MOCK QUALIFYING EXAM

Part I: Accounting 1

Instructions: Answer the following carefully. Highlight your answer with color yellow. After
answering all the questions edit the file name by replacing it with your name.

Example:

1. The relevance of providing information in financial statements is subject to the constraint of

a. Comparability

b. Cost-benefit

c. Reliability

d. Faithful representation

Example: MockQualifyingExam.doc to LucaPacioli.doc

1. Which is (are) correct concerning the FRSC?

I. The FRSC replaces the ASC as the standard setting body in the Philippines.
II. The FRSC is composed of 15 members with a Chairman and 14 representatives from various
sectors
III. Republic Act No. 9298 is the law regulating practice of accountancy in the Philippines.
IV. The Chairman and members of FRSC shall have a term of 2 years renewable for another
term.

A. I and II only
B. I, II, III only
C. I, II, III, IV only
D. None of the above
2. Which of the following violates the concept of faithful representation?

a. Financial statements included property with a carrying amount increased to management

estimate of market value
b. Financial statements were issued nine months late
c. Report data on segments having the same expected risks and growth rates to analysts
estimating future profit
d. Management reports to shareholders regularly refer to new projects undertaken but the
financial statements never report project results

3. The following information is given:

Current liabilities of 100,000; Non-current liabilities of 150,000; Owner’s Equity is twice as

much as total liabilities; Current assets is 40% of total assets

What is the total non-current assets?

Provide your answer: 450,000

4. An analysis of BPI Corporation unadjusted prepaid expense account at December 31, 2010,
revealed the following:

● An opening balance of 1,500 for BPI’s comprehensive insurance policy. BPI had paid an
annual premium of 3,000 on July 1, 2009.
● A 3,200 annual insurance premium payment made July 1, 2010.
● A 2,000 advance rental payment for a warehouse BPI leased for one year beginning January 1,
2011.

In its December 31, 2010 Statement of Financial Position, what amount should BPI report as
prepaid expense?
Provide your answer: 3,600

5. On the worksheet, under what circumstances will the last two columns be in balance after the
initial footing?

A. under no circumstances
B. under all circumstances, assuming no arithmetical errors have been made
C. when net income is zero
D. when no adjustment have been entered on the worksheet

6. At year-end, Rabid Company reported a cash balance of 5,250,000 which included the
following:
Petty cash fund 50,000
Undeposited receipts, including a postdated 1,300,000
customer check of 200,000
Cash in sinking fund 1,000,000
Vouchers paid out of collections, not yet recorded 250,000
IOUs signed by employees 150,000

What total amount should be reported as “cash” in the statement of financial position at year-
end?

A. 3,650,000
B. 3,850,000
C. 4,650,000
D. 4,050,000

7. An entity reported current receivables on December 31, 2015 which consisted of the
following:

Trade accounts receivable 930,000

Allowance for uncollectible accounts 20,000
Claim against shipper for goods lost in transit in November 2015 30,000
Selling price of unsold goods sent by the entity on consignment at 130% of
cost and not included in the ending inventory 260,000
Security deposit on lease of warehouse used for storing inventories 300,000

What is the correct total of current net receivables on December 31, 2015?

a. 1,500,000
b. 1,200,000
c. 1,240,000
d. 940,000

8. Which of the following methods of determining bad debt expense does not properly match
expense and revenue?

a. Charging bad debts with a percentage of sales under the allowance method.
b. Charging bad debts with an amount derived from a percentage of accounts receivable
under the allowance method.
c. Charging bad debts with an amount derived from aging accounts receivable under the
allowance method.
 d. Charging bad debts as accounts are written off as uncollectible.

9. Celibacy Company provided the following information for the current year:

Beginning Inventory 650,000

Purchases 2,300,000
Purchase Returns 80,000
Freight in 60,000
Sales 3,400,000
Sales Discounts 20,000
Sales returns 30,000

At year-end, a physical inventory revealed that the ending inventory was only 420,000. The
gross profit on sales has remained constant at 30%. The entity suspects that some inventory may
have been pilfered by one of the employees.

What is the estimated cost of missing inventory at year-end?

A. 151,000
B. 165,000
C. 420,000
D. 585,000

10. Which of the following information should be disclosed in relation to biological asset and
agricultural produce?

a. Separate disclosure of the gain or loss relating to biological asset and agricultural
produce.
b.  The aggregate gain or loss arising on the initial recognition of biological assets and
agricultural produce and from the change in fair value less estimated cost of disposal of
biological asset.
c. The total gain or loss from biological asset, agricultural produce, and from change in
fair value less estimated costs of disposal of biological asset.
d. There is no requirement to disclose separately any gain or losses.

11. The major difference between the service life of an asset and the physical life is that
a. Service life refers to the time an asset will be used and physical life refers to how long the
asset will last.
b. Physical life is the life of an asset without consideration of residual value and service life
requires the use of residual value.
 c. Physical life is always longer than service life.
d. Service life refers to the length of time an asset is of use to the original owner, while
physical life refers to how long the asset will be used by all owners.

12. At the beginning of the current year, Kaye Company exchanged an old packaging machine,
which cost 1,200,000 and was 50% depreciated, for a used machine and paid a cash difference of
160,000.
The fair value of the old packaging machine was determined to be 700,000.

What is the gain on exchange?

A. 540,000
B. 100,000
C. 60,000
D. 0

13. At the beginning of the current year, Marjolyn Company purchased a parcel of land as a
factory site for 1,000,000.

An old building on the property was demolished to pave the way for the construction of a new
building which was completed at year-end.

Demolition of old building 100,000

Architect Fee 175,000
Legal fee for title investigation and purchase contract 25,000
Construction cost 5,450,000

What amount should be the cost of building?

A. 5,475,000
B. 5,750,000
C. 5,725,000
D. 5,450,000

14. In accounting for plant assets, which of the following outlays made subsequent to acquisition
should be fully expensed in the period the expenditure is made?

a. Expenditure made to increase the efficiency or effectiveness of an existing asset

b. Expenditure made to extend the useful life of an existing asset beyond the time frame
originally anticipated
c. Expenditure made to maintain an existing asset so that it can function in the manner
intended
 d. Expenditure made for major replacement

15. Jim is a lawyer who requires that his clients pay him in advance of legal services
rendered. Jim routinely credits Legal Service Revenue when his clients pay him in
advance. In June Jim collected $12,000 in advance fees and completed 75% of the work
related to these fees. What adjusting entry is required by Jim's firm at the end of June?

a. Unearned Revenue ............................................................. 9,000

Legal Service Revenue .............................................. 9,000
b. Unearned Revenue ............................................................. 3,000
Legal Service Revenue .............................................. 3,000
c. Cash .................................................................................... 12,000
Legal Service Revenue .............................................. 12,000
d. Legal Service Revenue ....................................................... 3,000
Unearned Revenue .................................................... 3,000

16. Southeastern Louisiana University sold season tickets for the 2008 football season for
$160,000. A total of 8 games will be played during September, October and November. In
September, three games were played. The adjusting journal entry at September 30

a. is not required. No adjusting entries will be made until the end of the season in
November.
b. will include a debit to Cash and a credit to Ticket Revenue for $40,000.
c. will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for
$60,000.
d. will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for
$53,333.

17. Cathy Cline, an employee of Welker Company, will not receive her paycheck until April 2.
Based on services performed from March 15 to March 30, her salary was $900. The
adjusting entry for Welker Company on March 31 is

a. Salaries Expense .................................................................. 900

Salaries Payable ............................................................ 900
b. No entry is required.
c. Salaries Expense .................................................................. 900
Cash............................................................................... 900
d. Salaries Payable ................................................................... 900
Cash............................................................................... 900

18. Which one of the following is not a justification for adjusting entries?
a. Adjusting entries are necessary to ensure that revenue recognition principles are
followed.
b. Adjusting entries are necessary to ensure that the matching principle is followed.
c. Adjusting entries are necessary to enable financial statements to be in conformity with
GAAP.
d. Adjusting entries are necessary to bring the general ledger accounts in line with the
budget.

19. Able Company received the bank statement for the month of March. However, the closing
balance of the account was unreadable.

Attempts to contact the bank after hours did not secure the desired information.

February 28 book balance 1,460,000

Note collected by bank 100,000
Interest earned on note 10,000
NSF Check of Customer 130,000
Bank Service Charge on NSF Check 2,000
Other Bank Service charges 3,000
Outstanding Checks 200,000
Deposit of February 28 placed in night depository 85,000
Check issued by Axle Company charged to Able’s account 20,000

What is the cash balance per bank statement?

A. 1,435,000
B. 1,530,000
C. 1,340,000
D. 1,550,000

20. At the beginning of the current year, Jamin Company had a credit balance of 260,000 in the
allowance for uncollectible accounts. Based on past experience, 2% of credit sales would be
uncollectible.

During the current year, the entity wrote off 325,000 of uncollectible accounts. Credit Sales for
the year totaled 9,000,000.

What amount should be reported as allowance for uncollectible accounts at year-end?

A. 115,000
 B. 180,000
C. 245,000
D. 440,000

21. Which is the reason why entities are permitted to change accounting policy?

a. The change would allow the entity to present a more favorable profit picture.
b. The change would result in the financial statements providing more reliable and relevant
information about an entity’s financial position, financial performance and cash flows.
c. The change is made by the internal auditor.
d. The change will be long-term.

22. The expenses other than interest expense of John Company for the current year is 40% of
cost of sales but only 20% of sales. Interest expense is 5% of sales. The amount of purchases is
120% of cost of sales. Ending inventory is twice as much as the beginning inventory. The
income after tax of 30% for the current year is P350,000. What is the amount of sales for the
current year?

a. 1,625,000
b. 1,300,000
c. 2,000,000
d. 2,500,000

23. The full disclosure principle is best described by which of the following?

a. All information related to an entity's business and operating objectives is required to be

disclosed in the financial statements.
b. Information about each account balance appearing in the financial statements is to be
included in the notes to financial statements.
c. Enough information should be disclosed in the financial statements so a person wishing
to invest in the shares of the entity can make a profitable decision.
d. Disclosure of any financial facts significant enough to influence the judgment of an
informed reader.
24. A law firm received $2,000 cash for legal services to be rendered in the future. The full
amount was credited to the liability account Unearned Legal Fees. If the legal services
have been rendered at the end of the accounting period and no adjusting entry is made,
this would cause

a. expenses to be overstated.
b. net income to be overstated.
c. liabilities to be understated.
d. revenues to be understated.

25. An entity provided the following information about assets in forest plantation:

Freestanding trees 5,000,000

Land under trees 900,000
Roads in forest 500,000
Animals related to recreational activities 2,000,000
Rubber trees and grape vines 1,500,000

What total amount should be reported as biological assets?

a. 5,000,000
b. 8,500,000
c. 6,500,000
d. 9,900,000

END OF PART I