FAR

QUIZ NOV. 20, 2020

NAME:YANNA BABES ALQUISOLA E. Date: 11-20-20
Professor: MARILOU CARUMBA Section: Score:

QUIZ 1: TRUE OR FALSE

1. Inventory refers to the goods that a merchandising business has purchased with the main
intention of reselling them.
Ans. TRUE

2. The periodic inventory system is commonly used for inventories that are normally
interchangeable, have relatively low value, and have a fast turnover rate.
Ans. TRUE

3. Under the perpetual inventory system, increases and decreases in inventory are recorded
through the purchases, freight-in, purchase returns, and purchase discounts accounts.
Ans. FALSE

4. Under the perpetual inventory system, cost of goods sold is debited when inventory is sold and
credited when there is a sales return.
Ans. TRUE

5. Purchase returns and discounts are deducted from gross purchases when computing for net
purchases.
Ans. TRUE

6. Ending inventory is added to Total Goods Available for Sale when computing for Cost of Goods
Sold.
Ans. FALSE

7. Under the perpetual inventory system, the business does not maintain records that show the
running balances of inventory on hand and cost of goods sold as at any given point of time.
Ans. FALSE

8. Under the periodic inventory system, all increases and decreases in inventory, such as
purchases, freight-in, purchase returns, purchase discounts, cost of goods sold, and sales
returns are recorded in the Inventory account.
Ans. FALSE

9. Beginning inventory less Net purchases less Ending inventory equals Cost of goods sold.
Ans. FALSE

10. No entry is made to recognize cost of goods sold when inventory is sold under periodic
inventory system.
Ans. TRUE

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QUIZ 2: IDENTIFICATION

1. The account used to record cash discounts availed of on purchased goods.

Ans. PURCHASE DISCOUNTS

2. The account used under the periodic system to record the shipping costs incurred on
purchases of inventory.
Ans. PURCHASES

3. The type of business that buys and sells goods without changing their physical form.
Ans. MERCHANDISING BUSINESS

4. The account used under periodic system to record returns of purchased goods to the
supplier.

5. The account used to record purchases of inventory under the periodic system.
Ans. PURCHASES ACCOUNTS

6. Under this inventory system, the “Inventory” account is updated each time a purchase or
sale is made.
Ans. Perpetual inventory System

7. Under this inventory system, the “Inventory” account is updated only when a physical
count is performed.
Ans. PERIODIC INVENTORY SYSTEM

8. This account is used to recognize the cost of an inventory that is sold as expense.
Ans. INCOME STATEMENT

9. It is the sum of beginning inventory and net purchases during the period.
Ans. MERCHANDISE INVENTORY

10. It is computed by deducting ending inventory from total goods available for sale.
Ans. PURCHASE

QUIZ 3: MULTIPLE CHOICE

1. If debits do not equal credits, the first step to find the error is to
a. call your manager and ask for advice.
b. add the debit and credit columns again.
c. review the journal entries for errors.
d. make correcting entries rather than adjusting entries.

2. Entity A has a beginning inventory of ₱280,000. During the period Entity A purchased
inventories costing ₱890,000. Freight paid on the purchase totaled ₱30,000. If the ending
inventory is ₱220,000, how much is the cost of goods sold?
a. 1,360,000
b. 980,000

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 c. 950,000
d. 920,000

3. Entity A has gross purchases of ₱360,000. Freight paid on the purchases amounted to ₱50,000.
Purchase discounts totaled ₱20,000 while purchase returns totaled ₱15,000. How much is the net
purchases?
a. 375,000
b. 390,000
c. 410,000
d. 445,000

4. Entity A has a beginning inventory of ₱340,000. During the period Entity A purchased
inventories costing ₱990,000. Freight paid on the purchase totaled ₱40,000. The ending inventory
was ₱360,000. If the net sales were ₱1,200,000, how much is the gross profit?
a. 1,010,000
b. 1,200,000
c. 190,000
d. 260,000

5. Entity A has a beginning inventory of ₱140,000. During the period Entity A purchased
inventories costing ₱790,000. Freight paid on the purchase totaled ₱10,000. The ending inventory
was ₱60,000. Gross sales were ₱1,800,000 while sales returns and discounts totaled ₱220,000.
How much is the gross profit?
a. 680,000
b. 700,000
c. 780,000
d. 880,000

QUIZ 4: STATEMENT OF COST OF GOODS SOLD AND GROSS PROFIT

The accounts of Entity A on December 31, 20x1 show the following balances:

Gross sales 5,800,000

Sales returns 116,000
Sales discounts 1,160,000
Gross purchases 2,200,000
Freight-in 110,000
Purchase discounts 66,000
Purchase returns 22,000
Inventory, beg. 460,000
Inventory, end. 320,000

Gross sales  5,800,000 

Sales returns     

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 116,000 
Sales discounts  1,160,000 
Gross purchases  2,200,000 
  
Freight-in  110,000 
Purchase    
discounts  66,000 
   
Purchase returns  22,000 
  
Inventory, beg.  460,000 
  
Inventory, end.  320,000 
        ------------ --------------------------------

BALANCES =10,256,000

Requirement: Prepare a statement of cost of goods sold and gross profit.

QUIZ 5: UNADJUSTED TRIAL BALANCE

Entity A started operations during the period. The following were the transactions:

a. Mr. A, the sole owner of Entity A, invested ₱1,000,000 to the business.

b. Equipment costing ₱250,000 was acquired for cash.
c. Inventory costing ₱180,000 was acquired on credit. Entity A uses the perpetual inventory system.
d. Inventory costing ₱120,000 was sold for ₱400,000 on credit.
e. Accounts payable of ₱160,000 was settled.
f. Accounts receivable of ₱340,000 was collected.
g. Utilities expense of ₱60,000 was paid.
h. Salaries expense of ₱280,000 was paid.
i. Owner’s drawings during the period totaled ₱70,000.
j. Depreciation expense on the equipment for the period was ₱25,000.

Requirements:
a. Journalize the transactions above. Be sure to provide a brief description for each journal entry.
b. Post the transactions to the general ledger. Use T-accounts for this purpose. Arrange your T-
accounts in the following order: Assets, Liabilities, Equity, Income and Expenses.
c. Prepare the unadjusted trial balance of Entity A on December 31, 20x1. Be sure to provide a
proper heading for the trial balance.

Entity A started operations during the period. The following were the transactions:

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    Account          Dr Cr
Cash  495,000
AR 60,000
Inventory  60,000
Equipment  250,000
A/p
20,000
Capital 
1,000,000
Drawing 70,000
Sales
COGS  40,00
120,000
Utilities  60,000
Salaries 280,000
Depreciation  25,000
        BALANCE                                1,420,000                                               1,420,000

ENTITY A 

A. CASH
     OWNERS CAPITAL      1,000,000

B. EQUIPMENT
    CASH         250,000

C. INVENTORY 
         ACCOUNTS PAYABLE    180,000

D. ACCOUNTS REC. 

        SALE         4000

COST OF GOODS SOLD 

     MERCHANDISING INVEN.    120,000

E. ACCOUNTS PAYABLE

     CASH      160,000

F. CASH

       ACCOUNTS R.   340,000

G. UTILITIES EXPENSE 

          CASH     60,000

H. SALARIES EXPENSE

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     CASH     280,000

I. OWNERS WITHDRAWAL

         CASH      70,000

J. DEPRECIATION EXPENSE

     CASH        25,000

QUIZ 6: WORKSHEET AND FINANCIAL STATEMENTS

Entity A started operations on November 1, 20x1. The following were the transactions during the
period:

Nov. Transactions
1 Provided ₱100,000 cash as initial investment to the business.
1 Acquired equipment for ₱72,000 cash. The equipment has a useful life of 4 years.
Entity A records depreciation expense only at year-end.
1 Paid a one-year insurance premium of ₱24,000. (Use ‘asset method’)
12 Purchased inventory costing ₱30,000 for cash. (Use periodic inventory system)
14 Sold goods for ₱30,000 cash.

Dec. Transactions
1 Sold goods with sale price of ₱24,000 in exchange for a ₱24,000, 10%, one-year note
receivable. Principal and interest are due at maturity.
5 Purchased inventory for ₱4,000 on account.
26 Sold goods for ₱34,000 on account.
27 Paid ₱2,000 account payable.
29 Collected ₱20,000 account receivable.

Additional information:
 There is no beginning inventory. The ending inventory per physical count is ₱21,000.
 Entity A determines at year-end that accounts receivable of ₱2,000 is doubtful of collection.
 Salaries earned by employees during the period but were not yet paid amounted to ₱20,000.

Requirements:
a. Provide the journal entries for the transactions.
b. Post the entries to the ledger using T-accounts.
c. Prepare the unadjusted trial balance using a worksheet.
d. Prepare the adjusting entries.
e. Complete the worksheet.
f. Prepare the closing entries.

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g. Prepare the balance sheet and income statement.
h. Prepare the reversing entries to be recorded in the next accounting period.