Q1.

These are items of adjusting entries that do not involve cash flows except
A. Provision for Doubtful Accounts

B. Deferred Income
C. Ending Inventory Adjustment

D. Depreciation

Q2. The Statement of Financial Position would should prepayments as

A. Deduction from the capital
B. Non-current assets
C. Current liabilities

D. Current assets

Q3. When preparing its financial statements, if a business deliberately under-estimates the
allowance required to cover doubtful debts, it would be:
A. Overstating its performance as well as its assets
B. Overstating its performance as well as its liability
C. Overstating its performance and understating its assets
D. Overstating its performance and understating its liability

Q4. As generally used, the term "net assets" represents

A. Retained Earnings
B. Current assets less current liabilities

C. Total contributed capital

D. Total assets less total liabilities
Q5. Comprehensive income includes

A. Profit or loss
B. Other comprehensive income
C. Both A and B

D. Neither A nor B

Q6. The length of time into which the life of a business is divided for the purpose of preparing
periodic financial statements
A. Natural business year
B. Calendar year

C. Accounting period
D. Interim period

Q7. Accrual accounting focuses on:

A. Earnings process
B. Legal considerations of the business entity

C. Articulation of financial statements

D. Cash flows of the business

Q8. The systematic and rational allocation of the cost of a long-lived item from asset to expense
is called

A. Matching
B. Recognition
C. Depreciation

D. Realization

Q9. Conceptually, net income is a measure of

A. Wealth
B. Change of wealth

C. Capital maintenance
D. Cash flow

Q10. Which of the following is not a characteristic of an adjusting entry?

A. They are generally not based on sourced documents
B. Include at least one nominal account and one real account

C. Usually refer to transactions that have effects on more than one accounting period
D. They rarely affect both an income statement account and balance sheet account

Q11. When the relationship between revenue and expense as no direct cause and effect, the
expense can be immediately recognized:
A. When allocation of the cost of a purchased item provides no additional useful information

B. If an item has no discernable future benefit

C. Both A and B are correct
D. None of these answers are correct

Q12. In analyzing an entity's financial statements, which of these would a potential investor
primarily use to assess liquidity and financial flexibility?
A. Income Statement
B. Statement of Financial Position

C. Statement of Retained Earnings

D. Statement of Cash Flows

Q13. Conceptually, asset valuation accounts are

A. Assets
B. Neither assets or liabilities
C. Part of shareholder's equity
D. Liablities

Q14. Which of the following is not a long-term investment?

A. Franchise

B. Land held for speculation

C. Cash surrender value of life insurance
D. A sinking fund

Q15. The term "deficit" refers to

A. An excess of current assets over current liabilities

B. An excess of current liabilities over current assets

C. A debit balance in retained earnings
D. A prior period error

Q16. If accounts receivable has a debit posting of 580,000; credit posting of 440,000; and ending
normal balance of 480,000, compute for its beginning balance.

X + 580,000 – 440,000 = 480,000

X = 340,000

Q17. A business pays a weekly salary of 200,000 every Friday for a 5-day-work ending on that
day. If the fiscal period ends on Wednesday, the adjusting entry is
3
200,000 x 5 = 120,000

Salaries Expense 120,000

Salaries Payable 120,000
Q18. Office supplies were 9,000 at the end of January and 11,400 at the end of February. During
February, office supplies expense equaled 3,000. How much cash is paid for office supplies
during February?
9,000 – 3,000 + X = 11,400
X = 5400

Q19. Hillary Clinton, sole owner of Clinton Mattress Company, has an ownership interest in the
company of 50,000 at January 1, 2018. During that year, he invests an additional 10,000 in the
company and the company reports a net income of 25,000. What it the balance of equity at the
end of the year?
50,000 + 10,000 + 25,000 = 85,000

Q20.

Asset 600,000 Liabilities – 100,000

Equity – 100,000
Liabilities ?

Beginning capital 150,000

Revenues 400,000

Expenses ?

Net income (loss) 300,000

Additional 100,000
investment
Withdrawal 50,000

Ending capital 500,000

Q1. Which term represents the deduction from the invoice price of purchased goods granted by
suppliers for early payment?

A. Sales discount
B. Purchase discount

C. Trade discount
D. Purchase return and allowance answer

Q2. Revenue from an artistic performance is recognized once

A. The audience register for the event online.
B. The tickets for the concert are sold.

C. Cash has been received from the ticket sales.

D. The event takes place.

Q3. A discount given to a customer for purchasing a large volume of merchandise is typically
referred to as
A. Trade discount

B. Quantity discount
C. Size discount
D. Cash discount

Q4. A company receives an invoice that indicates that, as a buyer, they must pay the
transportation costs of delivering the merchandise. Which of the following will most likely be
noted as the delivery terms?
A. FOB Destination
B. FOB Shipping Point
C. FOB 2/10, n/30
D. None of the above

Q5. In the annual report, where would a financial statement reader find out if the company’s
financial statements give a fair depiction of its financial position and operating results?
A. Notes to the financial statements

B. Management discussion and analysis section

C. Balance sheet
D. Auditor’s report

Q6. Which of the following is a characteristic of a perpetual inventory system?

A. Inventory purchases are debited to a purchases account.

B. Inventory records are not kept for every item.

C. Cost of goods sold is recorded with each sale.
D. Cost of goods sold is determined as the amount of purchases less the change in inventory.

Q7. The balance in a deferred revenue account represents an amount that is

Earned Collected

A. Yes Yes
B. Yes No
C. No Yes
D. No No

Q8. In a perpetual inventory system, transportation charges are recorded with a debit to the
Merchandise Inventory account.
A. The statement is always false

B. The statement is never false

C. The statement is true, but not always
D. The statement is neither true nor false
Q9. Which method may be used to record cash discounts received for paying suppliers
promptly?
A. Net method

B. Gross method
C. Average method
D. Net method and gross method

Q10. Why is inventory included in the computation of net income?

a. To determine cost of goods sold

b. To determine sales revenue

c. To determine merchandise returns
d. Inventory is not included in the computation of net income

Q11. Generally, revenue from sale of goods shall be recognized at a point when
A. Management decides it is appropriate to do so.

B. The product is available for sale to the ultimate consumer.

C. The entire amount receivable has been collected from the consumer and there remains no
further warranty liability.
D. The entity has transferred to the buyer the significant risks and rewards of ownership of
the goods.

Q12. If an inventory account is understated at year end, the effect will be to overstate the
A. net purchases.

B. gross margin.
C. cost of goods available for sale.
D. cost of goods sold.
Q13. On March 1, 2012, Forest Co. borrowed cash and signed a 36-month, interest-bearing note
on which both the principal and interest are payable on February 28, 2015. At December 31,
2014, the liability for accrued interest should be
A. 10 months' interest

B. 22 months' interest
C. 34 months' interest
D. 36 months' interest

Q14. When inventory is misstated, the presentation lacks

a. Relevance

b. Faithful representation
c. Comparability
d. All of the choices are correct

Q15. Total net income over the life of an enterprise is

A. higher under the cash basis than under the accrual basis.

B. lower under the cash basis than under the accrual basis.
C. the same under the cash basis as under the accrual basis.
D. not susceptible to measurement.

Q16. When merchandise inventory is purchased with credit terms of 2/10, n/60, the credit period
is 60 days from date of the invoice.
A. The statement is always false
B. The statement is never false

C. The statement is true, but not always

D. The statement is neither true nor false
Q17. In a period of falling prices, the use of which inventory cost flow method would typically
result in the highest cost of goods sold?
A. FIFO
B. LIFO

C. Weighted average
D. Specific identification

Q18. Inventories encompass all of the following, except

A. Merchandise purchased by a retailer
B. Land and other property not held for sale

C. Finished goods produced

D. Materials and supplies awaiting use in the production process

Q19. Which inventory cost flow assumption would consistently result in the highest income in a
period of sustained inflation?
A. FIFO

B. LIFO
C. Weighted average
D. Specific identification

Q20. AG Inc. made a $15,000 sale on account with the following terms: 1/15, n/30. If the
company uses the gross method to record sales made on credit, what is/are the debit(s) in the
journal entry to record the sale?
A. Debit Accounts Receivable for $14,850.

B. Debit Accounts Receivable for $14,850 and Sales Discounts for $150.
C. Debit Accounts Receivable for $15,000.
D. Debit Accounts Receivable for $15,000 and Sales Discounts for $150.
Q21. Grace Ancheta Company, which uses the gross price method of recording purchases and
the periodic inventory system, bought merchandise for 8,000 terms 2/10, n/30. If Ancheta returns
2,000 of goods to the vendor, the entry to record the return is
2,000 x .98 = 1960

Accounts Payable 1,960

Purchase Returns and Allowance 1960

Q22. A buyer received an invoice for 6,000 dated June 10. If the terms are 2/10, n/30 and the
buyer paid the invoice within the discount period, what amount will the seller received?
6,000 x .98 = 5,880

Q23. Kindness Company regularly buys sweaters and is allowed a trade discount of 20% and
10%. The entity made a purchase on March 20 and received an invoice with a list price of
P900,000, a freight charge of 50,000, and payment terms of net 30 days.
What is the cost of the purchase?
900,000 x .80 x .90 = 648,000 + 50,000 = 698,000

Q24. On June 1, 2019 Compassion company sold merchandise with a list price of P1,000,000 to
a customer. The entity allowed trade discount of 20% and 10% . Credit terms were 5/10, n/30
and the sale was made FOB shipping point. The entity prepaid 50,000 of delivery cost for the
customer as an accommodation. The customer paid in full on June 11, 2019.

What amount is received from the customer as full remittance?

1,000,000 x .80 x .90 = 720,000 x .95 = 684,000 + 50,000 = 734,000

Q25. OAR company buys bulk of accounting books in Recto and is allowed a trade discount of
15% and 5%. The entity made a purchase on April 4 and received an invoice with a list price of
25000.

What entry is necessary to record the trade discount?

None
Q26. On June 30, a fire destroyed Intense Company's entire inventory. The inventory on January
1 totaled 6,600,000. From January 1 through the time of the fire, the entity made purchases of
3,000,000, incurred freight in of 300,000, and had sales of 7,800,000. The rate of gross profit on
selling price is 30%. What is the approximate cost of the inventory that was destroyed?

6,600,000 + 3,000,000 + 300,000 = 9,900,000 – (7,800,000 x .70) = 4,440,000

Q27. Wala Kang Jowa Company provided the ff. information for the current year:

Sales 2,750,000
Beginning Inventory 300,000
Ending Inventory 180,000

Gross Margin 20%

What amount was reported as purchase?
2,750,000 x .80 = 2,200,000

300,000 + X – 2,200,000 = 180,000

X = 2,080,000

Q28. Walang Poreber Shop started the year with total assets of 60,000 and total liabilities of
40,000. During the year the business recorded 100,000 in car repair revenues, 55,000 in expenses
and dividends of 10,000.
The net income reported by the shop for the year was?
100,000 – 55,000 = 45,000

Q29.
Current Assets 120,000

Property, Plant and Equipment 24,000

Current Liability 48,000
Long-term liability 12,000

What is the current ratio?

120,000/48,000 = 2.5
Q30. Sa Wakas Tapos Na Company recorded journal entries for the payment of 50,000
dividends, 32,000 increase in accounts receivable for services rendered, and the purchase of
equipment for 21,000. What net effect do these entries have on owner's equity?
32,000 – 50,000 = (18,000)

Decrease of 18,000