COLLEGE OF ACCOUNTING EDUCTION

ACC 124 Review Session

1. Under the revised Conceptual Framework, which of the following are not among the enhancing qualitative
objectives of financial accounting?
A. Relevance D. Faithful representation G. Comparability
B. Neutrality E. Verifiability H. Freedom from error
C. Understandability F. Timeliness I. Completeness

a. A,B,D,C and H b. C,E,F and G c. C,D,E,I and F d. A,B,D,H and I

2. These users are interested in information that enables them to determine whether amounts owing to them will
be paid when due
a. Banks b. Lenders & other creditors c. Borrowers d. Trade creditors

3. What is the objective of financial reporting as indicated in the Conceptual Framework?

a. To provide information that is useful to those making investing and credit decisions.
b. To provide information that is useful to management.
c. To provide information about those investing in the entity
d. All of the above.

4. Which of the following is not a basic assumption underlying the financial accounting structure?
a. Economic entity assumption.
b. Going concern assumption.
c. Periodicity assumption.
d. Historical cost assumption.

5. A change in accounting policy requires that the cumulative effect of the change for prior should be shown as an
adjustment to
a. Beginning retained earnings for the earliest period presented.
b. Net income for the period in which the change occurred.
c. Comprehensive income for the earliest period presented.
d. Shareholder’s equity for the period in which the change occurred.

6. Which of the following options for displaying comprehensive income is preferred?

I. A continuation from net income at the bottom of the income statement.
II. A separate statement that begins with net income.
III. In the statement of changes in shareholders’ equity.
a. I only
b. II only
c. II and III only
d. I and II only

7. Which of the following statements in relation to cash is true?

I. If material, deposits in foreign bank which are subject to foreign exchange restriction and is earning interest
should be classified separately as long-term investment with appropriate disclosure.
II. A Company’s own postdated check issued to the supplier will be restored to cash as of the reporting period.
a. I only b. II only c. Both I and II d. Neither I nor II

8. The cash account of Acctg5 Corporation on December 31, 2022 has a balance of P127,600 and it consists of the
following:

Bills and coins on hand P 52,780

Petty cash including petty cash vouchers of P650 1,000
Balance in savings account with a bank closed by the BSP 36,000 other asset
Customer’s check dated January 15, 2014 8,000 staled check
Credit memo from suppliers for purchases returns 6,500
Postage stamps 120

1
 Money order (always a certified checks same w/ traveler’s check) 800
IOU of an employee 400
Checking account balance in Bank of Philippine Island 22,000

The correct cash balance on December 31,2014 of Acctg5 Corporation is

a. P75,930 b. P75,130 c. P76,580 d. P76,330

9. If the cash balance shown in a company’s accounting record is more than the correct cash balance and neither
the company nor the bank has made any errors, there must be
a. Outstanding checks
b. Deposits in transit
c. Bank charges not yet recorded by the company
d. Deposits credited by the bank but not yet recorded by the company.

10. On March 31, 2022, Mind Company received its bank statement. However, the closing balance of the account
was unreadable. Attempts to contact the bank did not secure the desired information. Thus, a bank
reconciliation is prepared from the following available information:

February 28 book balance P730,000

Note collected by bank 50,000
Interest earned on note 5,000
NSF check of customer (DAUD/DAIF) 65,000
Bank service charge on NSF check 1,000
Other bank service charges 1,500
Outstanding checks 101,000
Deposit of February 28 placed in night depository 42,500
Check issued by Mild company charged to Mind account 10,000

What was the cash balance per bank statement?

a. P717,500 b. P766,000 c. P669,000 d. P778,500

11. The following data are gathered for McQueen Company for the month of December 31, 2022.

Balance per book P2,500,000

Bank service charge for the month of December P 25,000
Customer’s check returned by bank marked NSF P 250,000
Customer’s note collected by bank
Face, P1,000,000; Interest P100,000;
Collection fee, P25,000 P1,075,000

What is the entry to record the customer’s note collected by bank?

a. Cash P1,125,000
Notes Receivable P1,000,000
Interest Income 100,000
Service Charge 25,000
b. Cash P1,125,000
Note Receivable P1,125,000
c. Cash P1,100,000
Note Receivable P1,100,000
d. Cash P1,075,000
Service Charge 25,000
Note Receivable P1,000,000
Interest Income 100,000

12. Trade receivables are classified as current assets when they are reasonably expected to be collected
a. Within one year.
b. Within the normal operating cycle.
c. Within one year or within the normal operating cycle whichever is longer.
d. Within one year or within the normal operating cycle whichever is shorter

2
13. The following data were taken from the records of Girlie Company for the year ended December 31, 2022:

Sales on account 2,880,000

Notes received to settle accounts 320,000
Provision for doubtful accounts 72,000
Accounts receivable determined to be worthless 16,000
Merchandise returned by customer 12,000
Collections received to settle accounts 1,960,000
Allowance for sales discount 36,000
Collections received in settlement of notes 120,000

What is the net realizable value of accounts receivable?

a. P 670,000 b. P 464,000 c. P 480,000 d. P 536,000

14. The following data are available on December 31, 2022 for James Company:

Sales 2,400,000
Accounts Receivable 600,000
Allowance for doubtful accounts, beg. 30,000
Accounts written off 39,000
Recovery of accounts previously written off 6,000

James Company estimates that 8% of accounts receivable prove uncollectible. What amount doubtful accounts
expense will be reported on December 31, 2022?
a. P48,000 b. P51,000 c. P18,000 d. 81,000

15. Statement I Accounts receivable – assigned is excluded in the determination of net realizable value. false
Statement II Equity of the assignor in assigned accounts is equal to assigned accounts receivable minus the bank
loan balance. true
a.Both statements are true c. Statement 1 is true while statement II is false
b.Both statements are false d. Statement 1 is false while statement II is true

16. On January 1, 2022, Lozada Company received from a customer an 8-month, P6,000,000 note bearing an annual
interest rate of 10%. The principal and the interest are payable on September 1, 2022. To obtain cash quickly,
Lozada discounted the note with East-West Bank on March 1, 2022. The bank charged a discount rate of 12%.
What is the loss on note receivable discounting to be recognized by Lozada?
a. P 70,000 b. P 84,000 c. P 400,000 d. P 384,000

17. At the beginning of the current year, Myra company sold P17,400,000 in accounts receivable for cash of
P15,000,000. The factor withheld 10% of the cash proceeds to allow for possible customer returns and other
adjustments. An allowance for bad debts of P1,800,000 had previously been established by May company in
relation to these accounts. What was the loss on factoring recognized by May company?
a. 600,000 b. 2,100,000 c. 1,500,000 d. 2,400,000

18. In relation to notes receivable, which among the statement is true?

Statement I Accounting for the interest in a noninterest bearing note receivable is an example of substance over
form. true
Statement II The interest on a noninterest bearing note is equal to face value over the present value. true
a.Both statements are true c. Statement 1 is true while statement II is false
b.Both statements are false d. Statement 1 is false while statement II is true

19. On December 31, 2022, Perry company sold used equipment and received a noninterest bearing note requiring
payment of P250,000 annually for ten years. The first payment is due December 31, 2023, and the prevailing rate
of interest for this type of note at date of issuance is 12%.

In the December 31, 2022 statement of financial position, what is the carrying amount of the note receivable?
a. 2,500,000 b. 1,087,500 c. 805,000 d. 1,412,500

3
20. On January 1, 2022 Angel company sold equipment with a carrying amount of P2,400,000 in exchange for a
P3,000,000 noninterest bearing note due January 1, 2025. There was no established exchange price for the
equipment. The prevailing rate of interest for a note of this type of January 1, 2014 was 10%. The present value
of 1 at 10% for three periods is 0.75. In the income statement for 2022, what amount should be reported as
interest income?
a. 300,000 b. 250,000 c. 225,000 d. 45,000

21. If the direct origination cost is less than the direct origination fee in the transaction of loan granted to a debtor by
the financing institution, the amortization will increase
a. Unearned interest income c. Interest expense
b. Interest income d. Loans receivable

22. Jewel Company loaned P7,500,000 to a borrower on January 1, 2018. The terms of the loan were payment in full
on January 1, 2023, plus annual interest payment at 12%. The interest payment was made as scheduled on
January 1, 2019. However, due to financial setbacks, the borrower was unable to make its 2020 interest
payment. Davao Bank considers the loan impaired and projects the cash flows from the loan as of December 31,
2020. The bank has accrued the interest at December 31, 2019, but did not continue to accrued interest for 2020
due to the impairment of the loan. The projected cash flows are:

Date of Cash Flow Amount Projected – as of 12.31.20

Dec. 31, 2021 500,000
Dec. 31, 2022 1,000,000
Dec. 31, 2023 2,000,000
Dec. 31, 2024 4,000,000

The yield rate on December 31, 2020 is 10%.

How much is the loan impairment loss to be recognized on December 31, 2020?
a. P 2,275,000 b. P 3,175,000 c. P 5,225,000 d. P 2,175,000

23. What are the two entries under a perpetual system to record a sale transaction?
a. One entry recognizes the sales revenue and the second entry recognizes the cost of goods sold.
b. One entry recognizes purchase of merchandise and the second entry recognizes sales revenue.
c. One entry recognizes cost of goods sold and the second entry reduces the balance of the inventory account.
d. One entry updates the subsidiary ledger and other updates the general ledger.

24. Eroll company’s inventory at December 31, 2024 was P5,000,000 based on physical count priced at cost and
before any necessary adjustment for the following:

 Merchandise costing P200,000, shipped FOB shipping point from a vendor on December 30, 2024 was
received and recorded on January 5, 2025.
 Goods in the shipping area were excluded from inventory although shipment was not made until January 4,
2025. The goods billed to the customer FOB shipping point on December 30, 2024, had a cost of P800,000.
The selling price is P1,000,000.

What amount should be reported as inventory on December 31, 2024?

a. P5,000,000 b. P 5,200,000 c. P 5,800,000 d. P 6,000,000

25. Statement 1 When an entity uses First in, First out (FIFO) cost method during rising prices, it matches oldest low-
cost inventory with rising sales prices thus narrowing the gross profit margin. false
Statement 2 Weighted average differs from other methods in that no assumption is made about the sale of
specific unit. true
a.Both statements are true c. Statement 1 is true while statement II is false
b.Both statements are false d. Statement 1 is false while statement II is true

26. Pascual Company is a wholesaler of scented candles. The activity for item number X during June is presented
below:

Date Transaction Units Cost

June 01 Inventory balance 6,000 P 20.00
4
 04 Purchases 9,000 24.00
12 Sales 10,800
19 Purchases 14,400 26.00
22 Sales 11,400
29 Purchases 4,800 27.00

Under the weighted average cost periodic inventory system, how much is the ending inventory of item X at June
30?
a.278,400 b. 294,720 c. 302,400 d.316,800

27. Larry Company uses the moving average cost method of valuing inventories. During August 2022, the following
inventory details were recorded.

Opening balance 3000 units valued at P20 each

August 5 purchase of 5000 units at P24 each
August 10 issue of 4000 units
August 18 purchase of 6000 units at P25 each
August 23 issue of 2500 units

The value of the month-end inventory for august 2022 was:

a. P172, 500 b. P180,000 c.P176, 500 d.P187,500

28. Which of the following statements is not valid about the gross profit method?
a. It may be used to estimate inventory for annual statements.
b. It may be used to estimate inventory for interim statements.
c. It is an acceptable accounting procedure.
d. It may be used by auditors.

29. On June 30, 2024, a fire at Sherlock Company’s only warehouse caused severe damage to its inventory. Based on
recent history, Sherlock has gross profit of 25% on sale. The following information is available from the records
for the six months ended June 30, 2024:

Inventory - January 1 4,000,000

Net purchases 18,000,000
Net sales 20,000,000

A physical inventory disclosed undamaged goods with selling price of P1,000,000. On June 30, 2024, unsold
goods on consignment with a selling price of P1,500,000 are in the hands of the consignee. What is the estimated
cost of inventory destroyed by fire?
a. 4,500,000 b. 4,000,000 c. 5,125,000 d. 7,000,000

30. The retail inventory method would include which of the following in the calculation of the goods available for
sale at both cost and retail?
a. Freight in c. Markups
b. Departmental transfer-in d. Sales returns and allowances

31. Presented below is information related to Nation, Incorporated:

Cost Retail
Inventory, January 1, 2024 P 705,150 P1,170,000
Purchases 2,831,250 4,380,000
Purchase returns 180,000 240,000
Purchase discounts 54,000 0
Gross sales (after employee discounts) 4,756,000
Sales returns 292,500
Net markups 300,000
Net markdowns 75,000
Freight-in 0
Employee discounts granted 24,000
Loss from breakage 47,500

5
 Assuming that Nation, Inc. uses the FIFO retail inventory method, how much would be the cost of its ending
inventory at December 31, 2024?
a. P631,400 b. P640,000 c. P650,000 d. P665,600

32. If the combined market value of trading securities at the end of the year is less than the market value of the same
portfolio of Trading securities at the beginning of the year, the difference should be accounted for by
a. Reporting an unrealized loss in security investments in the stockholders equity section of the balance sheet
b. Reporting an unrealized loss in security investments in the income statement
c. A debit to Investment in Trading Securities
d. A credit to Investment in Trading Securities

33. On January 1, 2023, Eunice Company purchased “trading” equity securities. The cost and market value on
December 31, 2023 were:
Cost Market – 12/31/23 Market – 12/31/24
Security A 1,000,000 1,200,000 1,500,000
Security B 2,000,000 1,500,000 1,400,000
Security C 3,000,000 3,100,000 3,300,000

On July 1, 2024, Eunice Company sold Security A for P1,800,000. What amount should be reported as gain on sale
of trading securities in the 2024 income statement?
a. 800,000 b. 600,000 c. 500,000 d. 400,000

34. During 2022, the first year of operations, Globe Telecom, Inc. purchased the following equity securities:

Cost Market Value Market Value

December 31, 2022 December 31, 2023
Security One 2,200,000 1,400,000 900,000
Security Two 700,000 1,000,000 1,100,000
Security Three 1,600,000 1,500,000 1,600,000
Security Four 2,000,000 2,500,000 1,200,000

Security One and Security Two are held for trading and Security Three and Security Four are measured as at fair
value through other comprehensive income by election. During 2023, Socorro sold one-half of Security One for
P1,000,000 and one-half of Security Four for P1,300,000. In the statement of changes in equity for 2023, what
amount should be included as cumulative unrealized gain as component of other comprehensive income?
a. 200,000 b. 800,000 c. 1,200,000 d. 0

35. When an investor uses the equity method to account for investment in ordinary shares, cash dividends received
by the investor from the investee shall be recorded as
a. Dividend income
b. A deduction from the investor’s share of the investee’s profits
c. A deduction from the investment account
d. A deduction from the shareholder’s equity account, dividends to shareholders

36. Ayala Land, Inc. purchased 100,000 shares of Ronald Company on January 15, 2022 representing 5% ownership
interest. Ayala Land, Inc. received a stock dividend of 20% on March 31, 2022 when the market price of the share
is P40. Ronald Company paid a cash dividend of P5 per share on December 15, 2022. In the income statement
for the year ended December 31, 2022, what amount should Ayala Land, Inc. report as dividend income?
a. 300,000 b. 600,000 c. 1,400,000 d. 800,000

37. Bernadette Company owns 50,000 shares of another entity. These 50,000 shares were originally purchased for
P100 per share. On October 1, 2020, the investee distributed 50,000 rights to Bernadette. Bernadette was
entitled to buy one new share for P140 and five of these rights. On October 1, 2020, each share had a market
value of P150 and each right had market value of P10. On December 31, 2020, Bernadette exercised all rights.
The stock rights are accounted for separately and measured initially at fair value.

What total cost should be recorded for the new shares that Bernadette acquired by exercising the rights?
a. 1,400,000 b. 1,900,000 c. 1,650,000 d. 1,000,000

6
38. An investor uses the equity method to account for an investment in ordinary shares. After the date of acquisition,
the investment account of the investor would
a. Not be affected by its share of the earnings or losses of the investee.
b. Not be affected by its share of the earnings of the investee, but be decreased by its share of the losses of the
investee.
c. Be increased by its share of the earnings of the investee, and decreased by its share of the losses of the
investee.
d. Be increased by its share of the earnings of the investee, but not affected by its share of the losses of the
investee.

39. In January 1, 2022 Lemar Company acquired 20% of AC the outstanding ordinary shares of an investee for
P8,000,000. The carrying amount of the acquired shares was P6,000,000. The excess of cost over carrying amount
was attributed to a depreciable asset which was undervalued in the investee's statement of financial position and
which had a remaining useful life of ten years. For the year ended December 31, 2022, the investee reported net
income of P1,800.000 and paid cash dividends of P400,000 and thereafter issued 5% stock dividend. What is
carrying amount of the investment on December 31, 2022?
a. P7,720,000 b. P7,800,000 c. P8,000,000 d. P8,080,000

40. On January 1, 2020, Valerie Company purchased bonds with face value of P2,000,000 for P1,900,5000 including
transaction costs of P100,500 to be held as at FMTOCI. The bonds mature on December 31, 2022 and pay
interest of 8% annually every December 31 with a 10% effective yield. The bonds are quoted at 110 on December
31, 2020 and at 120 on December 31, 2021.

What amount of unrealized gain on these bonds should be reported in the 2021 statement of comprehensive
income?
a. 269,450 b. 436,395 c. 166,945 d. 499,500

41. On January 1, 2020, Jessa Company purchased serial bonds with face value P3,000,000 and stated 12% interest
payable annually every December 31. The bonds are to be held to maturity with a 10% effective yield. The bonds
mature at an annual installment of P1,000,000 every December 31. The rounded present value of 1 at 10% for:

One period 0.91

Two periods 0.83
Three periods 0.75

What is the purchase price of the serial bonds on January 1, 2020?

a. 3,106,800 b. 3,060,000 c. 3,045,000 d. 3,149,400

ACC 111 Component

42. Mr. Banda, the owner of Davao Bus Liner withdrew P20,000 from his transportation business for his “personal
use”. His bookkeeper told him that this withdrawal should not be recorded in the book of the business because
this transaction is personal in nature and that as what he learned, only business transactions are to be recorded.

Statement 1 – The argument of the bookkeeper is correct because of the “business entity theory” which states
that the transaction of the business and the owner is distinct and separate from each other.

Statement 2 - The argument of the bookkeeper is wrong because the cash he withdrew is the cash from the
business, thus, must be recorded as Drawing in the business book.

a. Only Statement 1 is correct.

b. Only Statement 2 is correct.
c. Neither Statement 1 nor Statement 2 is correct.
d. Both Statement 1 and Statement 2 are correct.

43. Mrs. Gevera is a CPA. She is the Dean of the College of Accountancy. She has plenty of business clients of which
she serves during Saturdays and Sundays. Her Auditing Office is run by her staff during weekdays. Three students
in accounting are discussing and arguing as to what sector in the accountancy does she belongs.

Student 1 – She belongs to Education sector because she is teaching at the same time, a Dean.
7
 Student 2 – She belongs to Commerce and Industry sector because she is an employee of the school.

Student 3 – She belongs to Public Practice sector because she has an Auditing office and does audit works but at
the same time she also belongs to Education sector because she is the Dean of the school.

a. Student 1 is correct.
b. Student 2 is correct.
c. Student 3 is correct.
d. All of them are correct.

44. On Dec. 26, 2022, Lopez hired three temporary staff to begin work immediately for some rush works. The clerks
were paid on Jan. 9, 2023. Disregarding amounts, what entry should be made on Dec. 31, 2022?
a. debit Salaries Expense and credit Salaries Payable
b. debit Salaries Expense and credit Cash
c. debit Salaries Payable and credit Cash
d. debit Salaries Payable and credit Salaries Expense

45. Reynante Rivera Company bought equipment on January 3, 2022 for P100,000. At the time of purchase, the
equipment was estimated to have a useful life of nine years and a trade-in value of P10,000 at the end of nine
years. Using the straight-line method, the amount of depreciation on Dec. 31, 2022 was?
a. P11,110. b. P90,000. c. P12,220. d. P10,000.

46. A computer costing P 30,000 has an estimated life of 5 yrs. without scrap value. The computer was acquired on
March 31, 2022. How much is the depreciation of the asset at the end of Dec. 31, 2022?
a. P6,000 b. P5,000 c. P4,500 d. P5,500

47. An pays weekly salaries of P200,000 on Friday for a five-day week ending on that day. If the fiscal period ends on
Wednesday, the adjusting entry is
a. Debit Prepaid Salaries Expense, P120,000; salaries expense P120,000.
b. Debit Salaries Expense, P120,000; credit Salaries Payable, P120,000.
c. Debit Withdrawals, P120,000; credit Salaries Payable, P120,000.
d. Debit Salaries Payable, P120,000; credit Salaries Expense, P120,000.

48. Failure to record the entry for accrued salaries results in;
a. Salaries payable being overstated.
b. Profit being understated.
c. Salaries expense being understated.
d. Total assets being understated.

49. The balance in the Prepaid Insurance account before adjustment at the end of the year is P7,200, which
represents twelve months’ insurance that started on December 1. The adjusting entry required on December 31,
is;
a. Debit Insurance Expense, P600; credit Prepaid Insurance, P600.
b. Debit Insurance Expense, P6,600; credit Prepaid Insurance, P6,600.
c. Debit Prepaid Insurance, P600; credit Insurance Expense, P600.
d. Debit Prepaid Insurance, P7,200; credit Insurance Expense, P7,200.

50. If an accountant fails to make an adjusting entry at the end of a fiscal period to record expired insurance, the
omission will cause;
a. Total assets to be understated.
b. Total expenses to be understated.
c. Total revenue to be understated.
d. Liabilities to be overstated.

51. Interest Expense shows a balance of P 3,500 at the end of 12.31.2022. It was determined that P 500 of the
amount is applicable in the next accounting period. From the data, how much of the amount has expired at the
end of 12.31.2022?
a. 3,000 b. 500 c. 4,000 d. 4,500

8
52. Based on the given data in no. 70, what is the adjusting entry on 12.31.2022?
Debit Credit
a. Interest Expense 500 Prepaid Interest 500
b. Prepaid Interest 3,000 Interest Expense 3,000
c. Prepaid Interest 500 Interest Expense 500
d. Interest Expense 3,000 Prepaid Interest 3,000

53. A business received cash of P30,000 in advance for revenue that will be earned later. The cash receipt entry was
debit cash and credit unearned revenues for P30,000. At the end of the period, P11,000 is still unearned. The
adjusting entry for this situation is:
a. debit unearned revenues and credit revenues for P 19,000
b. debit unearned revenues and credit revenues for P11,000.
c. debit revenues and credit unearned revenues for P 19,000
d. debit revenues and credit unearned revenues for P11,000.

54. Which of the following is an example of deferral?

a. The accumulation of interest in a bank account.
b. the purchase of a company vehicle
c. Property taxes accrued but not yet paid
d. Legal fees already earned but not yet collected

55. Which of the following assets is not subject to depreciation?

a. art equipment
b. Store Fixtures
c. computers
d. Land

56. The carrying value of a depreciable asset equals;

a. the estimated cost to replace the asset
b. the original cost minus accumulated depreciation
c. the estimated amount for which the asset could be sold
d. the original cost minus depreciation expense for the current period

57. A company recorded office supplies in an asset account when the supplies were purchased. Failure to take an
inventory and make an adjusting entry will result in an;
a. understatement of assets
b. understatement of owner’s equity
c. overstatement of owner’s equity
d. understatement of liabilities

The following information pertains to Bautista Company:

a. The company’s Store Supplies account showed a beginning debit balance of P2,000 and supplies purchased of
P8,000; P3,000 of supplies were on hand at year-end.
b. Depreciation on building is at P50,000.
c. A one-year insurance policy was purchased for P20,000 and was debited to insurance expense Three months have
passed since the purchase.
d. Accrued interest on a note receivable amounted to P1,000.
e. The company received a P36,000 advance payment during the year on services still to be performed and credit
unearned service revenues. By the end of the year, one-fourth of the services had been performed.

58. The adjusting entry for Store Supplies would include a;

a. debit to Store Supplies Expense for P8,000 c. credit to Store Supplies Expense for P8,000
b. debit to Store Supplies Expense for P7,000 d. credit to Store Supplies for P3,000

59. The adjusting entry to record the accrued interest on the note would include a
a. debit to Interest Receivable for P1,000. c. credit to Interest Payable for P1,000.
b. Credit to Interest Expense for P1,000. d. Debit to Interest Expense for P1,000.

9
 At the end of June 30, 2019, the following data were taken from the records of Tonet Matalino CPA. Profit of
P150,000 which is equal to 20% of the gross professional fees. The operating expenses is equal to 50% of revenue
and direct cost is 30% of the revenue.

60. How much is the amount of revenue?

a. P500,000 b. P600,000 c. P450,000 d. P750,000

61. The amount of operating expenses is :

a. P375,000 b. P250,000 c. P300,000 d.P225,000

62. The primary objective of reversing entries is to;

a. correct errors
b. simplify the bookkeeping associated with accruals from the prior period
c. transfer the balance of the expense accounts to the owner’s capital account and set the accounts equal to
zero.
d. place the expenses for the current period in the proper accounts.

63. If a trial balance were to be prepared on the first day of the current year, and the account Salaries Expense had a
credit balance, you would know that;
a. the trial balance is a post-closing trial balance
b. the adjusting entries have been recorded
c. the trial balance is an adjusted trial balance
d. a reversing entry has been made

64. Reversing entries are;

a. Optional
b. made to record a change in corporate objectives
c. required by generally accepted accounting principles
d. made prior to preparing a post-closing trial balance.

65. The post-closing trial balance contains:

a. real accounts only
b. nominal accounts only
c. both real and nominal accounts
d. neither real nor nominal accounts

The adjusted trial balance of BB Gandang Hari is shown below. For simplicity cost of goods sold and operating
expenses are presented on its total amount.
adjusted trial balance
221,1
Cash 80
428,0
Accounts Receivable 00
397,0
MDSE Inventory 00
14,0
Supplies Inventory 00
46,0
Prepaid Insurance 00
460,0
Land 00
1,750,0
Building 00
359,0
Accumulated Depreciation-Bldg 00
2,310,0
Equipment 00
642,0
Accum. Deprn. Equipment 00

10
 517,0
Accounts Payable 00
51,0
Salaries Payable 00
2,600,0
Mortgage payable 00
1,569,0
BB Gandang Hari capital 00
400,0
BB Gandang Hari drawing 00
1,332,0
Sales 00
141,0
sales returns and allowances 00
11,8
sales discounts 40
664,9
Cost of sales 80
226,0
Operating expenses 00
7,070,0 7,070,0
Totals 00 00
Beginning inventory amounted to P413,000, while ending inventory totaled P397,000.

BASED ON THE ABOVE DATA

66. Using the above data, the post-closing balance of the capital of BB Gandang Hari would be reflected at:
a. P1,569,000 b. P1,169,000 c. P 1,457,180 d. P1,857,180.

67. In the post-closing trial balance, sales of the company would reflect an amount of;
a. P1,332,000 b. P1,179,160 c. P-0- d. P514,180

68. Client Jay pays ABC Co. P10,000 in December 2020 for ABC to perform services for Jay in February 2021. ABC uses the
accrual basis of accounting. In December ABC will debit Cash for P10,000. What will be the other account involved in
the December 2020 accounting entry prepared by ABC (and what type of account is it)?
a. Accounts Receivable (Asset) c. Prepaid Expense (Asset)
b. Service Revenues (Revenue) d. Unearned Revenues (liability)

69. On December 15, 2020 ABC Co. hired Juanita Perez to begin working on January 2, 2021 at a monthly salary of
P14,000. ABC's balance sheet of December 31, 2020 will show a liability of;
a. P168,000 b. P14,000 c. No liability d. Deferred liability

---End of Examination---

11