UP Junior Philippine Institute of Accountants

Education and Research Committee

BA 99.1 First Long Exam (Samplex)
A.Y. 2018-2019

Theory

1. A Balance Sheet reports

a) financial position on a specific date.
b) results of operation on a specific date.
c) financial position for a specific period.
d) results of operation for a specific period.
2. Which account cannot be seen in a balance sheet?
a) Rent Payable
b) Unearned Rent Revenue
c) Prepaid Rent
d) Rent Revenue
3. An accountant mistakenly debits salaries expense in a cash purchase of equipment. This would:
a) Overstate net income
b) Overstate assets
c) Understate assets
d) Understate liabilities
4. For which of the following accounts is the normal balance a debit?
a) Rent Payable
b) Unearned Rent Revenue
c) Prepaid Expense
d) Rent Revenue
5. An Income Statement reports
a) Financial position on a specific date
b) Results of operation on a specific date
c) Financial position for a specific period
d) Results of operation for a specific period
6. A client gives a restaurant P1,500 in advance for a package of five meals. After providing 3 meals, what should the restaurant
report on the income statement?
a) Cash of P1,500
b) Service Revenue of P1,500
c) Service Revenue of P900
d) Unearned Service Revenue of P600
7. In accrual accounting, a debit in interest payable is usually accompanied by a credit in
a) Cash
b) Interest Revenue
c) Interest Expense
d) Interest Receivable
8. Which type of account is always debited during the closing process?
a) Assets
b) Revenues
c) Owner’s Equity
d) Expenses
9. A debit to Accounts Receivable would most likely be accompanied by a credit to:
a) Accounts Payable
b) Unearned Income
c) Service Revenue
d) Cash
10. Adjusting entries are used to
a) Convert cash accounting into accrual accounting.
b) Update accounts at the end of each period.

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 c) Record cash collected at the end of each period.
d) Zero balances of accounts in preparation for the next period.
11. An increase in cash cannot be accompanied by:
a) An increase in service revenue
b) An increase in accounts receivable
c) A decrease in accounts payable
d) A decrease in equipment
12. What is another term for owner’s equity?
a) Net Liabilities
b) Owner’s Drawings
c) Net Assets
d) Net Income/Net Loss
13. Failure to accrue revenue would not result in which of the following?
a) Understated Income
b) Understated Equity
c) Overstated Liabilities
d) Overstated Assets
14. Which statement is true?
a) Accrual accounting records both cash and non-cash transactions.
b) Cash-basis accounting records only cash receipts and cash payments.
c) Accrual accounting provides more information than cash-basis accounting.
d) All of the above are true.
15. A debit to owner’s drawings would effectively
a) Increase assets.
b) Increase liabilities.
c) Decrease income.
d) Decrease owner’s equity.
16. An increase in accounts receivable during the period would imply that
a) Cash collection from customers is equal to the sales revenue
b) Cash collection from customers is greater than the sales revenue
c) Cash collections from customers is less than the sales revenue
d) No sale was made during the period
17. A businessman uses cash from the bank account of his business to pay for his daughter’s schooling expenses. What
accounting assumption/principle does this violate?
a) The Economic Entity Assumption
b) The Monetary Unit Assumption
c) The Going Concern Principle
d) The Time Period Assumption
18. Closing the accounts without accruing some expenses would not affect which of the following?
a) Income Statement
b) Statement of Cash Flows
c) Statement of Changes in Equity
d) Balance Sheet
19. Which sequence of actions correctly summarizes the accounting process?
a) 1) Prepare the Trial Balance, 2) Journalize Transactions, 3) Post to Accounts
b) 1) Post to Accounts, 2) Prepare the Trial Balance, 3) Journalize Transactions
c) 1) Journalize Transactions, 2) Post to Accounts, 3) Prepare the Trial Balance
d) 1) Journalize Transactions, 2) Prepare the Trial Balance, 3) Post to Accounts
20. Which of the following is correct in describing the statement of cash flows?
a) The principal purpose of a statement of cash flows is to measure profitability of a business that uses the
cash-basis accounting.
b) In the long run, it is more important for a business to generate positive cash flows from investing activities
than from operating activities.
c) The statement of cash flows shows the sources and uses of cash during the period.
d) A statement of cash flows is organized into two statements: cash receipts and cash payments.

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Short Problems (15 questions)
1. If Gamma Inc.’s interest received for the year amounted to P62,200 and the interest receivable account began the
year with a balance of P2,550 and ended the year with a balance of P9,210, what was the interest revenue reported
on the income statement for the year?

2. Using the data provided, how much is the Investments by Owner for Instinct Company? How much is the Ending
Assets of Mystic Company?
Instinct Company Mystic Company
Balance Sheet
Beginning:
Assets 105,000 110,000
Liabilities 50,000 60,000
Ending:
Assets 160,000 ?
Liabilities 70,000 80,000
Owner’s Equity:
Investments by Owner ? 10,000
Withdrawals by Owner 100,000 70,000
Income Statement
Revenues 430,000 400,000
Expenses 320,000 300,000

3. Manto Jewelry’s fiscal year ended on November 30, 2018. The balances in the prepaid insurance account as of
November 30, 2018 (before adjustment) consisted of the following policies are:
Date of Purchase Date of Expiration Balance in Account
July 1, 2018 June 30, 2019 14,400
December 1, 2017 November 20, 2018 9,600

In its November 30, 2018 balance sheet, what amount should Manto report as the balance of prepaid insurance?

4. Janna Fisheries accidentally debited interest expense in her entry for an advance payment of rent for the next 12
months. The rest of the entry, a credit to cash for P3,600 is correct. How much is the difference between Janna’s
assets in her balance sheet and the correct balance of her assets?

5. The December 31 trial balance of Stark Industries shows the following:

Debit Credit
Cash 16,000
Accounts Receivable 15,000
Equipment 25,000
Accounts Payable 6,000
Owner’s Capital 44,000
Salaries and Wages
7,000
Expense
Rent Expense 12,000
Sales Revenue 25,000
Total 75,000 75,000

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The following pieces of information were discovered at year-end:
● All prepayment for rent was recorded under Rent Expense. As of December 31, 9 months-worth of prepaid
rent was used up.
● An entry made to record a purchase of equipment on account had a debit to equipment for P2,000. The
actual cost of the equipment purchases is P6,000. The rest of the entry was made correctly.
● An entry of a collection of P3,500 worth of receivables was omitted.
How much is Stark Industries’s total assets?

6. Eldrick forgot to do adjusting entries. All of the relevant accounts are

Equipment 24,000
Supplies 3,000
Sales Revenue 26,000
Advertising Expense 13,000
Salaries Expense 5,000
Additional information:
● Depreciation on equipment for the period is equal to P3,000.
● As of the end of the period, P1,000 worth of supplies remains.
● Eldrick pays his secretary every Friday of the week. His secretary earns P1,500 per week.
● The period ended on a Wednesday.
How much is Eldrick’s net income/loss?

7. Lyanna Stark reported salary expense of P65,000 on its 2018 income statement. Cash payments to employees
amounted to P57,500 in 2018. The ending 2018 balance in the salaries payable account was P12,000. What was the
beginning 2018 balance in the salaries payable account?

8. Jasmin’s Supplies Expense amounted to P12,000 for the year. Supplies at the end of last year were determined to
be P2,000. A physical count showed that 5,000 supplies remain at the end of the current year. How much supplies
were purchased during the year?

9. Cometa Company has a note payable on January 31 2018. The note was issued on October 31 2017 with a face
value of P9,000 and with 6% interest. How much interest expense related to this note would be reflected in Cometa
Company’s income statement for the year ended December 31 2017?

10. Team Rocket International had the following items in its entries on December 31:
● P12,000 worth of equipment was charged under miscellaneous expense.
● The entry for a withdrawal made by the owner was a debit to Owner’s Capital for P7,000 and a credit to
cash for P7,000.
● A one-year advance payment of insurance was made on March 31. As of December 31, the balance of
insurance expense still contained the full P54,000 worth of payment.
If these items persisted before closing the books, by how much would Bolton International’s net income be
overstated/understated? (Indicate if over or under.)

11. Clegane Cleaners has received a P20,000 advance payment from one of its customers for a thorough cleaning of
a building. At year-end, 60% of the job has been completed. In addition to this, Clegane Cleaners was able to
complete cleaning services for a total of P80,000. If Clegane Cleaners’ only source of revenue was its cleaning
services and net income for the year is P30,000, how much is the total expense incurred by Clegane?

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12. Galicia Publishing has the following values in the balance sheet:
December 31, 2019 December 31,2018
Prepaid Rent 0 13,500
Rent Payable 1,500 0
Rent is typically paid once every two months. Assuming no other transactions involving Rent happened in 2019,
what is Galicia Publishing’s Rent Expense in its 2019 income statement?

13. Hornwood & Dayne Ltd. pays its employees every Friday. The 2018 calendar year ends on a Tuesday. The
company has the following in its staff:
● Three employees who receive a salary of P3,500 per week per employee
● Two employees who receive a salary of P4,800 per week per employee
● Employee X, who receives a salary of P15,000 once every two weeks
Employee X hasn’t received any payment in the week preceding the end of the calendar year. How much is
Hornwood & Dayne Ltd.’s Salaries Payable on December 31, 2018?

14. Redwyne Consulting had Utilities Payable of P32,000 at the start of the year. Redwyne Consulting has paid a
total amount of P104,000 during the year. If Redwyne Consulting’s Utilities Expense was P85,000, how much
Utilities Payable was accrued at the end of the year?

15. Marbrand Manufacturing was able to collect P37,000 from its customers in the last quarter of 2014. Additional
information are as follows:
December 31, 2018 September 30, 2018
Cash 142,000 105,000
Sales Revenue 34,500 (for the whole year) 28,500

All sales were originally made on account. For the quarter that ended in December 31, what was the net
increase/decrease in Accounts Receivable? (Indicate increase or decrease.)

Long Problem
The balance sheet of ShE&Rlock Corporation is:
ShE&Rlock Corporation
Statement of Financial Position
As of December 31, 2018
Assets
Cash 191,000
Accounts Receivable 170,000
Supplies 12,000
Prepaid Insurance 6,000
Land 140,000
Equipment 160,000
Accumulated Depreciation - Equipment 16,000
Total Assets 663,000
Liabilities and Owner’s Equity
Accounts Payable 182,000
Salaries and Wages Payable 15,000
Interest Payable 12,000

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 Notes Payable 120,000
Owner’s Capital 334,000
Total Liabilities and Owner’s Equity 663,000

According to the ledger:

2019
A 12-month 10% note dated January 1, 2018 including interest has been
January 1
paid in cash. The note had a face value of P100,000.
January 3 All accrued salaries had been paid.
January 25 P50,000 worth of accounts receivable was collected.
Prepaid Insurance has been used up. Additional P72,000 pre-payment of
January 31
insurance was made. The pre-payment lasts for 12 months.
February 17 An additional P6,000 worth of supplies was purchased with cash.
February 18 Additional Equipment costing P15,000 was acquired on account.
March 25 Sales of P80,000 were made, all on account.
May 18 Collected P30,000 from the sales previously made.
The remaining outstanding note, 12% interest rate and a face value of
June 31
P20,000, including any interest it had, has been paid.
August 18 Cash sales amounting to P100,000 has been made.
August 25 All remaining collectible cash from the entry on March 25 has been collected.
September 13 Paid for the equipment purchase made last February.
September 30 Paid P32,000 worth of Accounts Payable.
November 15 P40,000 worth of salaries was paid by the company.
December 28 Sales on account that amounted to P46,000 were made.

Additional information:
● Remaining supplies on December 31, 2019 was P9,000.
● Depreciation on equipment for the year was P10,000.
● The ledger did not include a withdrawal made by owner. A total withdrawal of P10,000 cash was not
journalized.
● P8,000 worth of salaries is to be accrued.

Instructions:
1. Journalize all entries, including adjusting entries.
2. Prepare the income statement and owner’s equity statement.
3. Journalize the closing entries.
4. Prepare the December 31, 2019 Balance Sheet.

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E&R 60.1 | Shannen | Marielle | Raphael | Chiqui