1.

Crazy Company reported the following balances for the current year: Inventory, January 1 - P2,900,000; Inventory,
December 31 - P2,600,000; Trade accounts payable, January 1 - P500,000; Trade accounts payable, December 31 -
P750,000. The entity paid suppliers P4,900,000 during the current year. Under the accrual basis, what amount should
be reported as cost of goods sold? *
5450000
2. Averitt Company provided you the following information regarding payments and revenues: (1) On January 1, 2021,
Averitt paid P100,000 for a four-year insurance contract, which is attributed at P25,000 per year effectively upon
payment. (2) On September 1, 2021, Averitt received P80,000 advanced payment for eight months of service from a
customer. (3) On December 1, 2021, Averitt paid in advance P60,000 for a five-month rent. How much is Averitt's net
income for 2021 under the cash basis of accounting? *
(80000)
3. Using the information in item 2, how much is Averitt's net income for 2021 under the accrual basis of accounting?  *
3000
4. How much is the net income of Jiyeon Company in 2015 under the cash basis of accounting? *

1270000
5. Using the information in item 4, how much is the net income of Jiyeon Company in 2015 under the accrual basis of
accounting? *
290000
6. *

102000
7. *

6500000
8. *
5500000
9. *

2150000
10. *
768450
11. *

8000
1. Accounting lies on the objective that it should be a useful tool to be able to provide the users of financial information
make better economic decisions. Truly enough, reports generated in accounting becomes a way for these said users to
understand the entity better. For this cause, accounting is called the language of business. With these points given, we
can say that *
A structured representation of the financial position, financial performance, and cash flows of an entity can be provided by accounting
through reports known as Financial Statements.
Management Accounting, being more concerned on reporting to internal users of accounting information, heavily becomes more
important to managers than information provided by Financial Accounting to outside users.
The manner of presenting financial information is of paramount importance to taxation and government authorities.
Increased demand for accountants is needed worldwide because of the influence of Accounting to the society at large.
2. Two scenarios happened in the ledger as noted by the accountant: (1) Left-side postings of P10,000 and P24,000 to
an expense account. (2) Right-side postings of P70,000 and P20,000 to a revenue account. From these scenarios, we
can say that *
Both are decreasing revenues and expenses in their normal balances.
Both are increasing revenues and expenses in their normal balances.
Scenario 1 decreases expenses while scenario 2 increases revenue.
Scenario 1 increases expenses while scenario 2 decreases revenue.
3. The following account balances resulting from a month’s operations was provided by the ledger, as follows: Cash,
P40,000, debit balance; Accounts payable, P20,000 debit balance; Accounts receivable, P10,000 credit balance;
Salaries expense, P6,000, debit balance. How many accounts would you suspect an error or an inconsistent balance in
respect with the conventions of debit and credit? *
One
Two
Three
All four
4. Failure to adjust prepayments under the expense method would *
Overstate net income due to overstated expenses.
Overstate net income due to understated expenses.
Understate net income due to overstated expenses.
Understate net income due to understated expenses.
5. Statement 1 – An insurance contract paid in advanced will be directly debited to expense in full under the cash basis
of accounting. Statement 2 – An insurance contract paid in advanced will be directly debited to an asset account under
the accrual basis of accounting using the expense method. *
Only statement 1 is correct.
Only statement 2 is correct.
Both statements are correct.
None of the statements are correct.
6. A company failed to recognize the following adjusting entries at year-end: (1) A prepaid expense that was already
expired. (2) An unearned rent revenue that has already been earned. (3) Depreciation of the company equipment. What
will be the effect of the preceding failures in the assets, liabilities, revenue, and expenses of the firm?  *
All these mentioned financial statement elements are overstated.
All these mentioned financial statement elements are understated.
Understated, understated, overstated, overstated, respectively.
Overstated, overstated, understated, understated, respectively.
7. A firm received a large amount of money as a payment to a service rendered by the company. Then, the firm paid a
substantial amount of repairs expense due to a massive unfortunate event to the equipment of the entity. How should
the firm account for these two transactions? *
The large payment received should be recorded as earned only through allocating it in the remaining months covered in the reporting
year while the substantial amount of expenses should be allocated to the different asset accounts because of its substantial nature.
The large payment received should be recorded as earned only through allocating it in the remaining months covered in the reporting
year while the substantial amount of expenses should be recorded as expenses in the usual manner.
The large payment received should be recorded as revenue in the usual manner while the substantial amount of expenses should be
allocated to the different asset accounts because of its substantial nature.
The large payment received, and the substantial amount of expenses should be recorded as revenue and expenses, respectively, in
the usual manner.
8. Which statement best defines an accrual? *
Adjusting entries where cash flow precedes revenue or expense recognition.
Adjusting entries where revenue or expense recognition precedes cash flow.
Adjusting entries where cash flow and revenue or expense recognition are simultaneous.
Adjusting entries where revenues or expenses are recognized in the absence of cash flow evidence.
9. An entity uses the expense method in recording and adjusting prepaid expenses, whether it be prepayments of
insurance policies longer than one year, or office supplies used in the company’s operations. Which of the following
statements is correct concerning the use of reversing entries parallel to the application of the expense method?  *
Reversing entries is an optional step of the accounting cycle. Hence, the entity can continue the use of the expense method even
without reversing entries.
Reversing entries is a required step of the accounting cycle when an entity uses the expense method of adjusting.
Reversing entries is an optional step of the accounting cycle. However, an entity should be able to undergo reversing entries each
accounting period to keep up with the use of the expense method of adjustments.
An entity shall use the asset method so that they will not be compelled to undergo reversing entries.
10. Before closing it against the capital account, a credit balance in the Profit or Loss Summary account tells you that  *
The company may have a larger ending capital in respect with the beginning capital, assuming there is neither additional investments
nor withdrawals.
The company may have a smaller ending capital in respect with the beginning capital, assuming there is neither additional investments
nor withdrawals.
The accounting process up to this point is correct.
You don’t need to proceed to the Post-Closing Trial Balance.
11. How much is the company’s net income? *
P1,786,898.07
P1,796,112.09
P1,897,556.12
P1,912,997.14
12. How much were the total withdrawals made during the year? *
P1,290,781.24
P1,516,737.92
P1,889,011.17
P1,908,080.24
13. How much is the capital balance to be presented in the December 31, 2019 Statement of Financial Position?  *
P1,679,045.63
P1,789,671.28
P1,888,901.09
P1,927,877.18
14. How much is the total revenue earned for 2019? *
P612,500
P688,870
P722,500
P790,500
15. How much is the total revenue earned for 2020? *
P1,100,000
P1,507,000
P1,890,000
P2,000,000
16. How much is the total revenue earned for 2021? *
P550,000
P660,000
P770,000
P880,000
17. How much is the total revenue earned for 2022? *
P124,000
P289,000
P304,000
P337,500
18. How much is the total revenue earned for 2023? *
P108,000
P122,000
P156,000
P188,000
19. How much insurance expense should be presented in the December 31, 2019 Statement of Comprehensive
Income? *
P12,980
P15,780
P29,559
P33,999
20. How much insurance expense should be presented in the December 31, 2020 Statement of Comprehensive
Income? *
P33,588
P37,903
P38,602
P40,978
21. How much remaining office supplies should be reported in the December 31, 2019 Statement of Financial
Position? *
P22,000
P25,400
P54,000
P76,000
22. How much total insurance and office supplies expense would be added to operating expenses for the December 31,
2019 Statement of Comprehensive Income? *
P21,980
P25,400
P40,890
P51,559
23. *
P70,208
P82,208
P100,208
P106,208
24. *
P490,120
P550,120
P672,520
P687,520
25. Cambridge Company reports monthly depreciation on their equipment of P8,571 and monthly depreciation of
automobile of P5,625. These assets have a residual value of P30,000 and P40,000, respectively. If the asset was
bought on January 1, 2019, and have lives of 7 and 12 years, how much cash was paid at the start of 2019 for these
assets? *
P1,509,894
P1,521,777
P1,529,964
P1,599,964
26. *

P7,912,000
P8,712,500
P8,912,500
P10,362,500
27. How much is the total gross profit under functional approach? *

P5,250,000
P5,310,000
P5,500,000
P5,560,000
28. Using the information in item 27, how much is the total deductions portion under the natural approach?  *
P1,050,000
P1,250,000
P1,450,000
P1,650,000
29. *
P16,080,000
P16,330,000
P17,330,000
P17,955,000
30. *

P(274,000)
P255,000
P300,000
P376,000
31. How much is the total current assets of Tzuyu Company? *
P45,000
P57,000
P156,000
P175,600
32. How much is the total noncurrent assets of Tzuyu Company? *
P45,000
P47,000
P145,000
P147,000
33. How much is the total current liabilities of Tzuyu Company? *
P20,000
P32,000
P35,000
P55,000
34. How much is the total noncurrent liabilities of Tzuyu Company? *
P-0-
P12,000
P59,000
P71,000
35. The balance sheet totals of Tzuyu Company in the Statement of Financial Position should then amount to?  *
P126,000
P145,000
P188,000
P190,000
36. *

A
B
C
D
37. How much is the net cash flow from operating activities? *
P38,000
P61,000
P150,000
P262,000
38. How much is the net cash flow from investing activities of Macee Company? *
P-0-
P(250,000)
P250,000
P(140,000)
39. How much is the net cash flow from financing activities of Macee Company? *
P65,000
P110,000
P155,000
P(95,000)
40. How much is the ending cash balance of Macee Company? *
P1,673,000
P1,943,000
P2,047,000
P2,443,000