EASY 1.

The underlying concept that supports the recognition of the cost of small hand tools of workers in a factory as expense is called _________. a. Conservatism b. Materiality c. Objectivity d. Cost 2. When an interest-bearing 90-day notes payable is paid a. Assets are increased b. Net income is not affected c. Current liability is increased d. All accounting elements decrease 3. The book of Final Entry is _____. 4. ______ states that immaterial amounts of similar nature and functions should be grouped or condensed as one line item in the financial statements. 5. The account debited by the seller to record the purchase price of merchandise that has already been sold under the perpetual inventory method. 6. When adjustment for a prepaid expense under the expense method is not recorded, assets would be understated while net income would be ___________. 7. On January 1, 2012, Budoy Companys financial statements showed assets and liabilities amounting to P600,000 and P250,000, respectively. By the end of the year, due to some errors in the decisions of the management, the company incurred a net loss of P50,000. The assets of the company went up to P650,000 while the liabilities were reported at 110% of the companys beginning capital balance. Assuming no additional investments were made, how much withdrawals did the owners make? 8. Berlin Company is a VAT registered entity that engages in the purchase and sale of scale model structures. In July, it purchased a scale model of the Eiffel Tower for P35,700 exclusive of 12% VAT. It also purchased a scale model of the White House for P23,600, a price that is inclusive of VAT. A scale model of the Great Wall of China was sold for P27,920, a price 50% above its cost, exclusive of VAT. How much should Berlin Company remit to the BIR for the month of July?

MODERATE 1. This basic accounting concept entails a non-liquidation assumption and provides as a conceptual basis for the many classifications used in accounting. Examples of such is classifying assets as either current or noncurrent, for if this is not assumed, such classification loses its value a. Time Period b. Going Concern c. Objectivity d. Disclosure 2. All EXCEPT ONE correctly describes the Merchandise Inventory account a. It is a general ledger account. b. It represents items purchased which are intended for sale. c. It is debited for additional investment in merchandise by the owner under the perpetual inventory method. d. It is the selling price of the merchandise withdrawn by the owner for personal use. 3. The law regulating the practice of Accountancy is called __________ 4. A detailed listing of all the account titles used by a business. 5. In the ordinary course of business, when a company receives payment from a customer, it prepares a/an _______________. But when is pays for goods or services, it prepares a/an _______________ to give evidence on the authorization for the release of funds. 6. When accounting for payroll, the company withholds and remits to government agencies the employees share and the employers share of certain salary deductions. Which salary deduction does not necessitate remittance of an employers share 7. Bluebook Services received on February 16, 2012 a 125-day, 10% P50,000 note as settlement from a customer for services that were rendered February 13, 2011. Due to its tight cash position, Bluebook Services decided to have the note discounted with BSP at a rate of 16% during the fourth to the last day of the succeeding month after receipt of note. COMPUTE THE TOTAL DEBIT TO CASH AS A RESULT OF THE DISCOUNTING 8. In the November 2011 bank statement of Third Reich Corporation, it was shown that the company had a balance of P9,589,000. The balance per book at that time was P9,335,000. The following data pertains to the preparation of the companys monthly bank reconciliation statement:

Deposits recorded by the bank totaled P1,130,000 while it recorded disbursements totaling P637,500. Per the cash disbursements journal, the company had recorded P888,000 as payments while its cash receipts journal recorded receipts of P1,980,000. All receipts are deposited in tact the same day or the immediate subsequent banking day. The bank had collected a note receivable of the company with a carrying value of P775,500, inclusive of interest amounting to P75,500. However, it also charged the company for a note that was dishonored amounting to P78,000 plus P12,000 interest and P10,000 protest fee. In addition, the company had an error of recording a deposit. Instead of recording it at P530,000, it was recorded at P350,000. The company was charged P2,000 for miscellaneous services the bank has provided during the month. When the company prepares its November bank reconciliation statement, what should be reported as the adjusted cash balance per bank?

DIFFICULT 1. In preparing a worksheet, a net loss would be computed and entered in the: a. b. c. d. debit column of the income statement columns of the worksheet credit column of the income statement columns of the worksheet in the debit column of the adjusted trial balance in the credit column of the balance sheet columns of the worksheet.

2. Shipman Company had accrued salaries of P300 on December 31. The company recorded reversing entries on the following January 1. On the next payday, January 7, the appropriate entry to record the payment of P1,000 in salaries should include: a. b. c. d. a debit to Salaries Expense of P1,000 a debit to Salaries Expense of P700 a debit to Salaries Expense of P1,300 a debit to Salaries Payable for P300

3. Which of the following is not included in the computation of the acquisition of cost of an item of property, plant and equipment? a. Cost of site preparation b. Import duties c. Cost of testing whether the asset is functioning properly

d. Cost incurred while an item capable of operating in the manner intended by management has yet to be brought into use or is operated at less than full capacity e. Nonrefundable purchase taxes

4. Which of the following does not describe a functional presentation of an income statement? a. It is the traditional and common form of an income statement b. It does not show the entitys comprehensive income c. Manufacturing and merchandising businesses are required to prepared their income statement in this form d. It shows the financial performance of an entity for a period e. It is also known as the cost of sales method 5. Given the following statements, which of the following defines a partnership? I. A partnership is an association of two or more persons to carry on as co-owners a business for profit. II. A partnership is an entity, distinct and apart from the members composing it, and, for the purpose of which it was created; it is a person having its own assets and liabilities and any benefit or liability attaching to a member of the partnership, results from the partnership relation. A. I, II B. I C. II D. Both are incorrect 6. Which statement is incorrect concerning treasury shares? A. Treasury shares shall be recorded at cost irrespective of whether acquired below or above par value B. The total cost of treasury shares shall be deducted from equity C. The retained earnings balance should be positive before a company can sell treasury shares. D. Gain or loss on sale of treasury shares shall not be included in profit and loss. 7. According to Article ____ of the Civil Code of the Philippines, By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.

A. 1767 B. 1868 C. 1707 D. 1807 8. In the Statement of Financial Position, the arrangement of assets is according to their ________. 9. Assuming that a company uses the expense method, failure to adjust the prepaid insurance of a company at yearend will result in an ________ of recorded insurance expense. 10. The hiring of a new manager is not recorded in the books of the company because of the ________ principle. 11. It is a special journal that contains a column for debiting Sales Discount 12. It is one of the factors that causes discrepancies between book and bank balance due to the cut off dates. 13. It is a cash management system where cash receipts are deposited intact daily. 14. When a corporate pays dividends, the three relevant dates for dividends occur in this order _______________________ , _____________________ , ______________________. 15. The account charged for all expense relating to delinquent subscription is __________________. 16. The asset recognized upon incorporation of a partnership which represents the excess of the value of the share capital issued by the corporation over the fair value of the net assets of the partnership transferred to the new corporation is ____________. 17. The highest bidder is willing to take the _______ number of shares while paying the _______ amount of money. 18. What is the share capital issued for inadequate or insufficient consideration? 19. The property, plant and equipment account of the Statement of Financial Position of Litmus Company for December 31, 2011 consists of the following: Purchased on Cost Salvage Value Useful Life

(years) Land January 1, P 650,000 P2010 Building January 1, 2,420,000 20,000 10 2010 Computer 1 June 30, 2010 80,500 5 Computer 2 February 1, 80,000 5,000 5 2011 Furniture October 1, 250,000 3,500 20 2011 How much is the accumulated depreciation to be deducted from the cost of the property, plant and equipment? 20. The service income account of MG Company, which renders cleaning services, as of the period ended June 30, 2012 included the following: Start of service Amount received Service Period July 1, 2011 P540,000 Three years November 30, 2011 120,000 One year January 1, 2012 55,250 Six months March 31, 2012 245,000 Eight months June 1, 2012 30,000 Three months Assuming that MG Company uses the income method, how much is the balance of the unearned service income account after the recording of adjusting entries? 21. On March 23, 2005, LaLa Trading purchased office equipment from Pineapple Company for P150,000 less 10 on terms 20% down and the balance 2/10 n/30. Freight of P1,500 is FOB Destination, collect. Other costs associated with the purchase of the equipment include minor repairs due to mishandling for P2,000; cost of 2-year preventive maintenance contract for P10,000; installation and test run costs for P2,500; and software package for P25,000. Three days later, the firm received credit memo from Pineapple for P2,000 representing allowance granted due to minor blemishes noted on the equipment. LaLa fully paid the account on April 5, 2005. On August 1, 2011, LaLa sold the equipment for P18,200 on terms 40% down and the balance payable in 10 days. It is the companys policy to depreciate assets bought during the first half of the month as if they were bought at the beginning of the month and to depreciate assets bought during the second half of the month as if they were bought the next month. The company estimated that the equipment will have a useful life of 8 years and a P10,000 residual value. Compute for the amount of gain or loss on sale and indicate whether there was a gain or loss. 22. The operating expenses other than the interest expense of Hello Kitty Company for the current year amount to 40% of cost of sales but only 20% of sales. Interest expense is 5% of sales. The amount of purchases is 120% of cost of sales. Ending inventory is twice as much as the beginning inventory.

The net income for the year is P560,000. What is the amount of sales for the current year? 23. The June Corporation has 100,000 outstanding shares of P30, par value ordinary share capital on January 2, 2011. The shares were issued in year 2010 for P50 per share. On June 2011, 15,000 shares were reacquired as treasury shares for P15 per share. During August 2011, June declared a 3:1 share split. On December 31, 2011, June accepted a subscription for P70,000 worth of ordinary shares at P20 per share payable within 90 days. Thereafter, June sold 20,000 ordinary shares for P15 per share. What is the number of outstanding ordinary share capital?

24. The following information was taken from the two partners of KCC Company. Partner A (cash received) 11,800 Partner B (cash received) 10,200 Loan, A 18,000 Loan, B 20,000 Loss on Realization 66,000 Capital, A (beginning) 10,000 Compute for the beginning balance of Partner A.