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:
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 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
Customer’s check dated January 15, 2014 8,000
Credit memo from suppliers for purchases returns 6,500
Postage stamps 120
Money order 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

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 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

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.
Statement II Equity of the assignor in assigned accounts is equal to assigned accounts receivable
minus the bank loan balance.
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

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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.
Statement II The interest on a noninterest bearing note is equal to face value over the present value.
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

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

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 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

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- Out on consignment - INCLUDED IN THE INVENTORY UNLESS SOLD

CONSIGNOR CONSIGNEE
Shipment of goods Memo Memo

Sale of consigned Due from consignee 9,000 Cash 10,000

goods Commission Expense 1,000 Commission income 1,000
Sales 10,000 Due to consignor 9,000

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
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
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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 4,756,000
discounts)
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

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. San Miguel Corporation has the following information pertaining to its biological assets for the year
2024:
A herd of 100, 2-year old animals was held at January 1, 2024. Ten animals aged 2.5 years were
purchased on July 1, 2024 for P5,400 and ten animals were born on July 1, 2024. No animals were sold
or disposed of during the period. Per unit fair values less estimated point-of-sale costs were as follows:

2.0 - year old animal at January 1, 2024 P5,000

Newborn animal at July 1, 2024 3,500
2.5 - year old animal at July 1, 2024 5,400
Newborn animal at December 31, 2024 3,600
0.5 - year old animal at December 31, 2024 4,000
2.0 - year old animal at December 31, 2024 5,250
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 2.5 - year old animal at December 31, 2024 5,550
3.0 - year old animal at December 31, 2024 6,000

What is the gain from change in fair value attributable to physical change?
a. P27,500 b. P83,500 c. P118,500 d.P146,000

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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,
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 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

39. 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.

40. 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

41. 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

42. 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

43. 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
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 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.

44. 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.

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.

45. 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

46. 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.

47. 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

48. 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.

49. 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.

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50. 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.

51. 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.

52. 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

53. 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

54. 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.

55. 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

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

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

57. 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

58. 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:

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 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.

59. 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

60. 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.

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.

61. How much is the amount of revenue?

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

62. The amount of operating expenses is :

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

63. 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.

64. 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

65. 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.

66. 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

Cash 221,180

Accounts Receivable 428,000

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 MDSE Inventory 397,000

Supplies Inventory 14,000

Prepaid Insurance 46,000

Land 460,000

Building 1,750,000

Accumulated Depreciation-Bldg 359,000

Equipment 2,310,000

Accum. Deprn. Equipment 642,000

Accounts Payable 517,000

Salaries Payable 51,000

Mortgage payable 2,600,000

BB Gandang Hari capital 1,569,000

BB Gandang Hari drawing 400,000

Sales 1,332,000

sales returns and allowances 141,000

sales discounts 11,840

Cost of sales 664,980

Operating expenses 226,000

Totals 7,070,000 7,070,000

Beginning inventory amounted to P413,000, while ending inventory totaled P397,000.

BASED ON THE ABOVE DATA

67. 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.

68. 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

69. 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)

70. 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---

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