San Beda College Alabang

Final Examination 1st semester AY2019-2020

ACEFIAR Financial Accounting and Reporting – Prof. M. Cullano

Accountancy Department

Name: _______________________________________ Date: __________ Section:________

GENERAL INSTRUCTION:
Identify the letter of the choice that best answers the question. Kindly shade your final answers
in the answer sheet provided. Use only black pen or pencil. Strictly NO ERASURES.
You can also write your answers and solutions in this questionnaire. Cheating is strictly
prohibited, this will constitute an automatic failure on this subject. GOOD LUCK!

1. Adjusting entries:
A. are prepared at the beginning of the accounting period to update all accounts
B. are not needed under the accrual basis of accounting
C. are prepared at the option of the accountant
D. are prepared at the end of the accounting period to update certain accounts

2. Adjusting entries
A. Bring asset and liability accounts to correct balances.
B. All of these.
C. Help to properly measure the period’s net income or net loss.
D. Assign revenues to the period in which they are earned.

3. Why are adjusting entries necessary?

A. To record revenues and expenses.
B. To correct erroneous balances in accounts.
C. To close nominal accounts at year-end.
D. To make debits equal credits.

4. No adjusting entry should consist of:

A. A debit to an expense and a credit to revenue.
B. A debit to an expense and a credit to an asset.
C. A debit to an expense and a credit to a liability.
D. A debit to a liability and a credit to revenue.

5. Which of the following accounts would never be adjusted in a journal entry?

A. Cash C. Supplies
B. Prepaid rent D. Inventory

6. At the end of the period, which is prepared first?

A. balance sheet C. unadjusted trial balance
B. adjusting entries D. income statement

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7. Which of these shows the correct order in which the steps in the accounting cycle are
carried out?
A. adjusting entries, closing entries, financial statements, post-closing trial balance.
B. post-closing trial balance, adjusting entries, financial statements, closing entries.
C. adjusting entries, financial statements, closing entries, post-closing trial balance
D. closing entries, financial statements, post-closing trial balance, adjusting entries.

8. One tool that may be used by accountants as part of the adjusting process is the:
A. Journal C. Ledger
B. Worksheet D. Lexicon

9. Reversing entries:
A. Are prepared on the worksheet C. Are mandatory
B. Are required by GAAP D. Are optional

10. The financial statements are prepared from the

A. adjustments C. adjusted trial balance
B. unadjusted trial balance D. ledger

11. Which of the following appears in the income statement of a merchandising business,
but not in the income statement of a business that renders only services?
A. Gross Profit
B. Advertising Expense
C. Interest Revenue
D. Income tax expense

12. FOB means:

A. from our buyer
B. fee on board
C. freight on board
D. free on board

13. If title to merchandise purchases passes to the buyer when the goods are shipped from
the seller, the terms are
A. n/30 C. consigned
B. FOB destination D. FOB shipping point

14. If the buyer is to pay the transportation costs of delivering merchandise, delivery terms
are stated as
A. FOB destination C. FOB n/30
B. FOB shipping point D. FOB buyer

15. Who pays the freight costs when the terms are FOB shipping point?
A. The ultimate customer C. either the seller or the buyer
B. The buyer D. the seller

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16. Who pays the freight cost when the terms are FOB destination?
A. The buyer C. the customer
B. The seller D. either the buyer or the seller

17. Which of the following items has no effect on owner’s equity?

A. Expense
B. Owner’s withdrawal
C. Purchase of land
D. Revenue

18. The asset created by a business when it makes a sale on account is

termed__________
A. Accounts payable
B. Accounts receivable
C. Prepaid expense
D. Unearned revenue

19. All of the following describe accounting, except

A. A service activity
B. An information system
C. An exact science rather than an art
D. A universal language of business

20. The overall objective of accounting is

A. To provide the information that the managers of an entity need to control the
operations.
B. To provide information that the creditors can use in deciding whether to make
additional loans.
C. To measure the periodic income of the entity.
D. To provide quantitative financial information about an entity that is useful in making
economic decision.

21. These users require information on risk and return on investment

A. Creditors
B. Investors
C. Lenders
D. Customers

22. Using accrual accounting, revenue is recorded and reported only______________

A. If cash is received after the services are rendered
B. when cash is received at the time services are rendered
C. when the services are rendered without regard to when cash is received
D. when cash is received without regard to when the services are rendered

23. Which of the following entries records the receipt of a utility bill from the water
company?
A. debit Accounts Payable, credit Cash

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B. debit Accounts Payable, credit Utilities Payable
C. debit Utilities Expense, credit Accounts Payable
D. debit Utilities Payable, credit Accounts Receivable

24. The process of posting is mostly associated with_________

A. Financial statements
B. General ledger
C. Source documents
D. Worksheet

25. A post-closing trial balance is prepared before

A. Preparing financial statements
B. Reversing the accounts
C. Adjusting and closing the books
D. Preparing a worksheet

26. Equipment with an estimated market value of P60 000is offered for sale at P90 000. The
equipment is acquired for P30 000 in cash and a note payable of P50 000 due in 30
days. The amount used in buyer’s accounting records to record acquisition is
__________
A. P 80,000 C. P 90,000
B. P 60,000 D. P 30,000

27. On January 1, 2019, Potter Company bought a building for P2,750,000 to serve as the
Company’s office. It was estimated that the said building will be useful for 20 years.
After the end of its useful life, the building can still be sold for P250,000. What is the
amount of depreciation expense that should be recognized by Potter Company on
December 31, 2019?
A. P 100,000 C. P 150,000
B. P 125,000 D. P 175,000

28. An item retailing for P 100,000, subject to a trade discount of 25% is paid for within the
discount period on terms 2/10, n/30. What is the amount of payment made?
A. P73,500 C. P75,000
B. P74,000 D. P100,000

29. As of December 31, Ravenclaw Merchandising Company’s records show the

following amounts:
Purchases P 1,250,000
Purchase discount 25, 000
Purchase returns 140,000

If Ravenclaw Company’s beginning inventory amounted to P 375,000, the Company’s

total Cost of Goods Available for sale is________________
A. P710,000 C. P1,460,000
B. P1,085,000 D. P1,250,000

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30. The unearned rent account has a balance of P 36,000. If P 4,000 of the P 36,000 is
unearned at the end of the accounting period, the amount of the adjusting entry is
A. P4,000 C. P32,000
B. P40,000 D. P36,000

31. If a note receivable with a principal amount of P400,000 has an interest rate of 8%, what
is the amount of interest that will accrue over nine months?
A. P16,000 C. P2,700
B. P32,000 D. P24,000

32. For the month of January, the Cold Storage Company paid its employees P11,000 in
wages. Cold Storage owes its employees P2,500 for work done during January which has
not yet been paid. Under accrual accounting, Cold Storage’s wage expense for January
is:
A. P4,000 C. P11,000
B. P13,500 D. P2,500

33. Rent a Wreck, Inc. began operations on July 1, 2019. On July 1, the company paid P9,600
cash in advance for a one-year insurance policy beginning on that day. What will the
company report for prepaid insurance on its balance sheet at July 31, 2019?
A. P9,600 C. P8,800
B. P4,800 D. P800

34. On May 1, Counts, Inc. has a balance of P1,000 in office supplies. During May, the
company buys P500 more of the office supplies. On May 31, the company counts the
supplies and finds P200 of supplies remaining. What will the company report on its May
31 balance sheet?
A. Supplies expense of P1,500
B. Supplies of P200
C. Supplies expense of P500
D. Supplies of P1,300

35. Enoch, Inc. began operations on July 1, 2019. On August 1, it received P12,000 in
advance for services to be performed evenly over the next 12 months. How much
unearned revenue should the company report on its balance sheet at December 31,
2019?
A. P1,000 C. P12,000
B. P7,000 D. P5,000

36. Cerner Company showed the following balances at the end of its first year:
Cash P 5,000
Prepaid insurance 500
Accounts receivable 2,500
Accounts payable 2,000
Notes payable 3,000
Cerner, Capital 1,000
Cerner, Drawing 500

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 Revenues 15,000
Expenses 12,500

What did Cerner Company show as total credits on its trial balance?
A. P20,500 C. P22,000
B. P21,500 D. P21,000

37. The unadjusted trial balance shows Accumulated Depreciation—Computer with a credit
balance of P190. After determining depreciation expense is P45, the adjusted trial
balance in the accumulated depreciation account for the computer will be a:
A. P145 debit C. P235 credit
B. P45 debit D. P190 credit

38. At the beginning of 2019, a company’s balance sheet reported the following balances:
Total Assets = P125,000; Total Liabilities = P75,000. During 2019, the company reported
revenues of P46,000 and expenses of P30,000. In addition, owner’s withdrawals for the
year totaled P20,000. Assuming no other changes to owner’s capital, the balance in the
owner’s capital account at the end of 2019 would be:
A. P66,000 C. P46,000
B. P(4,000) D. P86,000

39. The Unadjusted Trial Balance columns of a company's work sheet show the balance in
the Office Supplies account as P750. The Adjustments columns show that P425 of these
supplies were used during the period. The amount shown as Office Supplies in the
Balance Sheet columns of the work sheet is:
A. P750 credit C. P750 debit
B. P325 debit D. P425 debit

40. After all of the account balances have been extended to the Balance Sheet columns of
the work sheet, the totals of the debit and credit columns are P25,250 and P21,825,
respectively. What is the amount of net income or net loss for the period?
A. P25,250 net loss C. P3,425 net loss
B. P21,825 net income D. P3,425 net income

41. Satellite Warehouse is a small retail business that specializes in the sale of top-of-the-
line televisions. This year, the store has begun to carry the Flat TV manufactured by
Swan Co. Thus far this year, Satellite has recorded the following transactions involving
the Flat TV:
Jan. 5 Purchased 8 Flat TVs at a unit cost of P1,300
Jan. 18 Purchased 5 additional Flat TVs at P1,300 each
Feb. 12 Sold 9 Flat TVs to the Duke Hotel for P14,700

Satellite maintains a subsidiary ledger account for each type of TV carried in the store.
An examination of the account for the Flat TV model at the end of February would
show:

A. 13 units on hand with a total value of P16,900.

B. 4 units on hand with a total value of P1,300.

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 C. The amount that Satellite owes to Swan.
D. 4 units on hand with a total value of P5,200.

42. During 2019, Salon Enterprises generated revenues of P60,000. The company’s expenses
were as follows: cost of goods sold of P30,000, operating expenses of P12,000 and a loss
on the sale of equipment of P2,000.
Salon’s income from operations is
A. P30,000 C. P18,000
B. P12,000 D. P60,000

43. The inventory system employing accounting records that continuously disclose the
amount of inventory is called
A. Periodic C. perpetual
B. Retail D. physical

44. Michael uses its periodic inventory system and the following information is available:
Sales P43,400
Inventory – Beginning 11,200
Inventory – Ending 9,800
Purchases 32,300
Calculate the cost of goods sold:
A. P43,400 C. P9,800
B. P33,600 D. P32,200

45. At the beginning of September, 2019, RFI Company reported Merchandise Inventory of
P4,000. During the month, the company made purchases of P7,800. At September 31,
2019, a physical count of inventory reported P3,200 on hand. Cost of goods sold for the
month is
A. P11,800 C. P8,600
B. P600 D. P7,800

46. A debit balance in which of the following accounts would indicate a likely error?
A. Dividends C. Supplies
B. Salaries expense D. Notes payable

47. The beginning capital balance used on the Statement of Owner’s Equity is obtained
from:
A. the worksheet in the balance sheet credit column.
B. the amount calculated on the statement of owner’s equity.
C. the worksheet in the income statement credit column.
D. The general ledger

48. The Statement of Changes in Equity lists:

A. assets, liabilities, revenues and expenses.
B. assets, liabilities and shareholders’ equity.
C. the changes in shareholders’ equity.
D. revenues and expenses.

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49. If the total of the debit column equals the total of the credit column in the trial balance,
it indicates that
A. no errors can be found
B. the accounting equation has remained in balance
C. all accounts reflect correct balances
D. no errors have been made

50. Which of the following account groups are all considered nominal accounts?
A. Dividends, Fees Earned, Rent Expense
B. Cash, Fees Earned, Unearned Revenues
C. Prepaid Expenses, Unearned Revenues, Fees Earned
D. Capital Stock, Dividends, Income Summary

Ora Et Labora

That in All Things, God may be Glorified