which is not part of the inventory of a grocery store?

C. Computer Equipment

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• Problem Solving

31. On December 1, 2017, a client advanced P 80,000 for services to be

rendered first quarter of 2018. The liability method was used to record the
collection of the said amount. What amount is recognized as revenue for the year
2017?
ANSWER: 0

* Because it will only be rendered by next year (2018), so no revenue is to be

recognized by December 31, 2017

32. The following data is available from the records of Spurs Merchandising
Company: Cost of Goods Available for Sale - P 3, 100,000; Gross Profit -P
900,000; Net Sales - P 3,000,000; Net Purchases - P 2,600,000; Operating
expenses - P 1,010,000; What is the company's ending inventory?
ANSWER: 1M

* Ending Inventory = Cost of Goods Sold (COGS) – Cost of Goods Available

for Sale/Total Goods Available for Sale (TGAS)
COGS = Net Sales - Gross Profit (Derived from Gross Profit = Net Sales –
COGS)

COGS = 3M – 900K = 2.1 M

Ending Inventory = 2.1 M – 3.1M = 1M

33. The company’s net income (loss) given the data in number 32 is
ANSWER: (110,000)

*Net Income (loss) = Gross Profit – Operating Expenses

Net Loss = 900,000 – 1,010,000 = (110,000)

34. Given: Sales P 1,800,000; Purchases P 684,000; Ending Inventory P

168,000; Operating expenses P 504,000; Net Income P 132,000. How much is the
cost of sales?
ANSWER: 1,164,000
*COGS/COS = Net Sales - Gross Profit
(Derived from Gross Profit = Net Sales – COGS)

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Gross Profit = Net Income + Operation Exp (Derived from Net Income = Gross
Profit – Operating Expenses)

Gross Profit = 132K + 504K = 636K

COGS/COS = 1.8 – 636K = 1,164,000

35. L A Clippers Company started its business operation on June 1, 2016 and
showed the following data regarding the Fixed assets as of December 31, 2017.•
Office Equipment bought for P 120,000 on August 1, 2016, estimated useful life 5
years with no salvage value• Transportation equipment - depreciable cost of P
240,000, salvage value of P 30,000, with estimated useful life of 8 years. This was
purchased on May 31, 2017. The company has a calendar year accounting period
and uses the straight line method for depreciation to all its fixed assets. How much
is the adjusting entry for depreciation expense for the year ended December 31,
2017?
ANSWER: 41,500

*Annual Depreciation = Depreciable Asset Cost x Depreciation rate per year

Depreciable Asset Cost = Purchase cost – salvage value
Office Equipment = 120,000 x 20% (1/5 years = Depreciation rate per year) =
24,000 = 24,000
Transportation Equipment = (240,000/8) x 7/12 (7months incurred from May 31
– Dec 31) = 17500
24,000+17500 = 41,500

36. 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:
ANSWER: (30,000)
*Changes in Owner’s Equity = Beg. Investment +/- Net Income/Net Loss +
Additional Investment – Withdrawals
Net Loss = 40K-88K = 48K
Changes in Owner’s Equity = 24,000 – (-48K-6,000) = (30,000)

37. 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 bad debts
expense of P 12,500 and accrued utilities of P 8,400. Net income, as corrected, is:

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ANSWER: 69,100
*Bad Debts expense &Accrued Utilities are expense accounts, thus should be
deducted from Net Income.
Adjusting entry:
• Bad Debts Expense
Allowance for Bad Debts
• Utilities Expense
Utilities Payable
Net Income = Revenues – Expenses
Correct Net Income = 90,000 – 12,500 – 8,400
Correct Net Income = 69,100

38. The accounts in the ledger of Pacers Company are as follows: . All accounts
have normal balances. Accounts payable 300; Owner’s equity 2,800; Accounts
receivable 400; Prepaid Rent 400; Accrued utilities 100; Rent expense 150; Cash
1,500; Unearned fees 200; Drawings 200; Utilities expense 50; Fees earned 1,900;
Wages expense 350; Insurance expense 250; Land 2,000. In preparing the trial
balance, the total credit is
ANSWER: 5,300
*Accounts payable = 300
Owner’s Equity = 2,800
Accrued Utilities = 100
Unearned Fees (Liability acc) = 200
Fess Earned = 1,900
These accounts are normally credited. Total = 5,300

39. Using data in number 38, total liabilities would amount to:
ANSWER: 600
*Accounts Payable = 300
Accrued Utilities = 100
Unearned Fess = 200
Total = 600

40. Using data in number 38, Pacers Company’s net income is

ANSWER: 1,100
*Net Income = Rev – Exp
Revenue = 1,900
Expenses = 150 + 50 + 350 + 250

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Net Income = 1,100

41. On June 1, 2019, Parker Company purchased a delivery equipment for P

250,000 with an estimated life of 20 years and a salvage value of P 10,000. Parker
Co. decided to use the straight line method of depreciation. How much will be the
depreciation expense on December 31, 2019?
ANSWER: 7,000
*Annual Depreciation = Purchased cost – salvage value/estimated useful life
Annual Depreciation = 250K-10K/20 yrs = 12,000
Accumulated Dep = 12K x 7/12 (7 months from June 1 – Dec 31) = 7,000

42. Using data in number 41, how much will be the accumulated depreciation
on December 31, 2028?
ANSWER: 115,000
*Annual dep = 12k x 9 yrs (2020-2028) = 108k
108K + 7K (2019 dep) = 115K

43. At the end of March 2017, the first quarter of operations, the following
selected data were taken from the financial records of Lacoste Company: First
Quarter profit P 39,750 ; Total Assets as of March 31, 2017 P 189,700 ; Total
liabilities as of March 31, 2017 P 20,200. In preparing the financial statements,
the following adjustments were overlooked: a) Supplies used during the first
quarter, P 1,750; b) Unbilled fees earned at March 31, 2017, P 2,900; c)
Depreciation of equipment for the quarter, P 2,500; d) Accrued salaries at March
31, 2017, P 1,500. How much is the adjusted amount of profit for the first quarter
ending March 31, 2017?
ANSWER: 36,900
*Profit = 39,750
Supplies Expense = (1,750)
Fees Earned = 2,900
Dep Exp = (2,500)
Salaries Exp = (1,500)
Profit = 36,900

44. As of May 31, 2019, Mr. Davis has a capital balance of P 470,000. During
the month of June, he withdrew P 50,000 to be used for his annual check-up. His
company's income statement revealed various expenses totalling P 89,000,
thereby a Net Loss of P 14,300. During the same period, he was unable to pay a

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note amounting to P 20,000. How much would be the capital balance of Mr. Davis
at the end of June 2019
ANSWER: 405,700
*Capital end = Beg. Cap - Net Loss – Withdrawals
Capital end = 470K – 14,300 – 50K = 405,700

45. The balance sheet of Tala Company shows total liabilities of P 150,000
which is equal to 1/3 the amount of total assets. What is the amount of total
assets?
ANSWER: 450,000
*150K divided by 1/3 = 450k

46. Using data in number 45, what is the amount of the owner's equity?
ANSWER: 300,000
*A = L + OE
OE = A-L
OE = 450K – 150K = 300K

47. Isabel Company had assets of P 145,000 and liabilities of P 94,000 at the
beginning of the year. during the year, assets decreased by P 32,000 and total
liabilities decreased to P 72,000. Total expenses were P 40,000. There were no
additional investments nor withdrawals during the year. What is the amount of
revenues for the period?
ANSWER: 30,000
*Beginning
A=145K; L=94k; OE=51k
End
A=145-32k=113k
L=72K(“decrease to” means exact decreased amount)
OE = 41K

Formula: Beg OE + Revenue - Expenses – withdrawal = End OE

Reverse operation:

Revenue = 41k End Oe + 40k expenses – 51K beg OE = 30,000

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48. The following information was taken from the bools of Annakel Trading
Company: Purchases P 127,500; Sales P 423,500; Purchase discount P 3,785;
Sales discount P 5,765; Beginning Inventory P 29,000; Ending Inventory P
17,400; Selling expenses P 78,575; Administrative expenses P 68,475. How much
is the gross profit of Annakel Trading Company?
ANSWER: 282,420
*Gross Profit = Net Sales – COGS
COGS = Beg. Inventory + (Purchases – purchase discount) – Ending Inventory
Net Sales = Sales – Sales Discount
Net Sales = 423,500 – 5,765 = 417,735
COGS = 29K + (127,500 – 3,785) – 17,400 = 135,315
Gross Profit = 417,735 – 135,315 = 282,420

49. Using the data in number 48, how much is the net income (net loss)?
ANSWER: 135,370
*Net Income = Gross Profit – Operating Expenses
NI = 282 420 – (78,575 + 68,475) = 135,370

50. The unadjusted trial balance of Butler Company on December 31, 2019
showed the Accounts Receivable with a debit balance of P 150,000 and a credit
balance of P 3,000 for the Allowance for Bad debts. The management estimated
that bad debts will 8% of the outstanding accounts receivable. How much is the
bad debts expense for 2019?
ANSWER: 9,000
*
Required ending balance of Allowance for Doubtful Accounts P12,000
(8% x P 150,000)
less credit balance of allowance before adjustment 3,000
Doubtful Accounts Expense for the period P 9,000
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