BASIC ACCOUNTING CRASH COURSE

Wrap-up Examinations

Name: ______________________ Section: _____ Score: ____ / 50

Part I. Matching. Match the following transactions with their affects to the accounting equation.
(CBCED-DFCAF)
a. Increase assets, increase liabilities
b. Increase liabilities, decrease stockholders equity
c. Increase assets, increase stockholders equity
d. No affect
e. Decrease assets, decrease liabilities
f. Decrease assets, decrease stockholders equity
1. Received cash for services provided
2. Received utility invoice to be paid next month
3. Investment of land by stockholder
4. Paid part of an amount owed to a creditor
5. Paid cash for the purchase of a one year insurance policy
6. Received payment from a customer for an invoice that was billed last month
7. Dividends paid
8. Provided a service to a customer on account
9. Purchased supplies on credit
10. Paid wages

Part II. Multiple Choices. Choose the letter that corresponds to your answer.
1. Amar Company received P96,000 on April 1, 2002 for one years rent in advance and recorded
the transaction with a credit to a nominal account. The December 31, 2002 adjusting entry is
a. Debit rent revenue and credit unearned rent revenue, P24,000.
b. Debit rent revenue and credit unearned rent revenue, P72,000.
c. Debit unearned rent revenue and credit rent revenue, P24,000.
d. Debit unearned rent revenue and credit rent revenue, P72,000.

2. Andoy Company paid P72,000 on June 1, 2002 for a two-year insurance policy and recorded the
entire amount as insurance expense. The December 31, 2002 adjusting entry is
a. Debit insurance expense and credit prepaid insurance, P21,000.
b. Debit insurance expense and credit prepaid insurance, P51,000.
c. Debit prepaid insurance and credit insurance expense, P21,000.
d. Debit prepaid insurance and credit insurance expense, P51,000.

3. Antipuesto Company purchase equipment on November 1, 2002 and gave a 12-month, 9% note
with a face value of P480,000. The December 31, 2002 adjusting entry is
a. Debit interest expense and credit interest payable, P7,200.
b. Debit interest expense and credit interest payable, P10,800.
c. Debit interest expense and credit cash, P7,200.
d. Debit interest expense and credit interest payable, P43,200.

4. On December 31, 2002, Asilo Companys bookkeeper made an adjusting entry debiting supplies
expense and credit supplies inventory for P12,600. The supplies inventory accounts had a
P15,300 debit balance on December 31, 2001. The December 31, 2002 balance sheet showed
supplies inventory of P11,400. Only one purchase of supplies was made during the month, on
account. The entry for that purchase was
a. Debit supplies inventory and credit cash, P8,700.
b. Debit supplies expense and credit accounts payable, P8,700.
c. Debit supplies inventory and credit accounts payable, P8,700.
d. Debit supplies inventory and credit accounts payable, P16,500.

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 5. Astillo Company loaned P300,000 to another company on December 1, 2002 and received a 3-
month, 15%, interest-bearing note with a face value of P300,000. What adjusting entry should
Astillo Company make on December 31, 2002?
a. Debit interest receivable and credit interest income, P7,500.
b. Debit cash and credit interest income, P3,750.
c. Debit interest receivable and credit interest income, P3,750.
d. Debit cash and credit interest receivable, P7,500.

6. The supplies inventory account balance at the beginning of the period was P66,000. Supplies
totaling P128,250 were purchased during the period and debited to supplies inventory. A
physical count shows P38,250 of supplies inventory at the end of the period. The year-end
adjusting entry is
a. Debit supplies inventory and credit supplies expense, P90,000.
b. Debit supplies expense and credit supplies inventory, P128,250.
c. Debit supplies inventory and credit supplies expense, P156,000.
d. Debit supplies expense and credit supplies inventory, P156,000.

7. At the end of 2002, Avila Company made four adjusting entries for the following items: (1)
depreciation expense, P35,000; (2) expired insurance, P2,200 (originally recorded as prepaid
insurance); (3) interest payable, P9,000; and (4) rental revenue receivable, P10,000.

In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may
be reversed is/are
a. Entry 1 c. Entries 3 and 4
b. Entry 4 d. Entries 2, 3, and 4

8. Bagaipo Company reported an allowance for doubtful accounts of P12,000 (credit) at December
31, 2002 before performing an aging of accounts receivable. As a result of the aging, Bagaipo
Company determined that an estimated P20,000 of the December 31, 2002 accounts receivable
would prove uncollectible. The adjusting entry at December 31, 2002 would be
a. Doubtful accounts expense 8,000
Allowance for doubtful accounts 8,000
b. Doubtful accounts expense 20,000
Accounts receivable 20,000
c. Allowance for doubtful accounts 8,000
Doubtful accounts expense 8,000
d. Doubtful accounts expense 8,000
Interest revenue 8,000

9. Assuming that the company does not reverse the adjusting entries, what should be made on
April 1, 200 when the annual interest payment is received?
a. Debit cash and credit interest revenue, P9,375.
b. Debit cash and credit interest receivable, P28,125.
c. Debit cash, P37,500; credit interest receivable, P28,125; and interest revenue, P9,375.
d. Debit cash and credit interest revenue, P37,500.

10. Using the data of No. 19, but assuming that the company does reverse its adjusting entries,
what entry should be made on April 1, 2003 when the annual interest payment is received?
a. Debit cash and credit interest revenue, P9,375.
b. Debit cash and credit interest receivable, P28,125.
c. Debit cash, P37,500; credit interest receivable, P28,125; and interest revenue, P9,375.
d. Debit cash and credit interest revenue, P37,500.

1.a 2.d 3.a 4.c 5.c 6.d 7.c 8.a 9.BONUS 10. BONUS

11. Information has the quality of relevance when

a. It influences the economic decisions of users by helping them evaluate past, present or
future events or confirming or correcting their past evaluations.

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 b. It is free from bias and error and can be depended upon by users to represent faithfully that
which it either purports to represent or could reasonably be expected to represent.
c. Users are assumed to have a reasonable knowledge of business and economic activities and
accounting and a willingness to study the information with reasonable diligence.
d. Users are informed of the accounting policies employed, any changes in those policies and
the effects of such changes.

12. Technically, this arises in the course of the ordinary activities of an enterprise and is referred to
by a variety of different names including sales, interest, dividends, royalties and rent.
a. Income b. Gain c. Profit d. Revenue

13. The following statements pertain to the concept of income and expenses. Which statement is
incorrect?
a. The definition of expenses encompasses losses as well as those expenses that arise in the
course of the ordinary activities of the enterprise.
b. Losses represent other items that meet the definition of expenses and may or may not arise
in the course of the ordinary activities of the enterprise.
c. The definition of revenue encompasses both income and gains.
d. Gains represent other items that meet the definition of income and may or may not arise in
the course of the ordinary activities of an enterprise.

14. An asset shall be classified as current when it satisfies any of the following criteria (choose the
incorrect one).
a. It is expected to be realized in or is intended for sale or consumption in the entitys normal
operating cycle.
b. It is held primarily for the purpose of being traded.
c. It is expected to be realized in more than twelve months after the balance sheet date.
d. It is cash or a cash equivalent which is unrestricted from being exchanged or used to settle a
liability for at least twelve months after the balance sheet date.

15. The Reynolds Company estimated that the value of its land had increased from $10,000 to
$16,000 and therefore wrote up the land account to $16,000. Which accounting concept(s) was
(were) violated?
a. cost concept
b. objectivity concept
c. unit of measure concept
d. cost and objectivity concepts

16. Assets are:

a. always greater than liabilities.
b. either cash or accounts receivables
c. the same as expenses because they are acquired with cash
d. financed by the company and/or creditors

17. Equipment with an estimated market value of 45,000 is offered for sale at 65,000. The
equipment is acquired for 10,000 in cash and a note payable of 40,000 due in 30 days. The
amount used in the buyer's accounting records to record this acquisition is:
a. 50,000 b. 65,000 c. 10,000 d. 45,000

18. The communication phase of accounting is accomplished by:

a. Storing data c. Recording data
b. Reporting to decision makers d. Processing data

19. Which is an example of a Service form of business

a. Hardware b. Funeral Parlor c. Boutique d. Pharmacy

20. Which is not an example of a Manufacturing form of business

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 b. Bakery b. Tire Shop c. Food Processing d. Furniture factory

Part III. Journal Entries and FS Preparation. In June 2017, Mr. Pagador organized a corporation to
provide aerial photography services. The Company called Aerial Views, began operations immediately.
Transactions during the month of June were as follows:

1-Jun The corporations issued 60,000 shares to Mr. Pagador in exchange for P60,000 cash.

Purchased a plane from utility aircraft for P220,000. Made a P40,000 cash downpayment
2-Jun
and issued a note payable for the remaining balance.

4-Jun Paid Woodrow airport P2,500 to rent office and Hangar space for the month.

15-Jun Billed customers P8,320 for Aerial photographs taker during the first half of June.

15-Jun Paid P5,880 in salaries earned by employees during the first half.

18-Jun Paid Hannigan's Hangar P1,890 for maintenance and repair services on the company plane.

25-Jun Collected P4,910 of the amounts billed to customers on 15 June.

30-Jun Billed customers P16,450 for aerial photographs taken during the second half of the month.

30-Jun Paid P6,000 in salaries earned by employees during the second half of the month.

Received a P2,510 bill from Peatree Petroleum for aircraft fuel purchased in June. The
30-Jun
entire amount is due on 10 July.
30-Jun Declared a P2,000 dividend payable on 15 July.

The account title used by Aerial views are:

Cash Retained earnings
Accounts Receivable Dividends
Aircraft Aerial Photography revenue
Notes Payable Maintenance expense
Accounts Payable Fuel expense
Dividends Payable Salaries expense
Share Capital Rent expense

Required: (20 points)

1. Prepare the necessary journal entries for the month of June 2013. (1 point each)
2. Prepare a Statement of Cash flow using the Indirect Method in good format. (9 points)

Suggested Answers:
Requirement 1:

1-Jun Cash 60,000.00

Share Capital 60,000.00

2-Jun Aircraft 220,000.00

Cash 40,000.00
Note payable 180,000.00

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 4-Jun Rent expesne 2,500.00
Cash 2,500.00

15-Jun Accounts receivable 8,320.00

Aerial Photography revenue 8,320.00

15-Jun Salaries expense 5,880.00

Cash 5,880.00

18-Jun Maintenance expense 1,890.00

Cash 1,890.00

25-Jun Cash 4,910.00

Accounts receivable 4,910.00

30-Jun Accounts receivable 16,450.00

Aerial Photography revenue 16,450.00

30-Jun Salaries expense 6,000.00

Cash 6,000.00

30-Jun Fuel expense 2,510.00

Accounts payable 2,510.00

30-Jun Retained earnings 2,000.00

Dividends Payable 2,000.00

Requirement 2:
Aerial Views
Statement of Cash Flows
For the period June 30, 2017

Net Income 5,990.00

Accounts receivable (19,860.00)
Accounts payable 2,510.00
Notes payable 180,000.00
Operating activities 168,640.00
Investing Activities
Purchase of Aircraft (220,000.00)
Financing activities
Issuance of Share Capital 60,000.00
Cash, end 8,640.00

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