MARIANO MARCOS STATE UNIVERSITY

College of Business, Economics and Accountancy

COMPREHENSIVE EXAM
ACC 31

NAME: _________________________________________________________ SECTION: _________SCORE: _____________

Choose the letter of the best answer. Write your answer on the space provided before each number. If answer not among the
choices, write X. Use CAPITAL letters only.

_____1. Which of the following statements are true?

I. If the adjustment for accrued salaries was omitted, liabilities and expenses would be understated
II. In recording adjusting entries for accrued income, all the accounts involved are decreased.
III. A deferral is the recognition of an income that has been earned but not yet collected
A. I and II B. All but I C. II and III D. I only

_____2. Which of the following statements are incorrect?

I. The ending inventory of one accounting period becomes the beginning inventory of the next
accounting period.
II. If an entity uses the perpetual inventory system, the account “Freight In” is not used.
III. If the seller recognizes a sales discount, the buyer must also recognize a purchase discount.
A. II only B. II and III C. I and II D. All statements are correct

_____3. Which of the following statements are correct?

I. Freight In and Freight Out are both credited when preparing closing entries.
II. Net sales is not an account title.
III. The difference between Net Sales and Gross Sales is the sum of all discounts and returns and
allowances
A. I and II B. I, II and III C. II and III D. I and III

_____4. Which of the following statements are untrue?

I. A withdrawal made by the owner of a business is recorded as a deduction from assets and an
increase in expenses.
II. An expense may be recorded although no cash outlay has been made.
III. In recording some transactions, the equality of the accounting equation may not be observed.
A. I, II and III B. I and II C. II and III D. I and III

_____5. Which of the following statements about accounting is not correct?

A. A transaction or event is recorded in the accounting records only if it has an effect on the assets, liabilities,
equity, income or expenses of the business.
B. The purpose of accounting is to provide information that is useful in making economic decisions.
C. Bookkeeping and accounting are interrelated but they are not the same.
D. All business transactions and events are recorded in the accounting books.

_____6. If the income summary has a credit balance, which of the following is true?
A. The business earned a profit C. Capital account was debited
B. The business sustained a loss D. Capital account was credited

_____7. Which of the following statements is correct?

A. A debit and a debit result to a credit.
B. A contra asset account is increased through debit.
C. All accounts are increased by a debit and decreased by a credit.
D. Of the five major types of accounts, only two have normal debit balances.

_____8. X and Y formed a partnership. X contributed cash of 300,000 while Y contributed land with a carrying amount of
700,000 and a fair value of 900,000. The land has an unpaid mortgage of 150,000 which is to be assumed by the
partnership. What is the capital balance of Y immediately upon formation?
A. 900,000 B. 700,000 C. 750,000 D. 550,000

_____9. When the accounts receivable account was debited when journalizing a transaction, that transaction might have
been a
A. Purchase of inventories on account C. Payment for purchases made on account
B. Sale of inventories on account D. Collection from sales made on account
X Enterprises paid 200,000 which covers their 20 months of rent starting on June 1, 2023. The accounting period of X ends
on December 31 of each year.

_____10. If X uses the asset method, the adjusting entry on December 31, 2023 would require
A. A debit to Prepaid Rent and credit to Rent Expense of 70,000
B. A debit to Rent Expense and credit to Prepaid Rent of 70,000
C. A debit to Prepaid Rent and credit to Rent Expense of 130,000
D. A debit to Rent Expense and credit to Prepaid Rent of 130,000.
_____11. If X uses the expense method, the adjusting entry on December 31, 2023 would require
A. A debit to Prepaid Rent and credit to Rent Expense of 70,000
B. A debit to Rent Expense and credit to Prepaid Rent of 70,000
C. A debit to Prepaid Rent and credit to Rent Expense of 130,000.
D. A debit to Rent Expense and credit to Prepaid Rent of 130,000

_____12. What happens if a deferred income was not adjusted at year-end?

A. Income and Liability would be overstated
B. Income and liability would be understated
C. Income would be overstated but liability would be understated
D. Income would be understated but liability would be overstated

_____13. After all adjusting entries has been made and posted, the balances of all asset, liability, income and expense
accounts correspond exactly to the amounts in the
A. Post Closing Trial Balance C. Financial Statements
B. Statement of Financial Position D. Income Statement

_____14. One alternative to determining the gross profit is by

A. Adding cost of sales and goods available for sale
B. Adding ending inventory and goods available for sale
C. Adding operating income and operating expense
D. Adding operating expenses and cost of sales

_____15. Which of the following would make the trial balance not balanced?
A. Posting the same journal entry twice C. Non-recording of an accountable transaction
B. Non-posting of journal entry D. Transposition error

_____16. A business has total assets, liabilities, and capital of 1.2 million, 700,000 and 500,000 respectively, at the
beginning of the year. During the year, total liabilities decreased by 250,000 while net income was 75,000. How
much is the total assets at the end of the year?
A. 875,000 B. 1,275,000 C. 1,025,000 D. 1,375,000

_____17. If a business uses the expense method in recognizing advance payments, failure to recognize the adjusting entry at
year-end would result in
A. Overstated assets and expenses C. Overstated assets and understated expenses
B. Understated assets and expenses D. Understated assets and overstated expenses

_____18. Which of the following profit-sharing schemes gives recognition to the services rendered by the partners to the
partnership?
A. Interest B. Bonus C. Salaries D. Ratio

_____19. Which of the following freight terms would increase Accounts Payable?
A. FOB Shipping Point, Freight Collect C. FOB Destination, Freight Collect
B. FOB Shipping Point, Freight Prepaid D. FOB Destination, Freight Prepaid

_____20. The accounts receivable has a balance of 780,000 at the end of 2023. For the year 2023, total debits amounted to
990,000 while total credits amounted to 1,050,000. If sales returns and allowances attributed to credit sales
amounted to 180,000 during the year, what was the accounts receivable balance at the beginning of 2023?
A. 720,000 B. 840,000 C. 660,000 D. 540,000
_____21. Which of the following Bonus agreements would yield the highest amount of bonus?
A. Bonus based on Profit
B. Bonus based on Profit after Bonus
C. Bonus based on Profit after Salaries
D. Bonus based on Profit after Interest
E. Bonus based on Profit after Salaries and Interest

At the end of the year, the books of X Enterprise show the following balances before any adjusting entries:
 Sales 10 million
Accounts Receivable 4.5 million
Allowance for bad debts 120,000

_____22. If X estimates that 2% of Sales is deemed uncollectible, bad debts expense for the year would be
A. 80,000 B. 120,000 C. 320,000 D. 200,000
_____23. If X estimates that 5% of Accounts Receivable is deemed uncollectible, the adjusted balance of allowance for bad
debts would be
A. 225,000 B. 345,000 C. 105,000 D. 120,000

_____24. Which of the following accounts is used to record returns of merchandise from the customers?
A. Sales Returns and Allowances C. Sales Discounts
B. Purchase Returns and Allowances D. Purchase Discounts

_____25. The primary purpose of preparing a trial balance is to

A. record transactions as they occur.
B. classify the effects of the transactions on the accounts.
C. check the equality of total debits and total credits in the ledger.
D. report the processed information to interested users.

_____26. The accounts payable has a balance of 560,000 at the end of 2023. For the year 2023, total debits to accounts
payable were 600,000 while total credits were 900,000. How much were the total payments to accounts payable?
A. 900,000 B. 300,000 C. 260,000 D. 600,000

_____27. If Sales are overstated, what happens to Gross Profit, Cost of Sales and Operating Income?
A. All but the Cost of Sales would be overstated C. All would be understated
B. All would be overstated D. All but Cost of Sales would be understated

Y Enterprises uses the straight-line method of depreciation. On January 1, 2023, Y purchased a piece of equipment for 1.5
million. This equipment is estimated to have a useful life of 10 years after which it could be sold for 180,000. Y Enterprises’
accounting period ends every December 31.

_____28. What is the carrying value of the equipment on December 31, 2023?
A. 1,350,000 B. 1,170,000 C. 1,368,000 D. 1,188,000
_____29. Depreciation expense to be recognized on December 31, 2024 would be
A. 132,000 B. 150,000 C. 300,000 D. 264,000
_____30. If the equipment was acquired on June 1, 2023; the accumulated depreciation on December 31, 2025 would have a
balance of
A. 330,000 B. 341,00 C. 264,000 D. 300,000

_____31. Non-recognition of depreciation expense at year-end would result in

A. Understated net income and assets C. Understated net income and overstated assets
B. Overstated net income and assets D. Overstated net income and understated assets

_____32. If the partner's agreement did not mention how losses would be divided, the partners shall
A. Divide the losses equally
B. Divide the losses in the ratio of capital contributions
C. Divide the losses in the ratio of ending capital balances
D. Divide the losses in accordance with the profit-sharing agreement

_____33. Non-accrual of expenses at the end of the year would lead to

A. An overstated Liability and Expenses C. An overstated Liability and understated Expense
B. An understated Liability and Expenses D. An understated Liability and overstated Expense
_____34. If an entity pays a 6-month, 12% Note Payable of 100,000 upon maturity, it would be recorded by
A. A debit to Notes Payable of 100,000, debit to Interest Expense of 12,000 and Credit to Cash of 112,000
B. A debit to Notes Payable of 100,000, debit to Interest Expense of 6,000 and Credit to Cash of 106,000
C. A debit to Notes Payable of 106,000 and Credit to Cash of 106,000
D. A debit to Notes Payable of 112,000 and Credit to Cash of 112,000

_____35. If a business uses the asset method in recording prepayments, the entry to record the transaction upon payment
would
A. Have zero effect on total assets C. Decrease total assets
B. Increase total assets D. Increase total assets and increase expenses

_____36. Y Enterprises’ trial balance reflected the following account balances on December 31:
Cash on Hand 20,000
 Trade Receivables 75,000
Inventory 60,000
Prepaid Insurance 12,000
Office Supplies 15,000
Land 30,000
Machinery 40,000
Accumulated Depreciation 10,000
Accrued Expenses 32,500
Accounts Payable 7,500
Notes Payable 12,000
How much is the total assets of Y?
A. 182,000 B. 242,000 C. 252,000 D. 254,000

_____37. Which of the following accounts may be classified as current or non-current depending on the terms?
A. Accounts Receivable B. Notes Receivable C. Equipment D. Accrued Expense

_____38. If cash is debited, the following are its typical credit. Which is an exemption?
A. Accounts receivable B. Sales C. Notes Receivable D. Equipment

_____39. Which of the following statements regarding the trial balance is most likely to be incorrect?
A. If total debits and credits are not equal, an error surely exists in the accounts.
B. The trial balance is a prerequisite in preparing financial statements.
C. The preparation of the trial balance creates a starting point for the preparation of the financial
D. The purpose of preparing a trial balance is to determine whether the total debits and total credits in the
ledger are equal.

X Enterprise sold merchandise on account for 600,000 with terms 2/10, n/15 on December 1. On December 2, defective
merchandise was returned from the customer amounting to 50,000. On December 5, 300,000 was received from the customer
as partial payment.

_____40. If full payment is made on December 11, how much would X debit to cash?
A. 250,000 B. 300,000 C. 238,000 D. 288,000
_____41. If full payment is made on December 10, how much would X credit accounts receivable?
A. 250,000 D. 300,000 C. 238,000 D. 288,000

_____42. Which of the following accounts would be decreased when recorded on the debit side?
A. Cash B. Accounts Payable C. Equipment D. Rent Expense

_____43. If an entity uses the asset method of recording prepayments, the adjusting entry at year-end would result in
A. An increase in Asset and Expense C. Increase in Asset and Decrease in Expense
B. Decrease in Asset and Expense D. Decrease in Asset and Increase in Expense

_____44. Which of the following statements about the accounting cycle is false?
A. Posting is done after transactions have been analyzed
B. Adjusting the accounts is done prior to preparing the adjusted trial balance
C. Journalizing the transactions is performed before preparing the unadjusted trial balance
D. Financial statements are prepared before preparing the adjusted trial balance.
_____45. On December 31, 2023, the accounts payable account of Y Enterprises showed a balance of 450,000. During the
year, Y Enterprise entered into the following transactions:
II. Acquired merchandise on account, 800,000
III. Sale of merchandise costing 200,000 for 300,000 on account
IV. Acquisition of equipment valued at 500,000 by issuing a note
V. The owner borrowed cash from the business, 50,000
If at the beginning of the year, the accounts payable account has a balance of 205,000, how much accounts
payable was paid during the period?
A. 805,000 B. 1,305,000 C. 605,000 D. 905,000

_____46. An expense already incurred but not yet paid will give rise to a/n
A. Accrued Income which is an Asset C. Prepaid Expense which is an asset
B. Deferred Income which is a liability D. Accrued expense which is a liability

_____47. Which of the following is not an operating expense?

A. Salaries Expense B. Interest Expense C. Supplies Expense D. Insurance Expense
Kwek, Bek and Kiat are partners and agreed to share profits and losses in the following manner:
a. Salary of 5,000 monthly to Kwek; 4,000 monthly to Bek and 3,500 to Kiat
b. Interest of 10% based on their ending capital balances
c. Balance to be divided in the ratio of 1:3:1
At the end of the year, the partners have capital balances before profit distribution of 400,000; 500,000 and 300,000
respectively.

_____48. If the partnership earns a profit of 300,000; the capital balance of Kiat after the distribution of profit is
A. 222,000 B. 375,000 C. 372,000 D. 378,000
_____49. If the partnership sustained a loss of 80,000; total capital after the distribution of loss would be
A. 1,120,000 B. 1,280,000 C. 1,200,000 D. 1,080,000
_____50. If the partnership operation resulted in a loss of 120,000; how much salary would be given to Bek?
A. 48,000 B. zero C. 60,000 D. 50,000
_____51. If the partnership operation resulted in a loss of 150,000, total Interest distributed to the partners would be?
A. 40,000 B. zero C. 50,000 D. 120,000
_____52. If the partnership earned a profit of 420,000; the profit share of Kwek would be
A. 188,000 B. 102,000 C. 130,000 D. 115,000

_____53. Which of the following freight terms would decrease the balance of Accounts Payable?
A. FOB Shipping Point, Freight Collect C. FOB Destination, Freight Collect
B. FOB Shipping Point, Freight Prepaid D. FOB Destination, Freight Prepaid

_____54. Salaries to partners of a partnership typically should be accounted for as:

A. A device for sharing net income.
B. An operating expense of the partnership.
C. Drawings by the partners from the partnership.
D. Reductions of the partners, capital account balances.

_____55. Which of the following is a correct accounting equation?

Assets Liabilities Capital Income Expense
A. 900,000 400,000 300,000 500,000 600,000
B. 920,000 500,000 400,000 420,000 440,000
C. 940,000 400,000 500,000 480,000 360,000
D. 960,000 500,000 420,000 500,000 460,000
E. 980,000 400,000 320,000 480,000 420,000

_____56. Which of the following freight terms would increase Accounts Receivable?
A. FOB Shipping Point, Freight Collect C. FOB Destination, Freight Collect
B. FOB Shipping Point, Freight Prepaid D. FOB Destination, Freight Prepaid

_____57. The Accounting process is divided into two phases, namely

A. Summarizing and Recording C. Journalizing and Adjusting
B. Financial Position and Income Statement D. Income and Loss
X and Y formed a partnership on December 1, 2023. X contributed the following:
Cash 175,000 Equipment 500,000
Accounts Receivable 300,000 Building 800,000
The accounts receivable is estimated to be 60% uncollectible, the Equipment is overvalued by 80,000 and the Building has a
fair market value of 700,000. Attached to the building is a note payable of 50,000 to be assumed by the partnership.

_____58. If Y will contribute sufficient amount of cash for a 40% capital interest, how much cash shall Y invest?
A. 983,333 B. 943,333 C. 950,000 D. 910,000
_____59. If Y will contribute sufficient amount of cash for a 1/4 capital interest, how much cash shall Y invest?
A. 455,000 B. 471,667 C. 491,667 D. 475,000
_____60. If Y contributes land with a carrying value of 600,000 and fair value of 750,000; total capital of the partnership
immediately after the formation would be
A. 2,175,000 B. 2,115,000 C. 2,165,00 D. 2,225,000
_____61. If X and Y agrees that total capital upon formation is 2.5 million and have equal capital interest; how much shall
X invest or withdraw?
A. Withdraw 175,000 B. Withdraw 225,000 C. Withdraw 115,000 D. Withdraw 165,000

_____62. The second step in the accounting cycle is

A. Journalizing B. Posting C. Analyzing D. Adjusting

_____63. Which of the following statements is not correct with respect to the rules on debit and credit?
A. The left side of an account is always the debit side, while the right side is always the credit side.
 B. The word debit means to increase while the word credit means to decrease.
C. Increases in assets and expenses are always debit entries.
D. The normal balance of an account appears on the side for recording increases.

_____64. A single transaction recorded in the general journal could

I. Increase an asset and increase a liability
II. Increase an asset and Increase capital
III. Decrease a liability and Increase Capital
IV. Decrease an Asset and Increase a Liability
V. Increase an Asset and Decrease a liability
A. II, III and IV B. All but III and V C. All but I and IV D. I, III and V

_____65. When a business uses the liability method of recording advance collections, the adjusting entry at year-end would
A. Decrease a liability and increase an income C. Decrease a liability and decrease an income
B. Increase a liability and decrease an income D. Increase a liability and increase an income

_____66. Which of the following is a characteristic of a partnership?

A. Limited life and limited liability C. Unlimited life and unlimited liability
B. Limited Life and unlimited liability D. Unlimited life and limited liability

Z Enterprise purchased inventories costing 500,000 on account with terms 2/10, n/30 on December 1. Freight associated with
the purchase amounted to 25,000.

_____67. If freight terms were FOB Shipping Point, Freight Collect; the entry to record the transaction on December 1
would require a
A. Debit to Purchases and Credit to Accounts Payable for 525,000
B. Debit to Purchases for 525,000; Credit to Accounts Payable for 500,000 and Credit to Cash for 25,000
C. Debit to Purchases for 500,000; Debit to Freight Out for 25,000; Credit to Accounts Payable for 500,000
and Credit to Cash for 25,000
D. Debit to Purchases for 500,000; Debit to Freight Out for 25,000 and Credit to Accounts Payable for 525,000
_____68. If freight terms were FOB Destination, Freight Collect; the entry to record the transaction on December 1 would
require a credit to accounts payable for
A. 500,000 B. 525,000 C. 475,000 D. 470,000

_____69. Which of the following is an example of accrual?

A. Equipment purchased for use in business C. Interest incurred but not yet paid
B. Rent collected but not yet earned D. Six months’ rent paid in advance
_____70. The balance of accumulated depreciation is reported in the
A. Income Statement
B. Statement of financial position
C. Income Statement and Statement of financial position
D. Either the Income Statement or Statement of Financial position

_____71. Which of the following statements is correct?

A. Total Liabilities may exceed total assets and total capital
B. Total Liabilities may exceed total assets but shall not exceed total capital
C. Total Assets may exceed total liabilities but it shall not exceed total capital
D. Total Assets may exceed the sum of total liabilities and capital

_____72. The following combinations of trial balance totals suggest that a transposition error has been made. Which is an
exemption?
A. 78,990 debit and 79,890 credit C. 1,000,000 debit and 100,000 credit
B. 86,690 debit and 89,660 credit D. 909,990 debit and 900,999 credit

_____73. An entity would have an operating income of zero if

A. Cost of sales is equal to gross profit C. Operating Income is equal to other income
B. Gross profit is equal to operating expense D. Net sales is equal to cost of sales

_____74. Which of the following is not an accounting transaction?

A. Payment of tax to the BIR C. Sale of newly designed product
B. Filing of business permit D. Distribution of profit to the partners

_____75. The primary function of an account in the accounting system is

A. Determine at what point a transaction would be recorded
B. Store accounting transaction until they are classified
 C. Identify the industry where the business belongs
D. Accumulate accounting information

_____76. Ana established a business engaged in the rendering of services. On June 1, 2022, Ana took home some of the
office supplies of the business. This transaction would
A. Be treated as a withdrawal C. Require recognition of an expense
B. Be treated as a sale D. Not be recorded

_____77. If the ending balance of capital is lower than its beginning balance, the most likely cause would be
A. The results of the operation was an income
B. The results of the operation was a loss
C. Additional investments exceeded withdrawals
D. Additional investments exceeded total expenses

_____78. Which of the following is equal to the amount of total goods available for sale?
A. Inventory beginning + Inventory, end. C. Net purchases + Inventory, end.
B. Cost of goods sold – Inventory Beginning D. Cost of goods sold + Inventory, end.

_____79. The balance of the Prepaid Rent at the end of the accounting period is expected to represent:
A. The unexpired portion of rent paid C. The amount originally paid
B. The rent incurred but not yet paid D. The rent incurred during the period

_____80. A partnership is formed by two individuals who were previously sole proprietors. Their non-cash property
investments shall be recorded at
A. Book values or fair values at the date of investment whichever is higher
B. Book values or fair values at the date of investment whichever is lower
C. Fair Value at the time the asset was acquired
D. Fair value at the time of investment

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