PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL

COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR

MOCK MIDTERM EXAMINATION REVIEW

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Part 1. THEORIES (Basic Accounting)

1. Statement 1: Transactions not recorded in the journal can be detected by the preparation
of trial balance.
Statement 2: The primary purpose of trial balance is to prove the mathematical equality of
the debits and credits after posting in the ledger
A. TRUE; TRUE C. FALSE; TRUE
B. TRUE; FALSE D. FALSE; FALSE

2. The balancing figure in the worksheet is NET LOSS if

A. The total of the credits exceeds the total of the debits in the income statement columns
B. In the statement of financial position columns, the total of the debits exceeds the total of the
credits
C. The total of the credits is the same as the total of the debits in the income statement
D. In the statement of financial position columns, the total of the debits is less than the total of
the credits

3. The terms of shipment wherein title of ownership to goods is transferred from the seller to
the buyer only upon the buyer's receipt of merchandise.
A. FOB Shipping Point C. Freight Prepaid
B. FOB Destination D. Freight Collect

4. Failure to record purchases for the year would

A. Overstate net income for the year C. Overstate cost of sale for the year
B. Understate net income for the year D. Not affect the net income for the year because
purchases are not considered in the computation of net income

5. What is the effect of increase in accounts receivable on the statement of cash flows if the
entity uses the indirect method in presentation
A. Increases net operating expenses C. Increases net operating cash flow
B. Decreases net operating cash flow D. Decreases net operating expenses

6. It is used to report information that does not fit into the body of the financial statements in
order to enhance the understandability of the financial statements.
A. Notes to the FS C. Balance Sheet
B. Profitability ReportD. Management Report

7. Adjusting entries are dated in the journal as of:

A. Date they are actually journalized C. Last day of the accounting period
B. Middle of the accounting period D. Last day of the next accounting period

8. Under the revenue method, the adjusting entry for revenue not yet earned but already
collected or recorded will
A. Increase Asset, Decrease Liabilities C. Decrease Asset, Increase Liabilities
B. Increase Liabilities, Decrease Revenue D. Decrease Liabilities, Increase Revenue

9. Which of the following steps in the accounting cycle are listed in logical order?
A. Post the reversing entries, prepare financial statements and a trial balance
B. Prepare the closing entries, prepare the adjusting entries and prepare the financial statement
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

C. Prepare the trial balance, journalize and post the adjusting

entries and prepare the financial statements
D. Post the closing entries, prepare a post- closing trial balance and the financial statements

10. A person starts a business by borrowing money from the bank and treating it as a capital,
what accounting concept that it shows?
A. Business entity concept C. Going concern concept
B. Monetary unit concept D. Time period concept

11. When a special journal is used,

A. A general journal is used
B. All cash payments are recorded at cash
C. All purchase transactions are recorded in a purchase journal
D. All sales transactions are recorded in a sales journal.

12.The end-of-the month balance in ABC cash receipt journal "Sundry Account" column is 23,750. How will the column be posted and
A. The total is posted rather than the individual items; an account number is entered as posting
reference.
B. The total will not be posted and there will be no posting reference
C. The total will be posted to cash as a debit, and the cash general ledger account number is the
posting reference.
D. None of these

13. Accounting information is considered to be relevant when it

A. Can be depended on to represent the conditions & events that it is intended to represent
B. Is understandable by reasonably informed users of accounting information
C. Is capable of making a difference in a decision.
D. It is verifiable

14. The company neglected to record the purchase of a certain merchandise inventory. At the
end of the year, this merchandise inventory was also not included in the physical count, hence,
not recorded also as part of the ending inventory. Considering this situation, what would be its
effect on the reported net income for the current year?
A. The net income would be overstated
B. The net income would be understated
C. The omissions will not affect the net income for the year
D. The effect on net income can never be ascertained

15.If the invoice price of merchandise bought by a tax registered business amounted to 12,000,
A. the amount must be multiplied to .12 to get how much tax is levied
B. the amount must be multiplied to 1.12 to get the amount to be recorded as purchases
C. the amount must be divided by .12 to compute for the purchases to be recorded
D. the amount must be divided to 1.12 to compute for the amount of purchases to be recorded

Part 2. PROBLEMS (Basic Accounting, AJEs, Closing Entries)

1.
how muchprice
The invoice is of
the list pricesold
merchandise ofisthe item?
13,965. If theThe
trade entities involved
discounts are arehow
2% and 5%, notmuch
VAT registered
is the list price of the item?
businesses.
a. 20,000
b. 15,000
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

c. 15,016

2.The net income of an entity amounted to 84,000. If there has been an increase in inventory of 8,000, increase in equipment for 6,000,

a. 92,000
b. 88,000
c. 68,000

3.On June 1, 2019, KayaKo Company bought merchandise on account worth 48,000 to FinalsNa Merchandising. The freight terms are

a. 56,000
b. 48,000
c. 40,000

4.The total debit column of the balance sheet in the worksheet showed an amount of 72,856 and the total credit column amounted to 61

a. 61,365
b. (11,491)
c. 11,491

5.Integrity Academy presents the following information regarding its Fixed Assets as of December 31, 2019. (A) - Purchased Furniture

a. Dep Expense 36,875; BV 263,125

b. Dep Expense 26,875; BV 333, 125
c. Dep Expense 20,000; BV 370, 000

6.On December 31, 2018, at the end of X Company's accounting period, the company had an outstanding A.R of 180,000. The compan

a. 174,600
b. 180,000
c. 5,400

7. Love bought 200 units of marker on June 2, 2019. The list price of the product is 15 pesos
per unit. Terms 10/10, n/30. On June 5, he returned 30 units as they were defected. If Love settled
the account on June 11, how much cash did he pay?
a. 3,295
b. 2, 295
c. 2,550

8.Hope Company incurs salaries at a rate of 6,200 per day. It is the company's practice to pay its employees on a weekly basis (every F
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

a. DR Salaries Exp 31, 000 CR Salaries Payable 31, 000

b. DR Salaries Payable 31, 000 CR Cash 31, 000
c. DR Salaries Exp 18, 600 CR Salaries Payable 18, 600

9.Faith Company has a 270,000, 10%, 90-day note receivable outstanding March 31. The note was acquired on March 1, 2020. How m
a. 4,500
b. 2,700
c. 1,800

10.The balance sheet of Percy Verans as of December 31, 2019 showed the following account. Assets – 819,732; Liabilities – 312,000

a. Increase by 20, 000

b. Decrease by 20, 000
c. No impact

11.The ending capital of an entity amounted to 682,500. During the period, the net increase in the net asset was 181,540. The owner wi

a. 169, 540
b. 193, 540
c. 852,040

12.The following data were given for the month ended Dec. 31; sales 200,000, sales returns and allowances 12,500, Sales discount 2,50

a. 59,480
b. 16, 000
c. 14, 800

13.The bookkeeper erroneously recorded a purchase of equipment amounting to 50,000 to the Supplies Account. What is the adjusting
a. DR. Equipment 50, 000 CR. Accounts Payable 50, 000
b. Dr. Supplies 50, 0000 Cr. Equipment 50, 000
c. Dr. Equipment 50, 000 Cr. Supplies 50,000

14.ABL Company must determine the December 31, 2019 year-end accruals for advertising and rent expenses. A 5,000 advertising bil

A. 140, 750
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

B. 125, 000
C. 137, 000

15.Chel Company sold merchandise with an invoice price of 76,500 net of trade discounts, 10%, 15%. What will be the recorded sales
a. 76,500
b. 57, 375
c. 58, 522.50

16. The prepaid rent account shows a balance of P46,350 representing 9-month rent paid on
July 31, 2003. Adjusting entry on Dec 31, 2003 would be

a. Dr. Prepaid rent 27,073.50 cr. Rent expense 27,073.50

b. Dr. Rent expense 19,312.50 cr. Prepaid rent 19,312.50

c. Dr. Prepaid rent 25,750.00 cr. Rent expense 25,750.00

d. Dr. Rent expense 25,750.00 cr. Prepaid rent 25,750.00

17. Market Consulting bought P 9,000 of furniture. Accumulated Depreciation had a balance of
P 3,000 prior to the recording of this year’s depreciation. Depreciation Expense at the end of the
year is P 2,000. What is the book value of the furniture at the end of the year?

a. P 4,000
b. P 6,000
c. P 11,000

d. P 3,000

18. A business received cash of P30,000 in advance for service that will be provided later. The
cash received entry debited Cash and credited Unearned Revenue for P30,000. At the end of the
period, P11,000 is still unearned. The adjusting entry in this situation is

a. Debit Unearned Revenue and credit Revenue for P19,000

b. Debit Unearned Revenue and credit Revenue for P11,000

c. Debit Revenue and credit Unearned Revenue for P19,000

d. Debit Revenue and credit Unearned Revenue for P11,000

19. Eagle Company recorded accrued salaries of P25,000 on December 31, 2014. During 2015,
the company paid salaries of P872,000. Unpaid salaries on December 31, 2015, amounted to
P34,000. Eagle prepares adjustments for the year-ended only on the first working day of the
following period and journalizes the adjusting entries as of December 31 and reversing entries are
dated January 1. The balance of Salaries Expense account that would appear in the post-closing
trial balance at December 31, 2015, is

a. 881,000
b. 34,000
c. 847,000
d. 0
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

20. Queen Amber, Inc. failed to take up the following

adjustments on December 31, 2015

As a result of the omissions, 2015 net income is overstated by how much?

a. P9,025 b. P18,025 c. P29,425 d. P32,125

Part 3. Theories & Problems (Merchandising)

1. True or False: Merchandise inventory refers to products that a company owns and plans to
sell to customers.
2. True or False: A service company earns net income by buying and selling merchandise.
3. True or False: A periodic inventory system requires updating of the inventory account only
at the beginning of an accounting period.
4. True or False: A perpetual inventory system continually updates accounting records for
merchandising transactions
5. True or False: Credit terms of 2/10, n/30 imply that the seller offers the purchaser a 2%
cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full
amount is due in 30 days.

6. What does FOB destination mean:

a. Title passes at shipping point; seller pays transportation cost.
b. Title passes at shipping point; buyer pays transportation cost.
c. Title does not pass at the shipping point; however, the seller is responsible for the
transportation cost.
d. Title does not pass at the shipping point and the seller is not responsible for the
transportation cost.

7. In the eyes of the seller under the terms FOB shipping point - Collect for the merchandise
purchase, who paid the freight at the point of shipment?
a. Buyer c. Freight company
b. Seller d. No one paid for the freight

8. In the eyes of the buyer under the terms FOB shipping point - Collect for the merchandise
purchase, who must pay for the freight at the point of shipment?
a. Buyer c. Freight company
b. Seller d. No one must pay for the freight
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

9. An item for P50,000 subject to a trade discount of

15% is paid within the discount period on terms 5/10, n/30. What is the
amount of payment?
a. P40,375 c. P42,500
b. P 57,500 d. P50,000

10. On October 1, Ace Company purchased P6,000 worth of goods on terms 2/15,n/30.
Freight of P500 was prepaid by the seller under the term FOB Shipping Point, goods worth P1,000
were returned and the account was paid on October 3. How much cash was paid to the seller?
a. P5,400 c. P5,380
b. P5,390 d. P5,500

11. Happy Company paid an account with a list price of P15,625 which was purchased 8 days
ago. Terms of the purchase are 4% trade discount, 3/10, n/30, FOB destination. The amount paid
by Happy is _______.

a. P15,250 c. P15,000
b. P14,550 d. P14,500

12. During the year, Shy Store purchased goods worth P150,000. There were P40,000 unsold
goods at the end of the year but the old stock brought forward from last year’s purchases was
P10,000. Cost of goods available for sale was _____________.

a. P160,000 c.P110,000
b. P120,000 d. P190,000

13. During the year, Sad Store purchased goods worth P150,000. There were P40,000 unsold
goods at the end of the year but the old stock brought forward from last year’s purchases was
P10,000. Cost of sale was _____________.

a. P160,000 c.P110,000
b. P120,000 d. P190,000

Use the information for nos. 14 and 15

A Company reported the following information for the month ended October 2020:

Account Amount
161,391.0
Net Sales 0
28,350.0
Sales Discount 0
10,259.0
Sales Returns 0
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

10,356.0
Inventory, October 1 0
15,678.0
Purchases 0
2,000.0
Freight-in 0
1,500.0
Freight-out 0
7,890.0
Inventory, October 31 0
28,000.0
Administrative expenses 0
30,000.0
Seling expenses 0

14. How much is the Cost of Goods Available for Sale?

a. P26,034 c.P20,114
b. P28,034 d. P 20,144

15. How much is the gross profit?

a. P202,675 c.P141,247
b. P161,391 d. P144,685

Part 4. Theories & Problems (Partnership Formation)

16. When a Sole-proprietorship and an individual form a Partnership using a new set of books,
which activity would always be necessary to perform?

a. Adjustments
b. Investments
c. Closing
d. All activities may not be necessary

17. Which of the following contributions cannot be valued at the fair market value?

a. Cash
b. Buildings
c. Land
d. Mortgage payable

18. Which among the following is not a characteristic of a Partnership?

a. Partners are acting as principal in behalf of the Partnership

b. Partners can be liable to the extent of their personal assets
c. Certain rights of a partner can be assigned to a third party
d. Limited life
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

19. As of July 1, 2020, A and B decided to form a Partnership. Their balance sheets on this date
are:

The partners agreed that machineries of A is under-depreciated by P15,000 and that of B

by P45,000. Allowance for doubtful accounts is to be set up amounting to P120,000 for
A and P45,000 for B. The Partnership agreement provides for a profit and loss ratio and
capital interest of 60% to A and 40% to B. How much cash must A invest to bring the
partners' capital balances proportionate to their profits and losses ratio?

A. 172, 500
B. 185, 600
C. 165, 000
D. 175, 000

20. On August 1, A and B pooled their assets to form a partnership, with the firm to take over the
business assets and assume liabilities. Partners capitals are to be based on net assets transferred
after the following adjustments.

B's inventory is to be increased by P4,000; allowances for doubtful accounts of P1,000 and
P1,500 are to be set up in the books of A and B, respectively; and accounts payable of
P4,000 is to be recognized in A's books. The individual trial balances on August 1, before
adjustments, follow:

DESCRIPTION A B

Assets P75,000 P113,000

Liabilities 5,000 34,500

What is the capital of A and B after the above adjustments?

a. A: 70, 000; B: 81,000

b. A: 61, 000; B: 81,000
c. A: 65, 000; B: 78,500
d. A: 70, 000; B: 78,500

21. Emil and Pearl form a new partnership. Emil invests P300,000 in cash for her 60 percent
interest in the capital and profits of the business. Pearl contributes land that has an original cost
of P40,000 and a fair market value of P70,000, and a building that has a tax basis of P50,000 and
a fair value of P90,000. The building is subject to a P40,000 mortgage that the partnership will
assume. What amount of cash should Pearl contribute?

a. P40,000

b. P80,000
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

c. P110,000

d. P15,0000

22. The Green and Red partnership was formed on January 2, 2011. Under the partnership
agreement, each partner has an equal initial capital balance accounted for under the goodwill
method. Partnership net income or loss is allocated 60% to Green and 40% to Red. To form the
partnership, Green originally contributed assets costing P30,000 with a fair value of P60,000 on
January 2, 2011, and Red contributed P20,000 in cash. Drawings by the partners during 2011
totaled P3,000 by Green and P9,000 by Red. The partnership’s 2011 net income was P25,000.
Red’s initial capital balance in the partnership is:

a. P20,000.

b. P25,000.

c. P40,000.

d. P60,000.

23. Bel, Joy, and Franco, new CPAs, are to form a partnership. Bel will contribute cash of P50,000
and his computer that originally cost P60,000 but with a second-hand value of P25,000. Joy will
contribute P80,000 in cash. Franco, whose family sells computers, will contribute P25,000 in cash
and a brand-new computer with printer that cost his family’s computer dealership P50,000 but
with a regular selling price of P60,000. The three agree to share profits and losses equally. Upon
formation, capital balances are:

a. Bel, P 75,000; Joy, P80,000; and, Franco, P85,000

b. Bel, P 80,000; Joy, P80,000; and, Franco, P80,000

c. Bel, P 88,333; Joy, P88,333; and, Franco, P88,334

d. Bel, P110,000; Joy, P80,000; and, Franco, P75,000

Questions 24 and 25 are based on the following information:

Selected balance sheet accounts of Silvano on December 31, 2011 are shown below:
Cash P30,000
Accounts receivable 25,000
Inventory 45,000
Furniture 32,000
Accounts payable 8,000

The following adjustments are to be made before he agrees to admit Pegasus as a partner in
exchange for his investment of P20,000 cash:
§ 3% bad debts should be provided.
§ The fair value of the furniture is P27,000.
§ P5,000 of the inventory is obsolete but can still be sold for P3,000.
 PUP SEEDS OF THE NATIONS (PUPSONS) ACCOUNTING TUTORIAL
COLLEGE OF BUSINESS & ACCOUNTANCY – 1ST YEAR
MOCK MIDTERM EXAMINATION REVIEW

24. After adjustment, how much capital should be reflected in the books
of Silvano?
a. P115,250
b. P116,250
c. P124,000
d. P132,25

25. How much is the total assets of the new partnership?

a. P116,250
b. P124,000
c. P124,250
d. P144,250

Proverbs 3:5-6
Trust in the LORD with all your heart and lean not on your own understanding;
in all your ways submit to Him, and He will make your paths straight.