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Fundamentals of Accountancy, Business & Management 2

FIRST GRADING EXAMINATION

1. Liabilities are classified as current

a. when they are expected to be settled within 12 months from the end of the reporting period.
b. when they are expected to be settled beyond 1 year from the end of the reporting period.
c. whenever management wants to classify them as current.
d. any of these.

2. Which of the following accounts is not a liability?

a. Accounts Payable
b. Accounts Receivable
c. Salaries Payable
d. Notes Payable

3. These are receivables that arise from the sale of goods or services in the ordinary course of
business.
a. Accounts receivable
b. Notes receivable
c. Trade receivables
d. Non-trade receivables

4. When are trade receivables presented as current assets?

a. Whenever they are collectible within 12 months from the end of the reporting period.
b. When they are collectible within the entity’s normal operating cycle, even if this extends
beyond 12 months from the end of the reporting period.
c. When they are collectible within the entity’s normal operating cycle or within 12 months
from the end of the reporting period, whichever is shorter.
d. Trade receivables are always presented as current assets.

5. These are present obligations that have resulted from past events and are expected to require
giving up of resources when settling them.
a. Assets
b. Expenses
c. Liabilities
d. Losses

6. Assets less liabilities is

a. Equity
b. Net assets
c. Capital
d. All of these

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7. This type of balance sheet (statement of financial position) does not show distinctions between
current and noncurrent assets and liabilities.
a. Classified
b. Unclassified
c. Report form
d. Account form

8. Which of the following is most likely to be a current asset?

a. Accounts payable
b. Land
c. Equipment
d. Cash

9. Entity A is a merchandising business. It is engaged in buying and selling grocery items. Unsold
groceries at the end of the period will be presented in Entity A’s statement of financial position
under which of the following line items?
a. Prepaid supplies
b. Trade and other receivables
c. Property, plant and equipment
d. Inventory

10. The land on which Entity A’s building was constructed is classified in the statement of financial
position as
a. current asset.
b. noncurrent asset.
c. current liability.
d. equity.

11. Accumulated depreciation is most commonly reported in the statement of financial position as
a. a separate current asset.
b. a separate noncurrent asset.
c. a deduction to the related noncurrent asset account.
d. an addition to the related noncurrent asset account.

12. Which of the following is presented as a noncurrent liability in an entity’s statement of financial
position?
a. Accounts payable
b. Notes payable due in 6 months
c. Income tax payable
d. Loans payable due after 5 years

13. Which of the following liabilities is presented as current liability even if it is due to be settled
beyond one year from the end of the reporting period but within the entity’s normal operating
cycle?
a. Accounts receivable arising from sales of goods in the ordinary course of business
b. Notes payable issued in conjunction with the purchase of equipment. The notes payable is
due after 2 years
c. Accounts payable arising from purchases of inventory

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 d. None of these

14. For purposes of presenting items on the financial statements, assets, liabilities, equity, income
and expenses with similar nature and function within the business are grouped together. These
groupings are called
a. account titles.
b. line items.
c. financial statements.
d. notes.

15. Accounts receivable is commonly presented in the statement of financial position under the
heading
a. Property, plant and equipment
b. Cash and cash equivalents
c. Prepaid assets
d. Trade and other receivables

16. This is the most commonly used format of the balance sheet. It presents the entity’s assets,
liabilities and equity in a vertical manner.
a. Report form
b. Account form
c. Standing form
d. Lying form

17. Entity A reports a loss of ₱60,000 and total expenses of ₱240,000. Entity A’s total income must be
a. 360,000
b. 300,000
c. 180,000
d. 400,000

18. The financial statements most frequently provided include all of the following except the
a. statement of profit or loss and other comprehensive income.
b. statement of financial position.
c. statement of cash flows.
d. statement of retained earnings.

19. An entity has the following assets:

Cash 20,000
Accounts receivable 40,000
Notes receivable (nontrade) - ₱60,000 due within 1 yr. 100,000
Inventory 130,000
Prepaid supplies 10,000
Land 200,000
Building 800,000
Accumulated depreciation (240,000)
Total assets 1,060,000

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 How much is the total current assets?
a. 200,000
b. 260,000
c. 300,000
d. 360,000

20. An entity has the following liabilities:

Accounts payable 60,000

Notes payable (nontrade) - ₱200,000 due within 1 yr. 1,000,000
Rent payable (due within 1 yr.) 20,000
Utilities payable 10,000
Interest payable 200,000
Salaries payable 800,000
Unearned income 240,000
Total liabilities 2,330,000

How much is the total current liabilities?

a. 1,330,000
b. 1,530,000
c. 1,830,000
d. 1,930,000

21. Entity A has a capital balance of ₱3,400,000 at the start of the period. During the period, Entity A
earned income of ₱8,800,000 and incurred expenses of ₱4,500,000. The sole proprietor of Entity A
made additional investments of ₱1,200,000 to the business but made a withdrawal of ₱960,000 at
the end of the period. How much is the capital balance of Entity A at the end of the period?
a. 7,849,000
b. 8,497,000
c. 8,740,000
d. 7,940,000

Use the following information for the next three questions:

Entity A’s post-closing trial balance on December 31, 20x1 shows the following account balances:

Accounts Dr. Cr.

Cash 20,000
Accounts receivable 122,000
Allowance for bad debts 30,000
Notes receivable (Trade) 8,000
Inventory 200,000
Prepaid supplies 15,000
Prepaid rent 25,000
Prepaid insurance 10,000
Land 1,000,000
Building 2,000,000

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Accumulated depreciation - Bldg. 1,600,000
Equipment 800,000
Accumulated depreciation – Equipment 250,000
Accounts payable 100,000
Notes payable - short term loan 200,000
Notes payable - long term loan
(₱50,000 due within 1 yr.) 1,450,000
Interest payable 65,000
Salaries payable 105,000
Utilities payable 8,000
Unearned income 35,000
Owner’s capital 357,000
Totals 4,200,000 4,200,000

22. How much is the total current assets?

a. 340,000
b. 370,000
c. 362,000
d. 480,000

23. How much is the total noncurrent liabilities?

a. 1,450,000
b. 1,400,000
c. 1,465,000
d. 1,515,000

24. How much is the total equity?

a. 434,000
b. 392,000
c. 387,000
d. 357,000

25. Which of the following statements is correct regarding the statement of comprehensive income?
a. The “Statement of profit or loss and other comprehensive income” and the “Income
statement” are the same.
b. Both the “Income statement” and the “Statement of profit or loss and other comprehensive
income” show profit or loss and “other comprehensive income.”
c. Comprehensive income and profit or loss are the same.
d. “Statement of comprehensive income” is another term used to describe the “Statement of
profit or loss and other comprehensive income.”

26. The financial position of the business on a given date is reported on the
a. Income Statement
b. Balance Sheet
c. Statement of Changes in Equity
d. Statement of Cash Flows

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27. The profit or loss for a particular period of time is reported on the
a. Income Statement
b. Balance Sheet
c. Trial Balance
d. Statement of Changes in Equity

28. A common business transaction that would not affect the amount of owners' equity is
a. purchasing an equipment on account.
b. payment of salaries.
c. billing of customers for goods sold.
d. drawings of the business owner from the business.

29. The cost of goods and services used in the process of generating revenue are called
a. expenses.
b. assets.
c. profits.
d. liabilities.

Use the following information for the next two questions:

The trial balance of ABC Co. on December 31, 20x1 shows the following information:

Accounts Dr. Cr.

Service fees ₱870,000
Interest income 60,000
Gains 20,000
Salaries expense ₱300,000
Rent expense 30,000
Utilities expense 20,000
Supplies expense 10,000
Depreciation expense 40,000
Taxes and licenses 70,000
Transportation and travel expense 5,000
Interest expense 2,000
Miscellaneous expense 1,000
Losses 15,000
Totals ₱493,000 ₱950,000

30. How much is the total income of ABC Co. in 20x1?

a. 870,000
b. 930,000
c. 950,000
d. 457,000

31. How much is the profit (loss) of ABC Co. in 20x1?

a. 870,000
b. 457,000
c. (457,000)
d. 453,000

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Use the following information for the next two questions:

The accounts of Entity A on December 31, 20x1 show the following balances:

Cost of goods sold ₱250,000

Insurance expense 120,000
Advertising expense 18,000
Freight-out 36,000
Loss on sale of equipment 4,000
Rent expense (one-half pertains sales department) 120,000
Salaries expense (1/4 pertains to non-sales
personnel) 200,000
Sales commission expense 20,000
Bad debts expense 6,000
Interest expense 1,000

32. How much is total distribution costs (selling expenses)?

a. 284,000
b. 334,000
c. 344,000
d. 394,000

33. How much is the general and administrative expenses?

a. 446,000
b. 296,000
c. 286,000
d. 236,000

Use the following information for the next five questions:

The trial balance of ABC Co. on December 31, 20x1 shows the following information:

Accounts Dr. Cr.

Sales ₱900,000
Interest income 60,000
Gains 20,000
Inventory, beg. ₱50,000
Purchases 200,000
Freight-in 10,000
Purchase returns 5,000
Purchase discounts 7,000
Freight-out 25,000
Sales commission 30,000
Advertising expense 15,000
Salaries expense 300,000
Rent expense 30,000
Depreciation expense 40,000
Utilities expense 20,000

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 Supplies expense 10,000
Transportation and travel expense 5,000
Insurance expense 12,000
Taxes and licenses 70,000
Interest expense 2,000
Miscellaneous expense 1,000
Loss on the sale of equipment 15,000
Totals ₱835,000 ₱992,000

Additional information:
a. Ending inventory is ₱80,000.
b. One-half of the salaries, rent, and depreciation expenses pertain to the sales department. The sales
department does not share in the other expenses.

34. How much is the net purchases?

a. 205,000
b. 198,000
c. 203,000
d. 222,000

35. How much is the cost of goods sold?

a. 248,000
b. 186,000
c. 142,000
d. 168,000

36. How much is the total income?

a. 992,000
b. 960,000
c. 980,000
d. 920,000

37. How much is the total selling expenses (distribution costs)?

a. 295,000
b. 305,000
c. 235,000
d. 255,000

38. How much is the total general and administrative expenses?

a. 303,000
b. 305,000
c. 302,000
d. 286,000

39. How much is the profit (loss)?

a. 236,000
b. 257,000

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 c. 302,000
d. 237,000

40. This method of presenting expenses shows information on cost of sales or cost of goods sold.
a. Classified method
b. Unclassified method
c. Nature of expense method
d. Function of expense method

“You will eat the fruit of your labor; blessings and prosperity will be yours.”
(Psalms 128:2)

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