ACC 109 – P3 QUIZ NO.

2
Cash to Accrual Basis of Accounting

NAME: Date:
Professor: Section: Score:

Test I - Multiple Choices Computation 2 pts each. Show your solution in good form.

1. An analysis of Thrift Corp.’s unadjusted prepaid expense account at December 31, 2024,
revealed the following:
 An opening balance of ₱1,500 for Thrift’s comprehensive insurance policy. Thrift had paid an
annual premium of ₱3,000 on July 1, 20x2.
 A ₱3,200 annual insurance premium payment made July 1, 2024.
 A ₱2,000 advance rental payment for a warehouse

Thrift leased for one year beginning January 1, 2024. In its December 31, 2024 balance sheet, what
amount should Thrift report as prepaid expenses?
a. 5,200 b. 3,600 c. 2,000 d. 1,600

2. The balance in retained earnings at December 31, 2024 was ₱810,000 and at December 31, 2024
was ₱654,000. Net income for 2024 was ₱563,000. A stock dividend was declared and distributed
which increased common stock ₱225,000 and paid-in capital ₱125,000. A cash dividend was
declared and paid. The amount of the cash dividend was
a. ₱279,000. c. ₱494,000.
b. ₱369,000. d. ₱719,000.

3. 3. On April 1, 2024, Ivy began operating a service proprietorship with an initial cash
investment of ₱1,000. The proprietorship provided ₱3,200 of services in April and received full
payment in May. The proprietorship incurred expenses of ₱1,500 in April which were paid in
June. During May, Ivy drew ₱500 against her capital account.

What was the proprietorship's income for the two months ended May 31, 2024, under the following
methods of accounting?
Cash basis Accrual basis
a. 1,200 1,200
b. 1,700 1,700
c. 2,700 1,200
d. 3,200 1,700

4. Entity Co. uses the cash basis of accounting and reported income of ₱87,000 in 2024. The
following items were considered in the computation of the cash basis net income.

Inventory, beginning 12,000

Inventory, ending 18,000
Receivables, beginning 40,000
Receivables, ending 38,000
Payables, beginning 19,000
Payables, ending 25,000

The accrual basis income is

a. 97,000 b. 73,000 c. 89,000 d. 85,000
5. Information on an entity’s accounts is shown below:
Current tax payable, beg. 150,000
Current tax payable, end. 400,000
Increase in deferred tax
liability 60,000
Increase in deferred tax asset 20,000
Income tax paid 280,000

How much is the income tax expense for the period?

a. 530,000 b. 540,000 c. 570,000 d. 610,000

Test II. Straight Problems. Show your solution in good form. 5 pts each requirement

1. Information on an entity’s accounts is shown below:

Increase in accounts receivable 800,000
Decrease in trade notes receivable 200,000
Collections on trade notes receivable 2,000,000
Recoveries of accounts previously written-off (included in collections) 10,000
Collections on accounts receivable 1,000,000
Write-offs 100,000
Sales returns (from credit sales) 20,000

Requirements: Compute for the following:

a. Net sales revenue under the accrual basis of accounting.
b. Net sales revenue under the cash basis of accounting.

2. Information on an entity’s accounts is shown below:

Increase in accounts payable 800,000
Decrease in inventory 200,000
Payments to suppliers 2,000,000
Purchase returns 20,000

Requirements: Compute for the following:

a. Cost of goods sold under the accrual basis of accounting.
b. Cost of goods sold under the cash basis of accounting.

3. Information on an entity’s accounts is shown below:

Prepaid utilities, beg. 100,000
Prepaid utilities, end. 120,000
Accrued utilities payable, beg. 80,000
Accrued utilities payable, end. 30,000
Utilities expense 220,000

Requirement: Compute for the following for the payments for utilities during the period.

4. Information on an entity’s accounts is shown below:

Rent receivable, beg. 1,000,000
Rent receivable, end. 800,000
Unearned rent income, beg. 600,000
Unearned rent income, end. 720,000
Rent income 2,100,000

Requirement: Compute for the following for the collections of rentals during the period.