pROBLEMS PROBLEM 1: TRUE OR FALSE 4, Chart of accounts is the basic storage of information in accounting. 2. Debit means the left side of an account, while credit means the right. 3, The difference between the total debits and total credits in an account represents the balance of that account. 4, Anaccount has total debits of #80 and total credits of ®20. This account has a balance of 60. 5. The balance of the account in #4 above is referred to as a credit balance. . : 6. If the total debits in an account exceed the total credits, the account would have a debit balance. . . There are five major types of accounts used in accounting. . Income and expenses are the balance sheet accounts. The “used up” portion of a prepayment (e.g., prepaid rent) is an expense, while the “unused” portion is an asset. The “used up” portion of supplies bought during the period is called “Prepaid supplies.” : 10. PROBLEM 2: TRUE OR FALSE 1. The right side of an account is called credit. 2 Accounts payable and accounts receivable are opposites, meaning if I have an account payable to you, you, in tum, have an account receivable from me. : You are selling banana cue. If 1 buy your banana cue and informally promise to pay for it tomorrow, your ‘accounts Payable’ will increase. In conjunction with #3 above, my ‘accounts receivable’ will increase, If after sometime, ] haven't paid yet my dues to you in #3 above, and you don’t expect that I can pay you, you will Tecognize an expense called bad debt expense.6. An entity that borrows money from the bank would Most likely present interest income in its income statement. 7. The terms “receivable” and “prepaid” connote an asset, while the terms “payable” and “unearned” connote a liability. 8. Collectively, land, building and equipment are referred to ag “Property, plant and equipment.” 9. Gains are income that arises in the ordinary course of business activities. : 10. Mr. Monkey’s main business activity involves selling bananas, One time, Mr. Monkey sold an iPRone with carrying amount of ®17 for ®20. Mr. Monkey recognizes a gain of ®3 on this transaction rather than revenue. PROBLEM 3: FOR CLASSROOM DISCUSSION The Account 1. Account is the basic storage of information in accounting, An account may be depicted through a ‘T-account’. Which of the following is not one of the parts of a T-account? a. Account title c. Right side or credit side b. Left side or debit side d! Upside down or bottoms up The Five Major Accounts : 2. Which of the following is not one of the five major accounts? a, Assets c. Equity b. Income d. Lossés. 3. Which of the following is not one of b: of financial position) accounts? a. Assets c. Equity b. Liabilities d. Income alance sheet (statement Chart of Accounts 4, Itis a list of all the accounts used by a business. a. Trial balance c. Chart of accounts b. - Contact list d. Organizational chart5. An account with the following accotint numbering ‘2100’ is most likely to be a(an) a, asset account. ¢. equity account. b. liability account. d. expense account. Common Account Titles 6. The money held by a business, including the increases or decreases thereto, is recorded in this account. a. Cash c. Owner's equity b. Accounts receivable’ ” d. Sales 7. Receivables that are supported only by oral or informal promises to pay. i a. Cash c. Accounts payable b. . Accounts receivable d. Notes receivable 8. Contributions by: the business owner to the business and profits or losses of the business are recorded in this account. a. Owner's equity ° : c.Sales . b. Owner's drawings d. Salaries expense. 9. Revenues earned from the sale of goods are recorded in this f account. a. Inventory income c. Sales b. Goods income d. Service fees 10. This represents the value of inventories that have been sold,. and consequently charged as expense, during the accounting period. é ; a. Inventory ' c. Supplies expense b. Cost of sales (Cost of goods sold) d. Freight-outPROBLEM 4: IDENTIFICATION Instruction: Indicate the classifications of the accounts listeq below as either an ASSET, LIABILITY, EQUITY, INCOME oy EXPENSE account under COLUMN A and as either a BALANCE SHEET account or an INCOME STATEMENT account under COLUMN B. Account Titles COLUMN A COLUMN B . Accounts receivable 2. Bad debt expense 3._ Building fT Siete (Steet =i 4. Notes payable jee eee 5. Rent expense jeer 6. Owner's equity . nett 7. Interest income EEE eeE| 8. Gain as 10. Computer equipment EEE 11. Depreciation Jeet re eT 12. Utilities payable jee 13. Freight-out fester 14. Rent income Bee ae 15. Unearned incomePROBLEM 5: IDENTIFICATION Instruction: Same as PROBLEM 4 above Account Titles 1. Taxes and licenses 2. Furniture & fixtures COLUMN A AO COLUMN B 3._ Supplies expense 4. Interest expense 6. Land 7._ Accounts payable 8. Notes receivable 9._ Prepaid insurance 10. Loss 11, Prepaid supplies 12. Rent payable 13. Sales 14. Interest receivable 15. Transportation equipment PROBLEM 6: IDENTIFICATION Instruction: Identify the account title/accounting term referred to in each of the statements below. 1. Increases in assets or decreases in liabilities resulting in increases in equity, other than those relating to transactions with the business owner. 2. These represent claims for cash that are supported by oral or informal promises to pay by a customer. 3. This represents the goods that are held for sale by a business. 4. This account is used to record the costs incurred in marketing or promoting the products or services of a business.The financial statement that presents the assets, liabilities ang equity of a business. The expense account used to record the uncollectible portion . of accounts receivable. The revenue earned from the sale of goods is recorded in this account. The cost of inventories sold is charged as expense using this . account. ‘10. This is used to record the cost of supplies used during the period. This account pertains to obligations supported by written or formal promises to pay by th the debtor.PROBLEM 8: MULTIPLE CHOICE 1 Receivables that are supported by written or formal promises to pay in the form of promissory notes. a. Inventory c. Notes payable b. Accounts receivable d. Notes receivable Goods that are held for sale by a business. a. Cash c. Accounts payable b. Accounts receivable d. Inventory The unused portion of rent paid in advance. a. Prepaid rent . c: Cash b. Rentexpense d. Inventory Salaries earned by employees but not yet paid. a. Salaries expense _ ¢. Employee points b. Salaries payable < ' . d. Employee credits Salaries earned by employees, whether paid or not. “a. Salaries expense c, Employee points b., Salariespayable ,_d. Employee credits Temporary withdrawals of the owner from the business during the period are recorded in this account. . a. Owner's equity c. Withdrawal expense b. Owner's drawings, . d. Salaries expense Income collected in advance but not yet earned. a. Unearnedincome . ©. Sales . b. Earlyincome . ° d. Service fees Obligations supported by oral or informal promises to pay by the debtor. a. Cash . c. Accounts payable b, Accounts receivable d. Notes payable9 The cost of inventories that have been sold during the period, a. Cost of sales c. Inventory b. Cost of inventories d. Selling expense 10. The amount of estimated losses from uncollectible accounts a receivable during the period. a. Good expense *_¢. Ugly expense b. Bad expense \ d. Bad debts expense PROBLEM 9: MULTIPLE CHOICE 1. A merchandising or manufacturing business uses this account to record revenues earned from primary business activities. a. Sales c. Gains b. Service fees d. Seals Obligations supported by written or formal Promises to pay by the debtor in the form of promissory notes. a. Notes receivable c. Accounts payable b. Accounts receivable d. Notes payable . The structure owned and being used by a business in its operations. a. Building . c. Castle b. Base d. Kingdom | The portion of the cost of a building that is already recognized as expenses since the building was acquired and made available for use. a, Accumulated depreciation — building b. Upkeep ¢. Accumulated upkeep d. Repairs and maintenance expense The cost of unused office and other supplies, a. Prepaid rent c. Cash * b. Prepaid supplies d. Accounts receivable .6. Interest incurred by a borrower but not yet paid. a. Interest payable c. Notes payable b. Interest expense d. Notes receivable 7. Interest incurred by a borrower, whether paid or not. a. Interest payable c. Notes payable b. Interest expense d. Notes receivable 8. The seller’s cost of delivering goods to customers. a. Freight-out c. Freight-good b. Freight-in d. Freight-bad 9. The cost of promotional or marketing activities during the period. a. Market expense c. Groceries b. ae expense . d. Insurance expense 10. The cost of gasoline, hotel accommodation, taxi oe and. similar expenditures. a. Transportation and travelexpense _c. Taxi expense b. Interest expense : d. Gas expense PROBLEM 10: MULTIPLE CHOICE 1. The cost of the lot on which the building of a business has been constructed is recorded in an account described as a. Realm. c¢. Land. b. Ground. d. Earth. 2. Entity A sells an asset that is not an inventory for P100. The carrying amount of the asset is ®180. The ®80 difference represents a a, gain. c. revenue. bs loss. d. interest income.bd 10. Interest earned by a lender but not yet collected a. Interest receivable c. Notes payable b. Interest income d, Notes receivable Interest earned by a lender, whether collected or not. a. Interest receivable c. Notes payable b. Interest income d. Notes receivable Revenues earned from rendering services. c. Unearned income c. Sales d. Rendering income d. Service fees The cost of supplies used in an accounting period. a. Prepaid supplies c. Supplies expense b. Supplies cost d. Surprise expense The portion of the cost of a building or equipment that ha been charged as expense in the current accounting period. a. Accumulated deduction —_c. Accumulated depreciation b. Deduction expense d. Depreciation expense You opened up a business. Your initial investment to thé business will be recorded in which of the following accounts? a. Owner's payable c. Notes payable b. Owner's equity d. Accounts payable In conjunction with #8 above, which of the following would most likely be your first expense? a. Equipment c. Taxes and licenses b, Inventory d. Utilities expenses You purchased goods that will be held for sale in the ordina'Y course of your business activities. You will record the goods a, Expense. c. Accounts receivable. b. Income. d. Inventory.PROBLEM 11: MULTIPLE CHOICE 1, You are a business owner. Your business needed additional capital so you obtained a Joan from a bank. The bank made you sign a contract promising to repay the loan after a year. Which of the following accounts is increased by this transaction? a. Accounts payable ¢. Accounts receivable b. Notes payable d. Notes receivable 2. From the point of view of the bank who lent you the loan in #1 above, which of the following accounts is increased?’ a. Accounts payable c. Accounts receivable b. Notes payable ___ d. Notes receivable 3. A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week. Which of the following accounts is increased by this transaction? 7 : Ge aeece a. Accounts payable c. Accounts receivable: b. Notes payable : d. Notes receivable 4. From the point of view of the customer who Bought goods _from your business in #3 above, which of the following accounts isincreased? : a. Accounts payable _ ¢. Accounts receivable b. Notes payable d. Notes receivable 5. When you collected the dues of the customer in #3 above, which of the following accounts is increased? a. Accounts payable ¢. Accounts receivable b. Cash d, Notes receivable10. From the point of view of the customer who paid you in #5 above, which of the following accounts is decreased? a. Inventory c. Accounts receivable b. Cash d. Notes receivable You purchased a computer. for 100,000. Which of the following accounts is increased by this transaction? a. Cash c. Computer equipment b. Owner's capital d. Inventory You expect to use the computer in #7 above over the next 5 years. How much is the depreciation expense per year? a. 10,000 . 107,143 b. 20,000 * d. 100,000 After using the computer in #’s 7 and 8 above for three years, how much is the balance of the “Accumulated depreciation - Computer equipment” account? .. a. 60,000 . c. 20,000 b. 30,000 . . d. 90,000 At the end of Year 2, how much is the carrying amount of the computer equipment in #’s 7 and 8 above? a. 50,000 . ¢. 60,000 « b. 40,000 40 :