JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS COLLEGE OF BUSINESS ADMINISTRAT RSITY OF THE EAST CALOOCAN BASIC ACCOUNTING, PART 1 PRELIM DEPARTMENTAL EXAM REVIEWER, THEORIES For numbers 1 to 5, identify each of the following accounts as either: ‘A. Asset account D. Revenue account B. Liability account E. Expense account ©. Owner's Equity account Uneamed Rent Prepaid Insurance Fees Eared Prepaid Rent Expense Drawings For numbers 6 to 10, use the following choices: ‘A. Both statements are true B. Both statements are false C. Only statement lis true D. Only statement iis true | — Posting a transaction twice will cause the trial balance totals to be equal I -Journalizing a transaction with transposition error for both the debit and credit of P69 instead of P96 will cause the trial balance to be out of balance |—When an owner invests assets in the business, the capital account increases due to revenue being earned lI — Debits will increase Uneamed Revenues and Revenues | - The general jourral is also called the book of original entry Il The special journal is also called the book of final entry | - Accrual basis recognizes income when it is eamed regardless of collection II Cash basis recognizes expense upon payment regardless of when itis incur _10. | - Financing activities include borrowings from a bank for the business IN Investing activities include personal investment by the owner of a businessJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS COLLEGE ¢ SSP NE UN Ts ih melt: CALOOCAN 11. Which of the following group of accounts increase with a credit a. Assets, capital, revenue ©. Capital, rever b. Liabilities, capital, revenue d. None of these 7 _12. Acquisition of furniture and fixtures in cash would a, Have zero effect on total assets c. Increase one asset and decrease b. Have no effect in the equity side another asset d. Allare correct, 19. The financial condition of the business as of a certain date is called ‘a. Income Statement d._ Statement of Changes in Owner's b. Balance Sheet Equity Cash Flow Statement _14, Payment of P100,000 current liability will a, Increase asset and increase liability cc. Increase asset and increase expense b. Decrease asset and decrease liability d. Decrease asset and decrease expense 15. Depositing the cash collection in bank will a. Increase net asset c. Decrease net asset, b. Decrease income d. Have no effect 16. Which of the following statements about users of accounting information is incorrect? a. Management is an internal user. b. Taxing authorities are external users. c. Present creditors are external users. d. Regulatory authorities are internal users, _17. The three types of business entities aro: ‘a. _proprietorships, small businesses, and partnerships b. _proprietorships, partnerships, and corporations c._proprietorships, partnerships, and large businesses ._ financial, manufacturing, and service companies _18. Performing services on account will have the following effects on the components of the basic accounting equation: a. increase assets and decrease owner's equity. b. increase assets and increase owner's equity. c._ increase assets and increase liabilities. d._ increase liabilities and increase owner's equity CD Mme AL) Ret OSB rece eoJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANT: COLLEGE ¢ SPAN NEU VERSITY OF THE EA ALOOCAN Which of the following events is not recorded in the accounting records? Equipment is purchased on account. ‘An employee is terminated. A cash investment is made into the business, The owner withdraws cash for personal use. The income statement reports Financial resources as of a specific date Financial resources for a specific period Results of operations as of a specific date Results of operations for a specific period Profit is the difference between Assets and liabilities The incoming cash and the outgoing cash ‘The assets purchased with cash contributed by the owner and the cash spent to operate the business ‘The amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services A branch of accounting that is concerned primarily with providing information to internal users Tax Accounting . Financial Accounting Management Accounting d. None of these Which of the following best describes accounting? Records economic data but does not communicate the data to users according to any specific rules Is an information system that provides reports to users regarding economic activities and conditioN of a business Is of no use by individuals outside the business Is used only for filing out tax returns and for financial statements for various types of governmental reporting requirements All of the following are general-purpose financial statements except: Balance sheet ¢. Statement of owner's equity Income statement d. Cash budget Cash investments made by the owner to the business are reported on the statement of cash flows in the: Financing activities section c. Operating activities section Investing activities section d. Supplemental statement }) @uecaljpia (8) jpiauecaN'819@gmail.comJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS COLLEGE OF BUSINESS ADMINISTRATION NN) 6. Accounts a, Do notreflect money amounts b. Are not used by entities that manufacture products c. Are records of increases and decreases in individual financial statement items d. Are only used by large entities with many transactions. Revenue should be recognized when a. Cashis received c. The customer places an order b. The service is performed d. The customer charges an order 8. How does the purchase of equipment by signing a note affect the accounting equation? a. Assets increase; assets decrease b. Assets increase; liabilities decrease c 4 Assets increase; liabilities increase Assets increase; owner's equity increases Financial information that is presented after a decision is made is considered of no value a. Timeliness c. Neutrality b. Verifiability d. None of these Philippine Accounting Standards 1 (PAS 1)is Statement of Financial Position c. Presentation of Financial Statements Accounting for Sole Proprietorship d. None of these PROBLEMS ____-1. The assets and liabilities of the company are P175,000 and 40,000. Owner's equity should be: a. P215,000 cc. P175,000 b. P135,000 4. 40,000 __-_2. _Iftotal liabilities decreased by P55,000 during a period of time and owner's equity increased by P60,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets s: a. P115,000 increase c. P5,000 decrease b. P5,000 increase d. P115,000 decrease _3. summary of selected ledger accounts appear below for Alberto’s Plumbing Services for the current ‘calendar year end,JUNIOR PHILIPPINE INSTITUTE OF AC COLLEGE OF BUSINESS ADMINISTRATION TNT eR Mel me CLRe N snip te ALBERTO, CAPITAL ALBERTO, DRAWING IN@gMe SUMMARY, 1281 8,500 | 1/1 6,500 12/31 3,500. | 12/31 8,500 12/31 15,000>,12/31 33,500, 1231 18500 5,000 1231 18,500 — Net income for the period is 16,500 18,500 b. 33,500 4. 15,000 4, After all the account balances have been extended to the Income Statement columns of the worksheet, the totals of the debit and credit columns are P77,500 and P85,300, respectively. What is the amount of the net, income or net loss for the period? ‘a. P7,800 Net Income ©. P85,300 Net Income b. P7,800Net Loss d. P77,500 Net Loss Aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals “~~ P2,000. If allowance for Doubtful Accounts has a P200 credit balance, the adjustment to record the bad debis expense for the period will require a a. Debit to bad debts expense for P2,200 b. Debit to bad debts expense for P2,000 ¢c. Debit to bad debts expense for 1,800 d. Credit to allowance for doubtful accounts for P3,000 6. On June 8, Alton Co. issued an P80,000, 6%, 120-day note payable to Seller Co. Assume that the fiscal year of Seller Co. ends June 30. Using the 360-day year in your calculations, what is the amount of interest revenue recognized by Seller in the following year? a. P1,200.00 cc. P1,306.67 b. P1,208.89 d. P1,600.00 ‘The current period statement of cash flows includes the following: Cash balance at the beginning of the period 310,000 Cash provided by operating activities 185,000 Cash used in investing activities 43,000 Cash used in financing activities 97,000 The cash balance at the end of the period is a. P45,000 c. P355,000 b. P635,000 d. P125,000 F) huecalipia (¥)(@) @uecaljpia (i) jpiauecans19@gmailcomJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTAN’ eniner a SINE ERSITY OF THE EAST CALOOCAN ‘The accounting records of Compunet Inc. shows the following: Cash 25,000 Office Equipment 20,000 Office Furniture 10,000 ‘Accounts Payable 5,000 How much is the Owner's Equity? a. P50,000 fc. 45,000 b. P55,000 d. 60,000 _9. At the beginning of the year, the assets of Solis Services were P360,000 and its owner's equity was 200,000. During the year, the assets increased by P'120,000 and liabilities increased by P20,000. What was the (Owner's Equity at the end of the year? a. P320,000 . P300,000 b. P160,000 d. P200,000 Total Liabilities is P825,000, which is 66% of total assets. How much is the equity? 425,000 c. P280,500 b. P1,250,000 d. P544,50 Given the following: Beginning capital P 70,000 Ending capital 48,000 Owner'swithdrawals 21,000 11. Calculate net income (net loss) a. P2,000 ©. P1,000 b. (P2,000) d. (P1,000) _12. Krammer has liabilities equal to one fourth of the total assets. Krammer's owner equity is P30,000. Using the accounting equation, what is the amount of liabilities for Krammer? a. P10,000 c. P20,000 b. P15,000 d. P25,000 13. Rose Soriano Company received cash of P13,500 on September 1, 2018 for one year's rentin advance and recorded the transaction with a credit to Uneamed Rent. The December 31, 2013 adjusting entry is a. Debit Rent Revenue and credit Uneamed Revenue P4,500 b. DebitRent Revenue and credit Unearned Rent P9,000 c. Debit Uneamed Rent and credit Rent Revenue P4,500 d. Debit Cash and credit Unearned Rent P9,000 ey tee eC eee ieee artJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS COLLEGE OF BUSINESS ADMINISTRATIO a UR AOlM NTT. CIer\rorelen Ny] value of P20,000. The December 31, 2018 adjusting entry is: a. Debit interest expense and credit interest payable P'1,800 b. Debitinterest expense and credit interest payable P450 c. Debit interest expense and credit cash P300 d. Debit interest expense and credit interest payable P300 _15. Before any year-end adjustments, the profit of Heart Co. was P1,870,000. However the following adjustment are necessary: olfice supplies use, P30,000; services performed for clients but not yet collected 65,000; interest accrued on notes payable, P'15,000. After recording these adjustment, the profit would be a. P 1,890,000 ©. 2,020,000 b. P 1,920,000 4, P 2,050,000 Bases on this trial balance, answer questions no, 16-20. The trial balance of Gerbo Company appears as follows: GERBO COMPANY Trial Balance December 31, 2018 DEBIT (PHP) | CREDIT (PHP) Cash 20,000 Accounts Receivable 50,000 Prepaid Insurance 20,000 ‘Supplies 15,000 Office Equipment 40,000 Accumulated Depreciation 10,000 Accounts Payable 30,000 Gerbo, Capital 85,000 Service Revenue Earned f) fuccalipia (W)(G) @uecalipia Gs) j ccnaJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS Coren eRe MUNSON EUTo UNIVERSITY OF THE EAST CALOOCAN ae a Salaries Expense Rent Expense 20,000 TOTAL 185,000 If on December 31, 2018 supplies on hand were P1,000, the adjusting entry would contain a Debit to supplies expense for P1,000 Credit to supplies expense for P1,000 Debit to supplies expense for P14,000 Credit to supplies expense for P14,000 _17. If on December 31, 2018 the trial balance showed insurance still unexpired amounting to P8,000, the adjusting entry would contain a. Debit to prepaid insurance for P12,000 Credit to prepaid insurance for P12,000 Debit to prepaid insurance for P8,000 Credit to prepaid insurance for P8,000 If the estimated depreciation for office equipment were 10,000, the adjusting entry would contain Credit to accumulated depreciation for P10,000 Credit to depreciation expense for P10,000 Debit to accumulated depreciation for P10,000 Credit to office equipment for P10,000 19. If as of December 31, the rent of P5,500 for December had not been recorded or paid the adjusting entry would include a. Credit to accumulated rent for P5,500 b. Debit to rent payable for P5,500 c. Debit to rent expense for 5,500 d. Credit to cash for P5,500 _20. If services totaling P10,000 had been performed but not billed, the adjusting entry to record this would include a. Debit to service revenue earned for P10,000 b. Credit to unearned service revenue for P10,000 c. Credit to service revenue earned for P70,000 d. Credit to service revenue earned for P10,000 a Ene ALS) Ret) OIE CULLJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS COLLEGE ¢ NWN nae UNIVERSITY OF THE EAST CALOOCAN uggested Answers: Theories 1 3, 4. 5. 6. 7. 8. 9. 10. 1" 12, 13, 14, 15, 16, 7. 18, 19, 20. 2 22. 23. 24, 26. 26. 2. 28. 29. 30. OFOBOFOTDDI0DMMO0BDDBDO>0OND0>0>0 fart ay eee) POOR ettJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANT: COLLEGE ¢ eNO Eee) UN Cin xe) ST CALOOCAN ‘Suggested Answers: Theories a O>FODO>OTBI09DDHOD0BMDDO>0000>0>0 ere MC ese oreJUNIOR PHILIPPINE INSTITUTE OF ACC Reem ess UNIVERSITY OF tae > 14, 15, O>OFO>000F000 Unearned Rent Rent Revenue P4,500 P4,500 Total Uneamed Rent for 1 year Time lapsed: (September to December) Total earned rent for 4 months D Interest Expense Interest Payable P 300 P 300 Total interest expense (P20,000 x 9%) Time lapsed: (November to December) Total accrued interest expense A Adjustments: Supplies Expense 30,000 Supplies 30,000 Accounts Receivable 65,000 Service Revenue 65,000 Interest Expense 15,000 Interest Payable 15,000 Cee ac) Tooter at) ADMINISTRATION fo \rorereny) P13,500 42 P 4,500 1,800 22 P 300, PereJUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS Ore eRe USSU UNIVERSITY OF THE EAST CALOOCAN ae a Unadjusted prot: P 1, 870,000 Adjustments: Service Revenue 65,000 ‘Supplies expense (30,000) Interest expense ——115.000) Adjusted profit P 1, 890,000 16. Supplies expense 14,000 Office supplies 14,000 Unadjusted office supplies P 15,000 ‘Supplies on hand, end 4.000) Supplies used for the period P 14,000 17.8 Insurance expense 12,000 Prepaid insurance 12,000 Unadjusted prepaid insurance P 20,000 Unexpired insurance (6.000) Expired insurance P 12,000 18.A Depreciation expense 10,000 Accumulated depreciation 10,000 19.C Rentexpense 5,500 Rent payable 5,500 20.D Accounts receivable 10,000 Service revenue earned 10,000 f )Auecaljpia (y) (6) @uecaljpia (3) jpiauecansi9@Marketable securities purchased by the temporary investment of cash available for current operations. Prepaid taxes which cover assessments of the following operating cycle of the business. Installment notes receivable due over 18 months in accordance with normal trade practices. 15, In a period of declining prices, the inventory cost flow method that would result in the lowest inventory figure is c. Moving average. b. LIFO d. Weighted average, 16. An inventory method which is designed to approximate inventory valuation at the lower of cost or market a. First-in, first-out. ©. Specific identification b. Last‘in, first-out. 17. Subnormal or obsolete goods, either under the cost, or cost or market basis should be a. Taken up as an unrealized inventory loss. ©. Valued by applying an inventory method by using a constant or nominal value for the “normal’ inventory level. d. Adjusted in the cost of goods sold. 18. After being held for 30 days, a 90-day 12% note receivable is discounted at a discount rate of 15%. The proceeds received from the bank upon discounting would be the a. ea value less discount at the rate of 15% for 90 iu ©. Face value less discount at 15% for 60 days. d. Face value less discount at 15% for 90 days. 19. Advances by officers from corporate funds are taken up under a. Capital stock, c. Cash dividends, b._ Retained earnings. 20. One method of estimating uncollectible accounts expense is adjusting the valuation of account to a new balance equal to the estimated uncollectible portion of the existing accounts receivable. Another method is a. Estimating the percentage of probable expenses for each age group of accounts receivable, b._ The balance sheet approach. d. The aging of the accounts receivable approach 21. They consist of collectibles usually arising from sales of merchandise and are valued in the balance sheet at estimated realizable value. a. Cash,b. Inventories. d. Bank drafts 22. |OU's and postage stamps found in the company’s cash drawers should be reported as a. Petty cash fund. b. Cash — because i a the equivalent of money. d. Investment. (rpopa 5/87) 23, _ Which of the following is part of the cash account? ‘a. Advances to employees. b. Cash received after the balance sheet date, Retumed check: (rpcpa 5/88) 24, At September 30, 1996, DEF Corporation had cash accounts at various banks. Its account balance at ABC Bank is segregated solely for an October 15, 1996 payment into a bond sinking fund. An account with WRS Bank, used for branch operations, is overdrawn. The account with KLM Bank, used for regular corporate operations, has a positive balance. How should DEF Corporation report these accounts in its September 30, 1996 classified balance sheets? a. The segregated and regular accounts should be reported as a current asset, and the overdraft should be reported as a current liability. cc. The segregated account should be reported as a noncurrent asset, and the regular account should be reported as a current asset net of the overdraft d. The segregated and regular accounts should be reported as current assets net of the overdraft (rpepa 10/96) 25. Cash or cash on hand and in banks on the balance sheet may include the following items: Currency or cash items on hand. Deposits in foreign countries which are subject to foreign exchange restrictions, Short-term placements of excess cash which can be pre-terminated, Post-dated checks. Cash set aside for the acquisition or construction of non-current assets, and c only. b. b,c, and e only. d. a only.a c d, a7. 26. Below are several items that may or may not be included in the cost of property, plant and equipment: + Delinquent property taxes on acquired property. * Interest paid on money borrowed to purchase new machine. * Expansion of storeroom space needed because of the increased output of the new machine. + Cost of training employees who will operate the new machine. * Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered, + Cost of raw material spoiled during the testing anc breaking-in period of the new machine. * Cost of tearing down old building (already owned) in preparation for new construction. * Insurance premium paid during first year of operation of new machine. + Safety devices added to machine to comply with collective bargaining agreement with ‘employees’ union. + _ Service contract paid in full covering first two years operations of the machine. How many of the items listed above should be included in the cost of property, plant and equipment? Less than four items, Six to seven items. More than seven items Which type of expenditure occurs when a company constructs an annex to its office building? a cs d. 28. Rearrangement, Betterment, Repair and maintenance. ‘An air-conditioning unit was installed in the ambulance used by a hospital. This type of expenditure is a (an) a d, 29, a, c. a. ‘Ordinary repair and maintenance. Betterment. Replacement. Improvements are Revenue expenditures. Debited to an appropriate asset account when they do not increase useful lif. Debited to accumulated depreciation when they do not increase useful life. Questions 1 thru 3 are based on the following informationLazer Company had the following bank reconciliation on June 30, 2004: Balance per bank statement, June 30, 2004 3,000,000 ‘Add: Deposit in transit 400.000 Total 3,400,000 Less: Outstanding checks 900,000 Balance per book, June 30 2,500,000 The bank statement for the month of July 2004 showed the following, Deposits (including P 200,000 note collected for Lazer) 9,000,000 Disbursement (including P 140,000 NSF check and P 10,000 service charge) 7,000,000 All reconciling items on June 30, 2004 cleared through the bank in’July. The outstanding Checks totaled P 600,000 and the deposits in transit amounted to P 1,000,000 on July 31, 2004. 30. What is the cash balance per book on July 31, 2004? (M) A 5,400,000 Cc. 5,550,000 D. 4,500,000 Answer: Balance per bank — June 30 3,000,000 July bank deposits 9,000,000 July bank disbursements ( Balance per bank — July 31 5,000,000 July deposit in transit 1,000,000 July outstanding checks. 800.000) ‘Adjusted bank balance 5,400,000 Balance per book — July 31 (SQUEEZED) 5,350,000 Note collected by bank in July 200,000 NSF check in July (140,000) Service charge in July (10,000) Adjusted book balance 5,400,000 ‘The balance per book on July 31 is “squeezed” by working back from the adjusted balance. 34 What is the amount of cash receipts per book in July 2004? (M) A. 9,400,000 C. 8,600,000 B. 9,600,000 D. 9,800,000 32, __ Whatis the amount of cash disbursement per book in July (M) ©. 7,300,000 B. 6,700,000 D. 6,850,000 Answer: Deposits per bank statement for July 9,000,000Note collected by bank ( 200,000) Deposit in transit - June 30, 2004 ( 400,000) Deposit in transit ~ July 31 1.000.000 Gash receipt per book for July 2,400,000 Disbursement per bank statement for July 7,000,000 NSF check in July (140,000) Service charge in July (10,000) Outstanding checks — June 30 (900,000) Outstanding checks — July 31 600,000 Gash disbursement per book for July 550,000 Proof of the cash balance — July 31 Balance per book — June 30 2,500,000 Book receipts for July 19,400,000 Book disbursement for July Balance per book — July 31 5.350.000 33. The following information pertains to Lucerne Corp as of December 31, 2004. Cash balance per general ledger 258,500 Cash balance per bank statement 270,500 Checks outstanding 35,000 Bank service charge shown on December bank statement 1,000 Error made by Luceme in recording a check that cleared that bank in December (check was drawn in December for P 14,500 but recorded at P 18,500) 4,000 Deposit in transit 26,000 ‘The correct cash balance as of December 31, 2004 is A. P.249,500 CC. P264,500 D. — P.273,500 Cash balance per bank statement 270,500, oir 26,000 oc 35,000 Correct cash balance 261,500Secrets Inc, was incorporated on January 1, 2021. The following items relate to Secrets, Inc.’s property, plant and equipment: Cost of land, which included an old apartment building Delinquent property taxes assumed by Secrets, Inc. Payments to tenants to vacate the apartment building Cost of razing the apartment building Architects fee for new building Building permit for new construction Fee for title search Survey costs Excavation before construction of new building Payment to building contractor Assessment by city for drainage project Cost of grading and leveling ‘Temporary quarters for construction crew Temporary building to house tools and materials Cost of changes during construction to make new building more energy efficient Interest cost on specific borrowing incurred during construction Payment of medical bills of employees injured while inspecting building construction Cost of paving driveway and parking lot Cost of installing lights in parking lot Premium for insurance on building during construction Cost of open house party to celebrate opening of new building Cost of windows broken by vandals distracted by the celebration 34. What is the cost of land? 5,960,000 6,540,000 oO ovm > 6,410,000 35, What is the cost of building? ‘A. 21,740,000 B 21,750,000 © 21,790,000 6,160,000 60,000 40,000 80,000 120,000 80,000 50,000 40,000 200,000 20,000,000 30,000 100,000 460,000 100,000 180,000 720,000 36,000 120,000 24,000 60,000 100,000 24,000‘On January 1, 2022, Romania Company purchased a specialized factory equipment for cash at a purchase price of P 700,000. The company incurred P 20,000 freight cost and handling costs of P 10,000. The company expects that it will incur dismantling cost amounting to P 80,000 at the end of the equipment's 5-year useful life. The prevailing market interest rate during the transaction date was 6%, Present value factory of 1 at 6% for five periods 0.747 Present value factory of annuity at 6% for five periods 4.212 How much is the initial cost of the equipment? A 730,000 B 810,000 1,086,960 ‘San Andreas Mercantile Inc., through no fault of its own, lost an entire warehouse due to an earthquake on April 13, 2003. In preparing their insurance claim on the inventory loss, they developed the following data: Inventory January 1, 2003, P 365,000; sales and purchases from January 1, 2003, to April 13, 2003, P 1,300,000 and P 875,000, respectively. San Andreas Consistently reports a 30% gross profit. The estimated inventory on April 13, 2003, is: A. P237,500. C. P390,000. B. — P330,000. DB. P295,000. Beginning inventory $365,000 Plus: Net purchases ‘875,000 Goods available for sale 1,240,000 Less: Cost of goods sold: Net sales $1,300,000 Less: Estimated gross profit _(390,000 Estimated cost of goods sold (910,000) Estimated ending inventory $330,000D. 502,000 Per Physical count 440,000 Excluded inventory in shipping room 34,000 Merchandise shipped FOB supplier warehouse __6,000 Correct inventory, December 31,2004 480,000 40, Jensen Company uses a perpetual inventory system. The following purchases and sales were made during the month of May: Date Activity Description May1 Balance 100 units at $10 per unit May9 Purchase 200 units at $10 per unit May Sale 190 units 16 May Purchase 150 units at $12 per unit a May Sale 120 units 29 if Jensen Company uses the first-in, first-out (FIFO) method of inventory valuation, the May 31 inventory would be $1,400 $1,493, 31,460 D. $1,680 pop Answer (D)is correct. The FIFO assumption is that the first units purchased are the first sold, so the ending inventory consists of the most recent units purchased. Thus, ending inventory consists of 140 units (100 beginning balance + 200 purchased - 190 sold + 150 purchased - 120 sold) from the May 21 purchase of 150 units. Its value is $1,680 ($12 x 140). Under FIFO, the inventory value is the same regardless of whether the inventory system is perpetual or periodic. ‘Answer (A) is incorrect because $1,400 is the value under periodic LIFO. Answer (B) is incorrect because $1,460 is the value under perpetual LIFO. Answer (C) is incorrect because $1,493 is the value under the weighted-average method, 41, Thomas Engine Company is a wholesaler of marine engine parts. The activity of carburetor 2642J during the month of March is presented below. Date Balance or Transa Units Unit Cost Unit Sales Price March 4 Inventory 3,20 $64.30 $86.50 0 4 Purchase 340 64.75 87.00 0 14° Sales 3,60 87.250 25° Purchase 3,50 66.00 87.25 0 28 Sales 3,45 88.00 0 If Thomas uses a first-in, first-out perpetual inventory system, the total cost of the inventory for carburetor 2642J at March 31 is A. $196,115 . $201,300 B. $197,488, D. $263,825, ‘Answer (C) is correct. The company began March with 3,200 units in inventory at $64.30 each. The March 4 purchase added 3,400 additional units at $64.75 each. Under the FIFO assumption, the 3,600 units sold on March 14 were the oldest units. That sale eliminated all of the 3,200 units priced at $64.30 and 400 of the units priced at $64.75, leaving an inventory of 3,000 units at $64.75 prior to the March 25 purchase. On March 25, 3,500 units were acquired at $66. The 3,450 units sold on March 28 were the 3,000 remaining units priced at $64.75 and 450 units priced at $66. Therefore, the ending inventory consists of 3,050 units at $66 each, or $201,300. Note that the answer would have been the same under the periodic FIFO method. ‘Answer (A) is incorrect because $196,115 is the answer under the periodic LIFO method. ‘Answer (B) is incorrect because $197,488 is the answer under the LIFO method using the $64.75 cost of the March 4 purchase (instead of the beginning inventory cost). Answer (D) is incorrect because $263,825 is based on the $86.50 selling price at March 1, not the cost of the items. 42, Dahigren Company began operation on January 1, 2004. On December 31, 2004, Dahlgren provided for uncollectibie accounts based on 5% of annual credit sales. On January 1, 2005, Dahigren changed its method of determining its allowance for uncollectible accounts to the percentage of accounts receivable. The rate of uncollectible accounts was determined to be 15% of the ending accounts receivable balance. In addition, Dahlgren wrote off all accounts receivable that were over 1 year old. The following additional information relates to the years ended December 31, 2004 and 2005. 2005 2004 Credit sales 8,000,000 6,000,000 Collections (including collections on 6,950,000 4,500,000 recovery) ‘Accounts written off 70,000 None Recovery in accounts previously written off 20,000 None ‘What is the provision for uncollectible accounts for the year ended December 31, 2005? A. 125,000 C. 400,000 B. 122,000 D. 72,000 Allowance — 1/1 300,000 Recovery 20,000 Provision (Squeeze) 128,000 Total 445,000Writeott 79,000 Required allowance ~ 12/31 (15% x 2,500,000) 375,000 43, The following accounts were abstracted from Pika Co.'s unadjusted trial balance at December 31, 2001 Debit Creait Accounts receivable $2,000,000 Allowance for uncollectible accounts 16,000 Net credit sales $6,000,000 Pika estimates that 3% of the gross accounts receivable will become uncollectible. After adjustment at December 34, 2001, the allowance for uncollectible accounts should have a credit balance of (E) A. $180,000 C. $44,000 B. $164,000. $60,000 REQUIRED: The ending balance in the allowance for uncollectible accounts. DISCUSSION: (D) The allowance for uncollectible accounts at year-end should have a credit balance of $60,000. This amount is equal to the $2,000,000 of accounts receivable multiplied by the 3% that is estimated to become uncollectibie. ‘Answer (A) is incorrect because $180,000 is equal to 3% of net credit sales. Answer (B) is incorrect because $164,000 equals 3% of net credit sales minus the unadjusted balance in the allowance account. Answer (C) is incorrect because $44,000 equals 3% of accounts receivable minus the unadjusted balance in the allowance account. 44, The following data were taken from the records of Asinas Corporation for the year ended December 31, 2004: Sales on account 50,000,000 Notes received to settle accounts 5,000,000 Provision for doubtful accounts expense 4,500,000 Accounts receivable determined to be worthless, 500,000 Purchases on account 40,000,000 Payments to creditors 25,000,000 Discounts allowed by creditors 1,000,000 Merchandise returned by customer 2,000,000 Collections received to settle accounts 30,000,000 Notes given to creditors in settlement of accounts 3,000,000 Merchandise returned to suppliers 2,500,000 Payments on notes payable 1,000,000 Discounts taken by customers 4,000,000 Collections received in settlement of notes 3,000,000 What is the balance of accounts receivable on December 31, 2004? A. 10,500,000 ©. 8,500,000 B. 9,500,000 D. 7,500,000 Sales 150,000,000 Notes received (5,000,000) Writeoff of worthless accounts (500,000) Sales return ( 2,000,000) Collections (30,000,000)Sales discounts 4,000,000) AR 8,500,000 45. On June 1, 1989, Pitt Corp. sold merchandise with a list price of $5,000 to Burr on account. Pitt allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made FOB shipping point. Pitt prepaid $200 of delivery costs for Burr as an accommodation. On June 12, 1989, Pitt received from Burr a remittance in full payment amounting to a. $2,744 c. $2,944 b $2,912 d. $3,112 REQUIRED: The amount of the full payment. DISCUSSION: (C) A trade discount is a means of establishing a price for a certain quantity, for a particular class of customers, or to avoid having to reprint catalogs whenever prices change. Neither the buyer nor the seller reflects trade discounts in the accounts. Assuming that the 30% discount is applied first, the initial discount is $1,500 (30% x $5,000). And the second discount is $700 [20% x ($5,000 - $1,500)]. Hence, the base price is $2,800. (If both discounts apply, it make no difference which is taken first.) Because the buyer paid within the discount period, the cash equivalent price is $2,744 (98% x $2,800). Given that the goods were shipped FOB shipping point, tile passed when they were delivered to the hipper, and the buyer is responsible for payment of delivery costs. Accordingly, the full amount owed by the buyer was $2,944 ($2,744 + $200 delivery costs). ‘Answer (A}is incorrect because $2,744 does not include the delivery costs. Answer (B) is incorrect because $2,912 assumes that the delivery costs are part of the list price. It also ignores the cash discount. Answer (D) is incorrect because $3,112 assumes that the delivery costs are part of the list price. It also ignores the cash discount, but adds back the delivery costs. 46. The following information relates to Jay Co.'s accounts receivable for 1992: ‘Accounts receivable, 1/1/92 ‘$650,000 Credit sales for 1992 2,700,000 Sales returns for 1992 75,000 ‘Accounts written off during 1992 40,000 Collections from customers during 1992 2,150,000 Estimated future sales returns at 12/31/92 50,000 Estimated uncollectible accounts at 12/31/92__ 110,000 ‘What amount should Jay report for accounts receivable, before allowances for sales returns and uncollectible accounts, at December 31, 1992? a. $1,200,000 cc. $1,085,000 b. $1,125,000 $925,000 REQUIRED: The year-end balance in accounts receivable. DISCUSSION: (C) The $1,085,000 ending balance in accounts receivable is equal to the ‘$650,000 beginning debit balance, plus debits for $2,700,000 of credit sales, minus credits for $2,150,000 of collections, $40,000 of accounts written off, and $75,000 of sales returns.The $110,000 of estimated uncollectible receivables and the $50,000 of estimated sales returns are not relevant because they affect the allowance accounts but not gross accounts receivable. 47. Delta, Inc. sells to wholesalers on terms of 2/15, net 30. Delta has no cash sales but 50% of Delta’s customers take advantage of the discount. Delta uses the gross method of recording sales and trade receivables. An analysis of Delta's trade receivables balances at December 31, 1993, revealed the following: ‘Age ‘Amount Collectible 0-15days $100,000 100% 16-30days 60,000 95% 31-60days 5,000 90% Over 60 days _2,500__ $500 $167,500, In its December 31, 1993 balance sheet, what amount should Delta report for allowance for discounts? a. $1,000 c. $1,675 b. “$1,620 d. $2,000 REQUIRED: The amount to be reported as an allowance for discounts. DISCUSSION: (A) The allowance for discounts should inciude an estimate of the expected discount based on the eligible receivables. According to the analysis, receivables equal to $100,000 are stil eligible. Base on past experience, 50% of the customers take advantage of the discount, Thus, the allowance should be $1,000 [$100,000 x 50% x 2% (the discount percentage)]. Answer (B) is incorrect because $1,620 assumes that 50% of all collectible amounts are eligible for the discount, Answer (C) is incorrect because $1,675 assumes that 50% of the total gross receivables are eligible for the discount. Answer (D) is incorrect because $2,000 assumes 100% of eligible customers will take the discount 48, On December 1, 1995, Money Co. gave Home Co. a $200,000, 11% loan. Money paid proceeds of $194,000 after the deduction of a $6,000 nonrefundable loan origination fee. Principal and interest are due in 60 monthly installments of $4,310, beginning January 1, 1996. The repayments yield an effective interest rate of 11% at a present value of $200,000 and 12.4% at a present value of $194,000. What amount of income from this loan should Money report in its 1995 income statement? A. $0 C. $2,005, B. $1,833 D. $7,833 REQUIRED: The amount of income from the loan at year-end DISCUSSION: (C) Under the effective-interest method, the effective rate of interest is applied to the net book value of the receivable to determine the interest revenue. Therefore,interest revenue from the loan, for the month of December, equals $2,005 ($194,000 x 12.4% x 1/12), ‘Answer (A) is incorrect because one month's interest should be accrued. Answer (B) is incorrect because $1,833 is the accrued interest receivable, which equals the face value times the nominal rate for the period ($200,000 x 11%x 1/12). Answer (D) is incorrect because $7,833 equals the $6,000 origination fee plus the accrued interest receivable of $1,833 49. On July 1, 1989, Jay Corp. sold equipment to Mando Co. for $100,000. Kay accepted a 10% note receivable for the entire sales price. This note is payable in two equal installments of $50,000 plus accrued interest on December 31, 1989 and December 31, 1980. On July 1, 1990, Kay discounted the note at an interest rate of 12%. Kay's proceeds from the discounted note were A. $48,400 CC. $50,350 B $49,350 D. $51,700 Answer (D) is correct. Following the receipt of the $50,000 plus accrued interest on December 31, 1989, the remaining balance was $50,000. Because the second installment is due 1 year after the first, the interest attributable to this balance is $5,000 ($50,000 principal x 10% x 1 year). On July 1, 1990, the $55,000 maturity value ($50,000 note + $5,000 interest) is discounted at 12% for the remaining 6 months of the term of the note. The discount fee charged would be $3,300 (855,000 maturity value x 12% x 6/12). The net proceeds are equal to the $55,000 maturity Value minus the $3,300 discount fee, or $51,700. {$50,000 x 10% x 1 year = $5,000 interest $55,000 x 12% x 6/12= $3,300 discount fee ‘Answer (A) is incorrect because $48,400 results from charging a discount fee for a full year. ‘Answer (B) is incorrect because $52,640 assumes the nominal interest rate is also 12%, ‘Answer (C) is incorrect because $52,250 assumes the discount rate is also 10%. 50. Holder Co. has an 8% note receivable dated June 30, 1999 in the original amount of $300,000. Payments of $100,000 in principal plus accrued interest are due annually on July 1, 2000, 2001 and 2002. In its June 30, 2001 balance sheet, what amount should Holder report as a current asset for interest on the note receivable? A. $0 &. $16,000 B. $8,000 D. $24,000 REQUIRED: The amount reported as a current asst for interest on a note receivable. DISCUSSION: (C) Current assets are those reasonably expected to be realized in cash, sold, or consumed during the longer of the operating cycle of a business or 1 year. Given that the date of the balance sheet is 6/30/01, the interest to be paid on the next day, 7/1/01, should be classified as a current asset. Answer (A) is incorrect because $16,000 of interest is reported as a current asset. Answer (B)is incorrect because $8,000 is the interest to be earned in 2002. Answer (D) is incorrect because $24,000 is the interest earned in 2000.51. On November 1, 2001, Love Co. discounted with recourse at 10% a 1-year, noninterest-bearing $20,500 note receivable maturing on January 31, 2002. What amount of contingent liability for this note must Love disclose in its financial statements for the year ended December 31, 2001? «© A. $0 C. $20,333, B. $20,000 D. $20,500 REQUIRED: The amount to be disclosed in the financial statements for a contingent liability. DISCUSSION: (D) When a note receivable is discounted with recourse, the discounting firm is responsible for the full amount of the note ($20,500) if the receivables are not paid. Consequently, this amount should be disclosed in the footnotes. Answer (A) is incorrect because a footnote should disclose the full potential liability. Answers (B) and (C) are incorrect because Love may be responsible for the full amount of the note ($20,500). 2, Punn Co. has been forced into bankruptcy and liquidated. Unsecured claims will be paid at the rate of $0.30 on the dollar. Mega Co. holds a noninterest-bearing note receivable from Punn in the amount of $50,000, collateralized by machinery with a liquidation value of $10,000. The total ‘amount to be realized by Mega on this note receivable is A. $25,000 Cc. $15,000 B $22,000 D. $10,000 REQUIRED: The amount to be realized from a liquidation claim, DISCUSSION: (B) The $50,000 note receivable is secured by the extent of $10,000. The remaining $40,000 is unsecured, and Mega will be paid on this claim af the rate of $0.30 on the dollar. Secured claim $10,000 Unsecured ($40,000 x 0.20) 42,000 $22,000 Answer (A) is incorrect because $25,000 equals 30% of the note receivable plus the liquidation value of the collateral ($50,000 x 0.30) + $10,000]. Answer (C) is incorrect because $15,000 is the amount that would be realized if not collateral had been pledged (0.30 x $50,000). Answer (D) is incorrect because $10,000 is the liquidation value of the collateral 53, Jayne Corp. discounted its own $50,000, 1-year note at a bank, at a discount rate of 12%, when the prime rate was 10%. In reporting the note of Jayne’s balance sheet prior to the note’s, ‘maturity, what rate should Jayne use for the accrual of interest? A. 10.0% C. 12.0%. B 10.7%D. 13.6% REQUIRED: The effective rate of interest on a discounted not. DISCUSSION: (D) The note had a face value of $50,000. The proceeds from discounting the note were $44,000 [$50,000 - ($50,000 x 0.12 x 1 year)]. Thus, Jayne paid $6,000 interest ($50,000 — $44,000) on $44,000 for 1 year. The effective interest rate was thus 13.6% ($6,000 $44,000). ‘Answers (A), (B), and (C) are incorrect because the rate used for the accrual of interest is the effective interest rate. 54, On July 1, 2004, Lee Company sold goods in exchange for 2,000,000, 8-month, non-interest- bearing note receivable. At the time of the sale, the note’s market rate of interest was 12%. What amount did Lee receive when it discounted the note at 10% on September 1, 2004? A. 1,940,000 . 1,800,000 B. 1,938,000 D. 1,880,000 Principal 2,000,000 Less: Discount (2,000,000 x 10% x 6/12 100,000 Net proceeds 1,900,000 The note is noninterest-bearing. Therefore, the maturity value is equal to the principal or face value of the note. ‘The note is dated July 1, 2004 and it was discounted on September 1, 2004 and therefore, 2 months already expired. Since the term of the note is 8 months, the unexpired term is 6 months. 55, The sale of an office equipment resulting in a gain indicates that the proceeds from the sale were a. Less than current market value. . Greater than book value. b. Greater than cost. d. Less than book value. RPGPAMOI86 56. The sale of a depreciable asset resulting in a loss, indicates that the proceeds from the sale were a. Less than current market value. c. Greater than book value. b. Greater than cost. d. Less than book value. 57. Depreciation, in accounting, is better considered as Drop in the resale value of an asset at some time after its acquisition. Physical deterioration through wear and tear, abuse and passage of time. Deciine in price of an equipment, machinery and building. Apportionment of the purchase price on an asset over its economic life. Loss of value of specific long-lived asset. RPCPA 10/78 ehose58. The system of reporting fixed assets at depreciated value based on cost in spite of substantial appreciation in market value is an application of a Money-measuring-unit assumption. . Matching assumption. b. Revenue recognition assumption. d. Going-concem assumption. RPCPAUOIT4 Physical depreciation vs. Functional depreciation 59, Depreciation which arises from obsolescence or inadequacy to perform efficiently is called a. Periodic. c. Normal. b. Physical d. Functional. 60. They represent the distillation of the effects of environment characteristics on the financial accounting process and could also serve as a foundation for other accounting principles that are based on the same environment characteristics a. Basic financial statements. ©. Basic elements of financial accounting b. Basic features of financial accounting d. Objectives of financial accounting 61. The term "matching costs and revenues” means that a. Allcosts should be allocated to accounting periods on the basis of the effect on net revenue. b. Costs which can be associated directly with specific revenue should be carried forward in the balance sheet until the associated revenue is recognized c. Costs should be carried forward to future accounting periods if they have not resulted in revenue during the current accounting period, d. If costs are charged off as expenses in the accounting period when they are actually incurred, they will be matched properly with revenues eamed during that accounting period 62. The principles that guide the recording, measuring and communicating process of financial accounting a. Broad operating principles. c. Pervasive principles. b. Detailed principles. 4. Qualitative principles 63. The qualitative aspect of information that provides results that would substantially be duplicated by independent measures using the same measurement methods is referred to as a. Verifiability c. Comparability.b. Consistency. d. —_Understandabilty. 64, The consistency standard of reporting requires that a. Accounting procedures be adopted which given a consistent rate of return b. Extraordinary gains and losses should not appear on the income statement, ¢. The effect of changes in accounting upon income be properly disclosed. d. Expenses be reported as charges against the period in which they are incurred. fe. The reports should be submitted monthly f they are prepared monthly, or annually ifthey are prepared on a yearly basis 65. Costs of which are to be regarded as applicable to the inventory in which is determined by adding the unit prices of all purchases and dividing by the number of purchase is known as Weighted-average method. c. Simple-average method. b. — Moving-average method. d Gross profit method 66. The best method of inventory valuation for a dealer of jewelry is a. Specific identification . Base-stock method. b. Last invoice price. d. Weighted-average method. 67. Discounting a note receivable is a way to Allof these. Update an account. Collect on a note. Increase interest revenue. 68. Under the direct write-off method, an actual write-off of specific customer's accounts Has not effect on net income. Decreases net assets. Decreases net income. 2 pe Decreases working capital 69. When the allowance method of recognizing bad debt expense is used, the entry to record the specific write-off of a specific customers’ account, a. Decreases current assets.2 soe Decreases net income. Has not effect on net income. Decreases working capital ‘The following statements relate to cash + The term “cash equivalent’ refers to demand credit instruments such as money order and bank drafts, + The purpose of establishing a petty cash fund is to keep enough cash on hand to cover all normal operating expenses of the business for a period of time. + Classification of a restricted cash balance as current or noncurrent should parallel the classification of the related purpose or obligation for which cash was restricted, + Compensation balances required by a bank should always be excluded ‘rom the “cash” classification on the balance sheet All the statements are false. Only two statements are false. Only one of the statements is false. Three statements are falseWhich of the following statement is correct? ‘a. An inventory control method that review the entire inventory at regular intervals, such as 30 days, 60 days or 90 days and after the review, placed an order for an item with low quantities is called Automatic Order System. b. Moving Average is another term for average periodic method of materials costing. ¢. Lead time refers to the time between placing an order with the supplier and receiving of the inventories. 4. Inventory shortage/loss under normal limits is charged to current period by debiting Inventory Loss or Shortage and crediting Raw Materials inventory, Which of the below statements is incorrect? a. FIFO method not always produces the same amount of ending inventories for both periodic and perpetual system b. Cost Accounting is a system of accounting that deals with the determination and accumulation of cost of a product, activity or services. ¢. The sum of direct materials, indirect labor and other indirect production cost is called manufacturing overhead cost. 4d. Total production cost is the sum of direct materials and conversion cost. Which of the following statements is false? a. When the production levels are expected to increase within the relevant range the fixed costs per unit decreases and variable costs per unit remain constant. b. The sum of indirect materials, indirect labor and other indirect production cost is called factory overhead cost. «. Fixed costs increase per unit when the actual level of activity increases. d. The key document used to accumulate costs in job order costing is called Job Order Cost sheet Which of the following statements is true? a. Total fixed cost at break-even point is equal to contribution margi b. Normal idle time cost should be charged to loss for the current period. . When the production levels are expected to increase within the relevant range the fixed costs per unit decreases and the total variable costs remain constant. d. In job order costing, production is transferred from one process to another until the products are fully completed. Product A accounts 75% of a company’s total sales revenue and has a variable cost equal to 60% of its selling price. Product B accounts for 25% of total sales revenue and has a variable cost equal to 85% of its selling price. What is the breakeven point given the fixed costs of P150,000.00. ‘a. P375,000.00 . P500,000.00 b. P4a4,4a4.a5 d. P545,455.55, Cost-volume-profit (CVP) analysis is a key factor in many decisions, including choice of product lines, pricing of products, marketing strategy, and use of productive facilities. A calculation used in a CVP analysis is the breakevenpoint. Once the breakeven point has been reached, operating income will increase by the a. Gross margin per unit for each additional unit sold b. Contribution margin per unit for each additional unit sold ¢. Fixed cost per unit for each additional unit sold d. Variable cost per unit for each additional unit sold 7. A company's breakeven point in sales pesos maybe affected by equal percentage increases in both selling price and variable cost per unit (assume all other factors are constant within the relevant range). The equal percentage changes in selling price and variable cost per unit will cause the breakeven point in sales pesos to a. Decrease by less than the percentage increase in the selling price b. Decrease by more than the percentage increase in the selling price c. Increase by the percentage change in variable cost per unit d. Remain unchanged 8. In process cost system, the application of factory overhead usually would be recorded as increase in: a. Finished goods inventory cc. Factory overhead control b. Work in process inventory d. Cost of goods sold control 9. ABC Company started 9,000 units in October 2019. The company transferred, out 9,500 finished units and ended the period with 1,500 units that were 40% complete as to both prime and factory overhead costs. Beginning work in process inventory units were: a. 1,100 units ¢. 1,500 units b. 1,400 units d. 2,000 units 10.No Chan Ged Company provided the following information for the month of October 2019: Factory overhead incurred P310,000.00 Applied Factory Overhead 340,600.00 Cost of Goods Sold 217,000.00 Ending Work In Process 62,000.00 Ending Finished Goods Inventory 31,000.00 The management consider the amount of over or under applied factory overhead significant if it is more than 5% of the actual factory overhead incurred, At what amount should the cost of goods sold be adjusted for the under or over applied factory overhead? a. P21,420 debit c. P30,600 debit b. P21,420 credit d. P30,600 credit 1Linventoriable costs are expense in the statement of profit and loss a. When direct materials for c. After the products are the product are purchased manufactured b. When the products are d. When the materials are sold put into production12.Cost associated with normal idle time should be: a. Included as part of direct c. Added directly to cost of labor cost goods sold for the period b. Treated as part of d. Included as part of selling overhead cost and administrative cost 13.The margin of safety is a key concept of CVP Analysis. The margin of safety is a. The contribution margin rate b. The difference between budgeted sales and breakeven sales c. The difference between budgeted contribution margin and breakeven contribution margin d. The difference between the breakeven point in sales and cash flow breakeven 14.Which of the following will result in lowering the breakeven point? a. An increase in variable c. A decrease in mixed cost per unit cost b. A decrease in the d. An increase in income contribution margin per taxes unit 15.if the operating leverage of Company A is 5. Which of the following statement is true? a. An increase of 10% in Sales of Company A will result to a corresponding 50% decrease in profit. b. A 50% increase in profit of Company A Is a result of the 10% increase in its Sales c. An increase of 10% in Sales will result to a 50% increase in Contribution Marain, d. A 10 % decrease in contribution margin will result to a 50% decrease in fixed cost 16.Which of the following would decrease unit contribution margin the most? aA 10% decrease in ©. A 10% decrease in selling price variable cost b. A 10% increase in variable d. A 10% decrease in fixed cost cost 17.All of the following items are debited to work in process inventory except a. Allocated manufacturing overhead b, Materials from production returned to storeroom c. Direct Labor Distributed d. Direct Materials Used 18.Cost incurred to convert raw materials into finished goods. a. Direct costs c. Prime costs b. Indirect costs d. Conversion costs 19.Factory overhead of 428 machine hours was applied to production at a rate P55.00/machine hour and the actual factory overheads are P24,680, there is, an: a, Under applied overhead b. Under applied overhead of of P1,140 45,940. Over applied overhead of d. Over applied overhead of P1,140 P45,940 20.If the raw material prices are affected by inflation, which of the following methods of valuing stocks will give the highest gross profit? a. LIFO ©, FIFO b. Replacement cost d. Simple average (Item No, 21 to 24) Activity in UNCEAN Company’s production Department 1 for the month of October 2019 follows: Percentage of Completion nits Materials Labor & FOH Work in process inventory, Oct. 1 6,000 60% 45% Started into production during October 55,000 Work in process inventory, Oct. 31 4,000 35% 20% 21.The Equivalent units for labor and overhead for October, using the weighted average method, are a. 59,600 units ¢. 61,000 units b. 57,800 units d. 59,000 units 22.The Equivalent units for labor and overhead for October, using the FIFO method, are: a. 53,100 units c. 52,500 units b. 55,000 units d. 55,100 units 23.The Equivalent units for Materials for October, using the FIFO method, are: a. 54,800 units ¢. 56,000 units b, 49,800 units d. 57,200 units 24.The Equivalent units for Materials for October, using the weighted average method, are: a. 59,000 units ¢. 58,400 units b. 55,000 units d. 57,000 units 25.Fourth step in process costing system is to a, summarize the flow of c. summarize total costs physical units d. compute cost for each b. compute total output in equivalent unit equivalent units 26.A company uses material A for production of Product Z. The supplier of Material A quotes a delivery period of 2 weeks. If the company uses 500 units of Material A per week according to activity levels, and with a safety stock equivalent to a weekly consumption of Material A, the Re-order Point of Material A will be a. 1,000 units d. 2,500 units b. 1,500 units €. 2,000 units27.Choco Company uses the FIFO costing method. It had 4,000 units at the beginning of the month that were 70% complete as to conversion costs and 6,000 units at the end of the month that were 40% complete as to conversion costs, Choco started 15,000 units during the month. All materials are added at the beginning of the process. Calculate the equivalent units for materials. a. 11,000 ¢. 15,000 b. 13,000 d. 19,000 28.The usage of materials during the production does not include an entry to: a. Debit work in process c. Debit factory overhead b. Credit accounts payable d. Credit materials inventory 29.1n a job order cost system, the use of indirect materials previously purchased usually is recorded as an increase in: a. Materials control ¢. Factory overhead control b. Work in process d, Factory overhead applied 30.All of the following represent expense except? a. Cost of goods sold c. Factory overhead b. Work in process inventory d. Expired insurance 31.Under the variable costing method, which of the following costs are allocated to inventory? Variable factory Variable Selling and Overhead costs Administrative costs a No No b No Yes e Yes Yes da. Yes No 32.The monthly sales commission of a sales supervisor is an example of: a. Cost of goods sold d. Research and development b. Administrative cost cost c. Selling and distribution cost 33.Which inventory control method is commonly used in a computerized environment and an order is automatically placed when the stock level reaches a predetermined level? a. Order Cycling System c. ABC System b. Automatic Order System d. Min-Max method 34.It refers to that level of inventory order that minimizes the total cost associated with inventory management. a. Reorder Point c. Safety stock b. Economic Order Quantity d. Automatic Order System 35.ABC Company shows the following production information for the month of October 2019: Materials cost (including P80,000.00 indirect materials) 400,000.00 Labor cost (including P50,000.00 indirect labor) 250,000.00 Factory Overhead representing utilities P150,000.00 How much is the Conversion Cost? a. P400,000.00 ¢, P480,000.00 b. P450,000.00 d. P520,000.00wT 36.Which inventory costing method of materials is used when the value assigned to materials closing inventory is the latest purchased price? a. FIFO Method c. Average Method b. LIFO Method d. Specific Identification 37.Peregrine Company uses periodic inventory system. The following information was provided for October 2019. Materials Purchased during the month P 52,000.00 Materials Available for use (P25,000 is indirect materials) 75,000.00 Materials Issued to Production 40,000.00 How much is the increase in the inventory of materials? ‘a. P35,000.00 c. P23,000.00 b, P12,000,00 d. P20,000.00 38.BCD Company show the following data. What is the Cost of Materials Used using LIFO Perpetual Inventory? Date ‘Transactions Units. Unit Cost Total October 1 Beginning Balance 50 50.00 2,500.00 October 17 Issued to Factory 50 October 30 Purchases 20 40.00 800.00 a. P1,000.00 c. P800.00 b. P2,300.00 d. P2,500.00 39. (Same data in No. 38) What is the Closing Materials Inventory of BCD. Company under LIFO costing? (Bonus - LIFO Perpetual or LIFO Periodic?) a, P1,000.00 (20 x P50.00) . PBO0.00 (20 x P40.00) Periodic Perpetual b. P2,300.00 d. P2,500.00 40.X Company uses activity-based costing for Product B and Product D. The total estimated overhead cost for the parts administration activity pool was P550,000 and the expected activity was 2000 part types. If Product D requires 1200 part types, the amount of overhead allocated to product D for parts administration would be: a. P275,000 c, P330,000 (1200/2000 x b, P300,000 550,000.00) d. P345,000 (Items 41 and 42) Y Company estimated that its total overhead cost of P600,000. It is considering implementing activity-based costing. Three cost pools (and activity measures) have been identified: machine-related (machine-hours), production orders (number of orders), and product testing (number of tests). The estimated overhead was assigned to the pools as follows: P200,000 to machine-related, P100,000 to production orders, and P300,000 to product testing. Y Company produces two products. The following information is available:Orders Test Direct Labor Hour Product 1 40,000 800 6,000 25,000 Product 2 10,000 200 9,000 15,000 The company currently uses traditional costing and allocates overhead based on direct labor-hours. 41.How much overhead is assigned to Product 1 using traditional costing? a. P375,000 (25,000/40,000 x c. P325,000 600,000.00) d. P225,000 b. P300,000 42.How much overhead would be assigned to Product 1 if ABC is used? a. P300,000 c. P420,000 b. P173,000 d. P360,000 Machine Hours (40,000/50,000 x P100,000.00) P 80,000.00 Orders (800/1000 x P200,000.00) 160,000.00 Test (6,000/15,000 x P300,000.00) 12 . ‘Total Overhead Cost - ABC Costing 360,000.00 (Items 43 to 46) Patrick Company has two consecutive departments, P and A. During the month, Department A received 12,000 units from Department P costing P26,400. There were 9,000 units completed and transferred to finished ‘goods warehouse and 2,000 units remained in the ending inventory with 20% completion. Costs incurred by Department 4 for the month are as follows: Materials P 9,400 Labor 5,640 Overhead 3,760 P 18,800 43.There were no beginning inventories. If lost units were discovered at the start of the process, the cost of units completed will be: a. P37,800 ¢. P39,600 b. P37,869 d. P39,906 Started during the Month 12,000 Units to be Accounted for 12,000 Completed & Transferred 9,000 100% 9,000 WIP Ending Inventory 2,000 20% 400 Lost Units: _1.000 0% o Units Accounted for 12,000 9,400 Cost from Department P P26,400.00/12,000 2.20 Cost this Department P18,800.00/9,400 2.00 Unit Cost 45,200.00 4.20 Lost Units Adjustment = (1,000 x P2.20)/11,000 Remaining Good Units= P2,200.00/11,000 = —PO.20 Cost of Completed Units: Completed & Transferred 9,000 x 4.20 37,800.00 Adjustment for Lost Units 9,000 x 0.20 1,800.00 P39,600.00 Work in Process End Cost from Department P 2,000 x 2.20 P 4,400.00 Cost this Department 400 x 2.00 800.00 Adjustment for Lost Units 2,000 x 0.20 400.00 5,600.00 Cost as Accounted For 45,200.00 44 Refer to the data for Patrick Company, if lost units were discovered during the process, the cost of units completed will be ? a. 37,973 . 39,600 b. 37,800 d. 39,906 Started during the Month 12.000 Units to be Accounted for 12,000 Completed & Transferred 9,000 100% 9,000 WIP Ending Inventory 2,000 20% 400 Lost Units: 1.000 0% 0 Units Accounted for 12,000 9,400 Cost from Department P P26,400.00/12,000 2.20 Cost this Department P18,800.00/9,400 2.00 Unit Cost 45,200.00 4.20 Lost Units Adjustment = __ (1,000 x P2.20)/9,400 Equivalent Units = P2,200.00/9.400 = 0.2340 Cost of Completed Units: Completed & Transferred 9,000 x 4.2000 P37,800.00 Adjustment for Lost Units 9,000 x 0.2340 2,106.00 39,906.00 Work in Process End Cost from Department P 2,000 x 2.20 P 4,400.00 Cost this Department 400 x 2.00 800.00 Adjustment for Lost Units 400 x 0.2340 94.00 5.294,00 Cost as Accounted For 45,200.00 45.Refer to the data for Patrick Company, if lost units were discovered at the end of the process, the cost of units completed will be ? a. 36,069 c. 39,906 b. 39,600 d. 40,077 Started during the Month 12,000 Units to be Accounted for 12,000 Completed & Transferred 9,000 100% 9,000 WIP Ending Inventory 2,000 20% 400Lost Units 1,000 100% 1,000 Units Accounted for 12,000 10,400 Cost from Department P P26,400.00/12,000 2.2000 Cost this Department P18,800.00/10,400 1.8077 Unit Cost 45,200.00 4.0077 Lost Units Adjustment = (1,000 x P2.200)+(1,000 x 1.8077) /9,000 Completed Units = P4,007.70/9,000 = 0.4453 Cost of Completed Units: Completed & Transferred 9,000 x 4.0077 P36,069.30 Adjustment for Lost Units 9,000 x 0.4453 4,007.70 40,077.00 Work in Process End Cost from Department P 2,000 x 2.20 P 4,400.00 Cost this Department 400 x 2.00 723.00 5,123.00 Cost as Accounted For 45,200.00 46.Refer to the data for Patrick Company, if lost units were deemed abnormal, the cost of units completed will be ? a. 36,069 (9,000 x 4.0077} c. 39,906 b. 39,600 d. 40,077 47.Alexandra Company provided the following information for the month of October 2019. Raw Materials Purchased 100,000.00 Raw Materials Inventory October 1 150,000.00 Raw Materials Inventory October 31 165,000.00 Factory Overhead (includes indirect materials ‘Amounting to P25,000.00 and indirect Labor amounting to P85,000.00) 320,000.00 Total Manufacturing Cost 640,000.00 How much is the Direct Labor Cost? a. P235,000.00 ¢. P345,000.00 b. P260,000.00 d. P320,000.00 Direct Materials Used Materials Inventory Beginning 150,000.00 Purchases 100,000.00 Materials Available for Use 250,000.00 Materials Inventory End 165,000.00 Materials Used 85,000.00 Less: Indirect Materials Used 25,000.00 60,000.00 Factory Overhead 320,000.00 Total Direct Materials Used and Factory Overhead Cost 380,000.00Less: Total Manufacturing Cost 640,000.00 Direct Labor Cost 260,000.00 48.,ll of the following expenses are Fixed costs except? a. Rental of warehouse ¢. Commission of Salesman b. Property Taxes d. Accountant's Salary 49.Determine the reorder point from the below data: Average daily usage = 50 Units Lead Time = 15days Safety Stock = 2 days average usage a. 750 Units c. 1,500 U b. 850 Units d. 1,550 Units Reorder Point = (Lead Time x Average Usage) + Safety Stock = (15x50) + 100 = 750+100 = 850 units 50.DEF Company shows the following materials data in its books: Transactions No. of Units Unit Cost Total Cost Beginning Inventory 100 Units P10.00 P1,000.00 Purchases 100 Units P 8.00 P 800.00 Issuance 85 Units If DEF Company reported Materials Ending Inventory value of P1,120.00, which of the following method was used? a. FIFO c. Specific Identification b, LIFO d, Weighted Average Beginning Inventory(100 units x P10.00) —_P1,000.00 Purchases (remaining) (15 units x P8.00) __120,00 Materials Ending Inventory P1,120.00 51.Using the same data in number 50. What is the Cost of Materials Used under FIFO method of costing materials? a. P680.00 ¢. P850.00 (85 units x P10.00) b. P765.00 d. P950.00 52.A direct labor overtime premium should be charged to a specific job when the overtime is caused by the: a, Management's failure to include the job in the production schedule, b. Customer's requirement for the early completion of the job. c. The overtime rendered was due to the delayed transfer of materials from storeroom. d. Management's requirement that the job be completed before the annual factory closure due to vacation. 53.For a manufacturing company, direct labor costs may be included in a. Direct materials inventory ¢. Merchandise inventory only. only. d. Direct materials inventory, b. Work-in-process inventory work in process inventory, and finished goods inventory and finished goods inventory.54,Whatothent iGasofinkshatéigeodsrinventory beginning, what is the difference of Costafegoods manufactured and finished goods ending inventory? b. Work in Process Inventory End ¢. Cost of Goods Sold d. Gross Margin55.The abnormal cost of rework would be recorded as: a. Increase in finished goods c. Decrease in factory overhead inventory control b. Increase in factory overhead d, Increase in loss from control abnormal rework 56.An estimated cost of normal spoilage cost excluding any disposal value that ‘are common to all jobs would be: a. Charged to work in process d. Charged to cost of goods b. Charged to factory overhead sold c. Charged to loss account 57.ABC Company manufactured the following units: Completed Units 5,000 Spoiled Units (normal) 200 Abnormal Spoilage 300 The company recognizes spoiled units in computing output in equivalent units, Total manufacturing costs is P99,000.00. What amount should ABC Company debit to finished goods? a. 90,000.00 ©. 95,400.00 b. 93,600.00 d. 99,000.00 Completed U (5,000 units x P18.00) P90,000.00 Spoiled Uni (200 units x P18.00) 3,600.00 Cost of Completed Units 93,600.00 Loss on Abnormal Spoilage (300 units x P18.00) —5,400,00 Cost as Accounted For 99,000.00 58.In manufacturing its products, BCD Company incurred normal spoilage of P14,000.00 and abnormal spoilage of P6,000.00 for the month of October 2019. How much spoilage cost should BCD Company charged as inventoriable for the month? a. P6,000,00 €. P14,000.00 «ormal Spoilage b. PO.00 Cost Only) d. P20,000.00 59.Spoilage from a manufacturing process was discovered during an inspection of work in process. In a process costing system, the cost of spoilage would be added to the cost of good units produced if the spoilage is: ‘Abnormal Normal a. No Yes b. No No c. Yes No d. Yes Yes 60.Which of the following is incorrect? a. Joint costs are allocated to main products and not to by-products b. The primary distinction between by-products and joint products is the difference in sales value ¢. Joint costs are incurred after the split-off p: in a production process.4d, The split-off point is where the individual products are first identifiable in a joint process. 61.ABC Manufacturing Company produces two joint products, AB and BC. October 2019 joint production costs were P30,000.00. To convert the products into salable form, further processing costs of P15,000.00 for 1,000 units of AB and P10,000.00 for 700 units of BC with a selling price per unit of P80.00 for AB and P100.00 for BC. ABC Mfg. Company uses net realizable value of allocating joint product costs. The joint costs allocated to product BC was, a. 15,600.00 c. 16,000.00 b. 14,000.00 d. 14,400.00 Product AB 1,000 80.00 80,000.00 (P15,000.00) P65,000/125,000 x 30,000 = P15,600.00 Product BC 700 100.00 70,000.00 (10,000.00) P60,000/125,000 x 30,000 = P24,400,00 62.P Company produces three types of products- product A, product B and product C. Product A requires 200 machine setups and machine hours used on it were 1,000. Product B requires 400 machine setups and machine hours used on it were 500. Product C requires 620 machine setups and machine hours used on it were 1,500. The company has defined an activity cost pool machine setups for which the cost driver is number of machine setups. The total overhead cost assigned to that cost pool was P183,000. The machine setups overhead assigned to each of the products was: ‘a. P61,000 for A; P61,000 for B; P61,000 for C b, P61,000 for A; P30,500 for B; P91,500 for C ¢. P30,000 for A; 60,000 for B; P93,000 for C 4d. P30,000 for A; P63,000 for 8; P90,000 for C Set-up Product A 20/1220 x 183,000 30,000.00 Product 8 40/1220 x 183,000 = —_—P60,000.00 Product __620/1220 x 183,000 P93.000.00 Total 1,220 183,000.00 (Item number 63 and 64) A Company has two products: X and ¥, It has prepared the following analysis showing budgeted cost and activity for each three activity cost pools: Per Budget Cost Pool Cost Product X Activity Product Y Activity Activity 1 P3,600 25,200 46,800 Activity 2. P4,800 36,000 44,000 Activity 3. P6,300 43,200 46,800 Annual production and sales level of Product X is 161,100 units, and the annual production and sales level of Product Y is 275,200 units. Activity 2 ‘Activity 2 Activity 3 ‘located Joint Cost Product X __25,200/72.000 x3,600= 1,260 38,000/00,000 x 4.900 = 2,160 43,200/90,000 = 3,024 P6,444/161,100 = PO.04 Product Y "46,800/72.000.x 3600 = 2,340 44,000/80,000 x 4.900 = 2,640 46,800/90,000 = 3,276 P8,256(275,200 = PO.03 72.000 ‘s0.000 ‘90,00063.How much is the overhead cost per unit of Product X? a. 0.03 c. 0.05 b. 0.04 d. 0.06 64.How much is the overhead cost per unit of product Y? a. 0.03 <. 0.05 b. 0.04 d. 0.06 (Items 65 and 68} W Company Assembly / Polish Labor hours manufactures spoked and solid P4.00 40,000 bicycle wheels. The company 30,000 relies on an activity based Inspection Inspections costing system. The following P20.00 100 information is for the cost pools: 1,100 Cost Pool Activity Total production Activity Rate 10,000 Spoked ‘Solid 10,000 Machine set-up Set- ups P180.00 200 800 Spoked Solid Machine Set-up (200 x P180,00) P 36,000.00 (800 += x_—=~P180.00) P144,000.00 Assembly/Polish (40,000 x P4.00) 160,000.00 (30,000 x P4.00) 120,000.00 Inspection (100 x 20.00) ___2,000.00 (1,100 x P20.00) __ 22,000.00 Total Overhead Cost 198,000.00 286,000.00 Total Production Units 10,000 units 10,000 units Overhead Cost per Unit P 19.80 P 28.60 65.How much is the total overhead assigned to spoked product? a. P286,000 ¢. 242,000 b. P198.000 d. P484,000 66.How much is the total overhead assigned to solid product? a. P286,000 c. P242,000 b. P198,000 d. P484,000 67.How much is the overhead cost per unit of solid product? a. P28.60 fc. P24.20 b. P19.80 d. P48.40 68.How much is the overhead cost per unit of spoked product? a. P28.60 ¢. P24.20 b. P19.80 d. P48.4069.How much is the estimated machine rental cost based on the chart below if the company operates at 2,750 machine hours? muse cost orapn a. 3,666.66 . 3,750.00 b. 3,667.00 d. 3,600.00 Total Mixed Cost 4,000.00 Machine Hours 2,750 Hours Less: Fixed Cost 1,000.00 Variable Cost — P1,00 Variable Cost P3,000,00 Variable Cost P2,750.00 Machine Hours 3,000 Fixed Cost 1,000.00 Variable Cost per Unit P 1.00 Estimated = Machine —_— Rental 3,750.00 (items 70 to 72} The following data were gathered from the books of Kings Company Department 1 during October 2019: Units: In process, beginning (25%) completed 2,000 Finished and transferred 15,000 In process, End (50% Completed) 5,000 Costs: In process, beginning 5,000.00 Cost added this month Materials 85,000.00 Labor 51,000.00 Overhead 34,000.00 WIP Inventory Beginning 2,000 Started during the Month 18.000 Total Units to be Accounted For 20,000 WIP Inventory Beginning 2,000 75% 1,500 Finished and Transferred 13,000 100% 13,000 Work In Process End 5,000 50% _ 2,500Total Units Accounted For 20,000 17,000 (70) WIP Inventory Beginning 5,000.00 Cost Added This Month: Materials 85,000.00/17,000 P 5.00 Labor 51,000.00 /17,000 3.00 Overhead 34,000.00 /17,000 2.00 ‘Total Cost to be Accounted For 175,000.00 P10. Cost Accounted for as Follows: Beginning Inventory P 5,000.00 WIP Inventory Cost This Month (1,500 x P10.000) 15,000.00 Finished and Transferred (13,000 x P10.00) 130,000.00 P 150,000.00 (71) Work In Process Inventory End (2,500 x P10.00) 25,000.00 (72) Cost as Accounted For P175,000.00 70.kings Company equivalent production units under FIFO Method : a. 17,500 c. 19,500 b. 17,000 d. 20,000 T1.How much is the cost of Finished Goods inventory of Kings Company for October 2019? a. 150,714.28 c. 153,205.13 b. 150,000.00 d. 153,750.00 72.How much is the cost of Work in Process Inventory of Kings Company for October 2019? a. 21,285.72 c. 21,794.87 b. 25,000.00 d. 21,250.00 73. Joby Company produces two products from a joint process: A and B. The joint costs for October 2019 production amounting to P50,000.00. Per Yard Product Yards [ SR @Splitof | Disposal Cost | Further | Final Selling @splitot | Processing Price Cost A 3,200 70.00 P12.00 72.50 61.00 8 2,800 45.00 P15.00 5.40 64.00 Yards FSP-FPC Net RealizableValue —_—JointCot. «Allocated JC Product A 1,200 x(P61.00-P2.50] = P 70,200.00 /234,280.00 xP50,000.00= _P14,982.07 Product 8 2,800.x(P64,00~P5.40] = _164,080,00 /234,280.00 x P50,000.00= _P35,017.93 4,000 234,280.00 50,000.00‘What is the method of allocating Joint Costs Joby Company used if the cost assigned to Product A 14,982.07 and Product 8 P35,017.93? Physical Output Method Sales Value at Split-of Method Net Realizable Value at Split-of Method Estimated Net Realizable Value (NRV) Adjusted Sales Value Method 74. What are the steps required for activity-based costing in administration? a. Identify activities thet consume resources. 19, identify cost drivers associsted with activities, C. Compute activity rate per cost driver. d. Allof the above 75.Which of the following is true of activity-based costing relative to traditional costing? a. itrequites less detailed cost measures. ‘6, Accounting department alone can handle all the work €._Itneeds more cost pools d._ tis less costly to implement,FINANCIAL ACCOUNTING AND REPORTING MIDTERM DEPARTMENTAL, EXAMINATION 2° Term., A.Y. 2018 - 2019 BAFACR1X Midterm Exam ‘SCORE: DATE: GENERAL DIRECTION: You are given two-part examination, Part |— Theories (1pteach) and Part ll Problem Solving - (1pt each). Read and analyze the following questions and choose the best answer by shading the letter of your choice in your answer sheet, STRICTLY NO ERASURES ARE ALLOWED. PART | - THEORIES (1PT EACH) 1. Which of the following steps in the accounting cycle are listed in logical order? a. Post the closing entries, take a post-closing trial balance, and joumalize the closing entries. '. Post the journal entries to the general ledger account, prepare a worksheet, and then take a ‘rial balance. c. Journalize transactions, post entries to general ledger, then prepare a trial balance. 4d. Prepare the income statement, prepare the balance sheet and then prepare a trial balance, 2. Atrial balance a. Proves that debits and credits are equal in the ledger '. Supplies a listing of open accounts and their balances that are used in preparing financial statements, c. Is normally prepared three times in the accounting cycle. d. Allof these 3, Failure to record the unexpired portion of insurance premium paid would a. understate expense b. understate profit c. overstates owner's equity d. overstales liabilities 4, Statement 1: In general, debits refer to increases in account balances, and credits refer to decreases. Statement 2: Allliabllty and equity accounts are increased on the credit side and decreased on the debit side. a. True, Tue c. False, True b. True, False d False, False 5, Statement 1: If purchased of supplies was recorded using the asset method and no adjusting ‘ontry was made, the net income will be understated and the assets will be overstated.‘Statement 2: If cash received for services to be rendered in the future was recorded by debiting ‘cash and crediting service revenue and no adjustment was made at the end of the period, the net income and revenues for the period will be both understated, a. True, True . False, True b. True, False d False, False 6. Choose the correct statement ‘a. No adjusting entries should be necessary for the inventory account if the periodic inventory system is used. . Example of accrued expenses include wages payable and depreciation expense. «. Accrued items are those for which recognition of the related revenue or expense occurs in an ‘accounting period after the entity pays or receives cash, respectively 4. Reversing enities are done at the beginning of the next acoounting period and are optional. 7. Statement 1: In a merchandising operation, the sales account should include only credit sales of merchandise. ‘Statement 2: If goods are sold at a mark-up of 75% on cost, the gross profit is 75 of cost. a. True, Tue ©. False, True b. True, False d False, False 8. Which of the following companies would be likely to use perpetual system? a. Drugstore c. Car dealer b. Hardware store dd. School and supplies store 9. Which of the following statements is not correct? 1. Physical possession is nat required for legal title to inventory. b. Acash discount has no account of its own and requites no special accounting entry, . The periodic inventory system utilizes a purchases account. 4. The sales account is usad only for the sales of inventories. 10. FOB shipping point means: 4, Title passes at shipping point; seller is responsible to pay for transportation cost b. Title passes at shipping point; buyer is responsible to pay for transportation cost €. Tile does not pass at shipping point, however, buyer is responsible for the transportation cost 4d. Title passes at place of the buyer; buyer is responsible to pay for the transportation cost 11, Which of the following statements is not a characteristic of a perpetual inventory system? 1a Sales are recorded with a corresponding entry to update the cost of goods sold. b. The company maintains detailed records of the cost of each inventory and continuously show the inventory that should be on hand, «. All purchase transactions are recorded to the Merchandise Inventory account. 4. Shipping costs are recorded in a separated account called ‘Freight:n’ 12. Which of the following is not a charactoristic of the periodic system? a. Periodic system is generally used by enterprises maintaining numerous inventory items with low unit costs,13, 14, 15. 16, 17. bb. The inventory quantity is determined by means of a physical count at year-end ‘and the quantity obtained is subtracted from the total units available for sale to dotormine tho units sold during the period. ©. The entry to record the sale of goods is accompanied by debiting Cost of goods sold and crediing Inventory account, @. Purchases of goods are recorded by debiting Purchases account ‘Which of the following statements is false? ‘a. The difference between list price and invoice price is equal to the amount of trade discount. bb. Trade discounts are a convenient means of reducing list price to invoice price. cc. Revenue from the sale of merchandise with a trade discount is entered in the ‘accounting records at lst price. . Trade discounts are not identical to cash discounts. ABC Co, sold P 22,400 of merchandise on account to a customer on January 16, 2018, term FOB Destination, 2/10, n/30 and the customer paid the shipping costs of P 1,500. What would be the journal entry by ABC Co. for the payment of shipping costs by the customer on January 16, 2018 if the company uses perpetual inventory system? ‘a. Freight in 1,500 Cash 1,500 b. Accounts receivable 1,500 Merchandise Inventory 4,500 c. Freight-out 1,500 Accounts receivable 1,500 d. Merchandise Inventory 1,500 Accounts receivable 1,500 Statement 1: Beginning inventory can be computed by adding ending inventory to cost of goods sold less cost of goods purchased. Statement 2: The excass of Output tax over the Input tax is known as VAT payable and is ‘considered a current liability unti itis remitted to Bureau of Internal Revenue. a. True, True ©. False, True b. True, False d. False, False ‘The following are advantages in using special journals except: a. The use of special journals often reduces recording time. b. When special journals are used, the recording step in the accounting cycle can be divided ‘among several accounting personnel. «. Personnel making entries in the special journals need not have a thorough knowledge of the entire accounting system d. None of the above Which of the following items would be recorded in the purchase journal?Supplies purchased on account Equipment purchased on account Merchandise purchased on account Allof the above. pose 18. The controlling account in the general ledger that summarizes the debits and credits to the individual accounts in the customers’ ledger is called a. Accounts payable ledger b. Accounts receivable ledger c. Purchases ledger 4. Sales ledger 19. Statement 1: The form of Balance sheet that lists assets on the left-hand side of the statement with the liabilities and owner's equity on the right-hand side is referred to as “Report form”. Statement 2: Financial statements should be prepared at least annually. a. True, True c. False, True b. True, False d. False, False 20. Statement 1: Assets will be classified as current when it is expected to be realized within twelve months after the reporting date. Statement 2: Expenses in the income statement presented using the nature of expense method are aggregated according to their nature and are not reallocated among various functions within the entity a. True, True c. False, False b. False, True 4. True, False PART Il - PROBLEM SOLVING (1PT EACH) 21. Comparison of the balance sheet of ABC Co. at the end of 2018 with its balance sheet at the end of 2017 showed a decrease in total assets of P 69,000 and owner's equity by P 15,000. The change in liabilities during the year was a. Increase of P 84,000 c. Decrease of P 54,000 b. Decrease of P 84,000 d. Increase of P 54,000 22. DEF Co. had total assets of P 20,000,000 and total equity of P 15,000,000 on January 1. During the year, assets increased by P 3,000,000 and liabilities decreased to P 4,000,000. DEF Co, also had withdrawals of P 1,000,000 and additional investments of P 2,500,000.What amount of net income/ net loss should be reported for the year? a. P 7,500,000 net income . P7,500,000 net loss 'b. P.2,500,000 net income 4. P 2,500,000 net loss Use the following information for no. 23-24. The following transactions and events relate to GHI Co. for the current accounting period: a.) Sold merchandise costing P 450,000 for P 100,000 cash and P 700,000 on account. b.) Perpetual inventory system is used. ¢.) Purchased land for P 1,000,000 cash with P 3,000,000 mortgage payable.4d.) Received payment on account, P 120,000 .) Utilities expense incurred for the month, P 80,000 {,) Estimated uncollectible accounts is 2% of the outstanding accounts receivable. The balance of accounts receivable and allowance for bad debts at the beginning of the month is P 500,000 and P 5, 000, respectively. During the month, there are recovery of accounts of P 4,000. g.) Depreciation for the month is P 15,000. 23. The foregoing transactions and events increased the total assets by a, P 3,080,000 b, P.246,000 ©. P 3,326,000 d. P3,623,000 24. The foregoing transactions and events increased the total equity by a. P 3,080,000 b. P 246,000 c. P:3,326,000 d. P- 3,623,000 Use the following information for nos. 25-28. The trial balance of JKL Company is shown below. JKL Company Trial Balance ‘As of December 31, 2018 Debit Credit Cash P 70,000 Accounts Receivable 25,000 Office Equipment 90,000 Accounts Payable P 65,000 JKL, Capital 107,500 Fees income 62,500 Salaries Expense 25,000 Rent Expense 5,000 Utilities Expense 1600 Total P 216,600 P.235,000 In the process of verifying the amount in the trial balance, the following errors were discovered: (a) A debit to P 5,000 was not posted to accounts payable. (b) A debit to utilities expense for P 1,000 was posted as P 100. (c) A debit entry for accounts receivable was posted to the credit side P 5,000. (d) Fees income of P 2,500 was posted twice. 25. The corrected trial balance of the JKL company should show total debits of a. P 228,500 c. P-231,000 b. P 226,000 d. P 227,500 26. The corrected net income of JKL Company is a. P 27,500 ¢. P-30,000b. P-30,900 . P 32,500 27. How much is the total assets of JKL Company? a. P 185,000 . P 180,000 b. P 195,000 . P 190,000 28. How much is the total liabilities of JKL Company? a. P-60,000 c. P.65,000 b. P96, 600 . P 60,900 Use the following information for no. 29. Prepaid Insurance: Balance beginning of year P.5,600 Balance end of year 6,400 During the year, an additional business insurance policy was purchased. A 2-year premium of P 2,500 was paid and charged to Prepaid Insurance. Assume that the entity prepares statements and adjusting entries only once each year. 29, What is the adjusting journal entry to arrive at ending the ending balance? a. Debit Insurance Expense and credit Prepaid Insurance, P 1,700 b. Debit Prepaid Insurance and credit Insurance Expense, P 1,700 ¢. Debit Prepaid Insurance and credit Insurance Expense, P 800 d. Debit Prepaid Insurance and credit Insurance Expense, P 6,400 30. The accountant of MNO Co. made the following adjusting entry on December 31. Prepaid Rent P 1,800 Rent Expense P 1,800 It annual rent is paid in advance every October 1. The original transactions entry made was a. Debit Prepaid Rent and credit Cash, P 1,800 b. Debit Rent Expense and credit Cash, P 1,800 c. Debit Rent Expense and credit Cash, P 2,400 . Debit Rent Expense and credit Cash, P 7,200 Use the following information for no. 31-32. ‘On June 1, 2018, Guzman Forest Products sold merchandise of P 2,500 for each Watunog terms: 2/10,n/30. Afable Audio bought seven units, less trade discounts of 10% and Disoman, 20%. 31. How much did Afable Audio pay on June 8, 2018? (Selling price is exclusive of VAT) a. P 12,348 ©. P 19,208 b. P 18,623.84 . P 13,829.76 32. How much is the sales discount recorded on June 8, 2018? a. P 282.24 ©. P.250 b. P252 d. P 242Use the following information for no. 33-37. ‘At the beginning of the current season on April 1, the ledger of Cho Cho Pro Shop showed cash P 250,500, Merchandise Inventory P 300,500 and Cho Ramos, Capital P 551,000. The following transactions are completed during April. (Note : transactions pertaining to merchandise is VAT inclusive.) April 5 Purchased golf bags, clubs and balls on account from Balata Co.,P 179,200, FOB Shipping point, terms: 2/10,n/60. 7 Paid freight on Balata purchase, P 8,000. 9 Received credit from Balata Co. for merchandise returned, P 22,400. 10 Sold merchandise on account to members P 12,096, terms 1/30. 11 Purchased golf shoes, sweaters, and other accessories on account from Arrow Sportswear, P 73,920, terms: 1/10,n/30. 14 Paid Balata Co. in full. 16 Received credit from Arrow Sportswear for merchandise returned, P 7,840. 18 Made sales on account to members for P 41,440, terms,r/30. Paid Arrow Sportswear in full Granted credit to members for clothing that did not fit, P 3,360. Made cash sales, P 67,200. Received payments on account from members, P 19,100. - All sale transactions are sold at 125% of cost - The company uses perpetual inventory system 33. How much is the balance of Merchandise Inventory on April 30, 2018? a. P-468,270 ¢.P119,70 b. P-420,860 4d. P 420,270 34, How much is the balance of Cash on April 30, 2018? a. P 109,716.80 c. P 240,555.20 b. P 175,136.20 d. P 185,080.80 35. How much is the balance of (vat payable)/vat creditable on April 30, 2018? a. (P 10,897.20) ©. P 12,576 b. P 10,897.20 d. (P 12,576) 36. How much is the balance of Accounts Receivable on April 30, 2018? a. P 50,176 . P 34,436b. P 31,076 d. P 53,536 37. How much is the gross profit for the month of April 20187 a. P 20,960 c. P.20,096 b. P 23,960 d. P 29,630 Use the following information for nos. 38-40. (On February 1, 2018, a fire destroyed all the merchandise inventory on hand of CAMMEE ‘Company. The following information was available from the company’s accounting records, which were saved from the fire by an employee; Cost of goods sold P 1,260,000 Transportation-in 39,600 Merchandise Inventory, 1/1/2018 300,000 Purchase discount 2% of Purchases Purchase returns and allowances 46,200 Purchases 60,000 more of cost of goods sold 38. How much is the value of the destroyed merchandise? a. P 372,000 . P 1,260,000 b. P 1,287,000 d. P 327,000 39. How much is the cost of goods available for sale? a. P 1,587,000 ¢. P 1,260,000 b. P 1,287,000 d. P 1,547,400 40. If goods are sold at a mark-up of170% on cost, how much is the sales for the period? a. P 3,402,000 ¢. P-3,204,000 b. P 2,142,000 d. P 2,412,000 Use the following information for no. 41-44 . At the end of December 31, 2018, the following sales invoices for selling of inventory were not yet recorded by XYZ Co. Invoice date_| Selling price | Cost Date Shipped | Date Received | FOB terms 12/31/2018 | P 400,000 _| P 320,000 | 12/22/2018 | 12/25/2018 Destination 1/2/2019 750,000 | P600,000 | 12/28/2018 | 1/2/2019 12/27/2018 | P 250,000 | P 200,000 | 1/3/2019 75/2019 1/10/2019 P 150,000 | P 120,000 | 12/31/2018 | 1/1/2019 destination 12/30/2018 | P 230,000 | P 184,000 | 12/30/2018 | 1/2/2019 Shipping point ‘The following are the unadjusted balances of each accounts before recording the following invoices: Accounts Receivable P 1,000,000Merchandise Inventory P 3,000,000 Sales P 5,000,000 Cost of goods sold P 2,500,000 41, How much is the adjusted balance of Accounts Receivable? a. P 2,780,000 ©. P 2,530,000 b. P. 2,630,000 4. P 2,380,000 42, How much is the adjusted balance of Merchandise Inventory? a. P 1,896,000 c. P 1,696,000 b. P 1,576,000 dP 1,856,000 43. How much is the adjusted balance of Sales ? a. P 6,380,000 c. P 6,630,000 b. 6,780,000 4. P 6,530,000 44, How much is the adjusted balance of Cost of goods sold? a. P 3,924,000 . P 3,604,000 b. P 3,804,000 4. P 3,724,000 Use the following information for no. 45-47 MTC Company had the following cash transactions during September. Record only the transactions relating to the cash receipts journal and total the columns using the Cash Receipts Journal below. Sept 1 Received payment from Alexis Food Corp for accounts receivable. The amount of the check was P60,000. A 2% discount was taken 8 Cash sales for the week amounted to P1,000.00 10 Mark, the owner, invested an additional P5,000.00 in the Company 20 Received payment from Allan for accounts receivable. Check was for P2, 000.00 and discount of P100.00 was taken. 31 Cash paid for salaries P4, 000.00 31 Received payment on account from Glenn in the amount of P5, 000.00. Payment was made after the discount period. 45. How much is the balance of cash on the cash receipts journal? a. P 70,000 c. P 65,000 b. P 69,100 4. P 71,100 48. How much is the balance of sales discount in the cash receipts journal?a. P 1,300 cP 100 b. P 1,200 . P1,800 47. How much is the total amount of accounts receivable credited in the cash receipts journal? a. P 60,000 . P 67,000 b.P I. Use the following information for no. 48-50 BLK Company have the following assets as of December 31, 2018. The total equity as on December 31, 2018 is P75, 000. Accounts Amounts Notes Receivable(to be collected on December 31, 2020) 15,000 ‘Accounts Receivable 12,000 Furniture and Fixtures 10,000 Office Supplies 500 Cash 21,500 Office Equipment 33,100 Inventories 20,000 Land 10,000 Building Total Assets 125,100 48. How much is total current assets as of December 31, 2018 to be presented of the Statement of Financial position? a. P 54,000 ¢.P-71,100 b. P 69,000 . P 60,900 49. How much is the total non-current assets as of December 31, 2018 to be presented of the Statement of Financial position? a. P 56,100 . P.54,000 b.P71,100 . P 60,900 50. How much is the total current liabilities as of December 31,2018 to be presented in the Statement of Financial Position , if non-current liabilities is equal to P 30,000? a. P 10,200 . P.50,100 b. P 41,100 4. P 20,100