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ACCOUNTING 1
Encircle the letter of your answer. Write your answer on the space before the number if it is not found
in the choices provided.
1. Which of the following entries should be reversed at the beginning of the next operating year?
a. Rental Expense
Cash in Bank
b. Income and expense summary
Rental Expense
c. Accrued Rental Expense
Rental Expense
d. Rental Expense
Accrued Rental Expense

2. It presents an indication in conformity with GAAP of the financial status of the enterprises at a
particular point in time.
a. Statement of Financial Position c. Statement of Changes in Equity
b. Income Statement d. Cash Flow Statement

3. Which of the following is not considered a book of original entry?

a. General Journal c. Sales Journal
b. General Ledger d. Purchase Journal

4. The buyer purchased merchandise on Dec. 25, 2016 under FOB destination, which was received
and recorded on January 2 of the following year. The business cut-off date is Dec. 31, 2016 and
it conducted physical counting of its merchandise inventory at year end. What is the effect of
this transaction?
a. Merchandise inventory, Dec. 31, 2016 is overstated
b. Merchandise inventory, Dec. 31, 2016 is correct
c. Purchases is overstated
d. Purchases is understated

5. Account of the petty cash fund of GOODLUCK COMPANY showed its composition as follows:
Coins and currency 2,000
Paid Vouchers:
Transportation 200
Gasoline 100
Office Supplies 150
Postage stamps 100
Due from employees 700 1,250
Managers check returned by bank marked NSF 3,000
Check drawn by the entity to the order of petty cash custodian 4,000

What is the correct amount of petty cash fund for statement presentation purposes?
a. 6,000
b. 3,250
c. 10,250
d. 7,250
For Items 6 to 8:
The following selected data were taken from the records of KAPOY Trading:
December 31
2015 2016
Merchandise inventory P 130,000 P 160,000
Sales 550,000
Sales Discount 8,000
Purchases 350,000
Freight-in 4,000
Purchase Discounts 3,000
Operating Expenses 77,000
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6. How much is the net profit from sales on Dec. 31, 2016?
a. 200,000 c. 144,000
b. 221,000 d. 192,000

7. How much is the gross profit from sales on Dec. 31, 2016?
a. 200,000 c. 144,000
b. 221,000 d. 192,000

8. How much is the Merchandise Inventory after closing entries on 2016?

a. Zero c. 130,000
b. 160,000 d.10,000

9. A collection of customers account in full amount will

a. Decrease total assets c. Total assets remain unchanged
b. Increase total assets d.Effect cannot be determined

10. Which of the following is a component of Cost of Sales?

a. Purchase Discounts c. Purchases
b. Merchandise inventory d. All of the above

11. Which of the following account titles is differently classified from the others?
a. Accrued Income c. Unearned Income
b. Prepaid Expense d. Cash or cash equivalents

12. SAYONPA COMPANY had the following account balances on December 31, 2016:
Cash in Bank 3,950,000
Cash on Hand 425,000
Cash restricted for addition to plant
(expected to be disbursed in 2020) 3,500,000

Cash in bank includes P700,000 of compensating balance against short-term borrowing

arrangement. The compensating balance is not legally restricted as to withdrawal by SAYONPA
COMPANY.

In Dec. 31, 2016 statement of financial position, what total cash should be reported under
current assets?
a. 3,675,000 c. 7,175,000
b. 4,375,000 d. 7,875,000

13. The following information relates to the selected transaction taken from the inventory ledger
of GARAA Enterprises for the quarter of 2016:
Purchases:
September 6 250 sacks of rice @ P200
September 11 400 sacks of rice @ P300
September 16 180 sacks of rice @ P280
September 21 270 sacks of rice @ P320
Purchase Returns:
September 14 20 sacks from September 11 purchases
September 17 10 sacks from September 16 purchases
Beginning Inventory, July1- 150 sacks at P100
Ending Inventory, September 31-450 sacks

How many sacks of rice were available for sale?

a. 1,100 sacks c. 1,250 sacks
b. 1,550 sacks d. 1,220 sacks
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14. DALIRA EMPORIUM presented the following data:

Freight In P5,000
Purchase Discount 500
Purchases 38,000
Depreciation Expense 20,000
Delivery Van 15,000
Merchandise Inv.,Beg. 10,000
Sales discount 2,000
Freight out 1,200
Merchandise Inv.,End 8,000
Sales 75,000
Sales Returns 2,500

The companys cost of Goods available for sale is:

a. 52,500 c.53,700
b. 42,500 d.51,700

15. On January 1, 2016, an equipment is purchased with a useful life of 5 years. Its depreciation
expense is P9,000. If the company use a shorter useful life, which of the following statement is
true?
a. Net Income will be overstated.
b. Depreciation expense will be understated.
c. Depreciation expense will remain the same.
d. Net Income will be understated.

16. Which of the following entries is executed when a new accountant/manager, with a monthly
compensation of 12,400, is hired by the business?
a.Memorandum entry
b.Debit to Manpower account
c. No entry
d.Debit to salaries and wages account

17. A flash flood on Jun physical count on 30, 2016 damaged the merchandise of SAYONRAJAPON
COMPANY. A physical count was conducted after the flood and found out that P1,775,000 cost
of merchandise were saved.
The following facts were gathered:
Beg. Inventory, Jan.1 P 3,000,000
Purchases (Jan.5 to June 28 ) 8,500,000
Purchase Discount 170,000
Sales 11,850,000
Sales return 20,000
The gross profit rate based on sales was 35%
The gross profit rate based on cost was 53.85%
The cost of estimated ending inventory was
a. P 4,360,500 c. P5,870,000
b. P 7,580,000 d. P3,640,500
18. Based on fact given above, how much is the cost of inventory damaged by the flash flood
a.P1,865,500 c. P4,095,000
b. P5,805,000 d.P 2,585,500
19. Which of the following would not be a correct form for an adjusting entry?
a. A debit to a revenue and a credit to Liability
b. A debit to an expense and a credit to a liability
c. A debit to a liability and a credit to a revenue
d. A debit to an asset and a credit to a liability
20. On July 28, 2016, KAYAPA collected advance cash of P48,000 from a tenant of her building. This
represents rental which covers August 1, 2016 to August 1, 2018. How much is the earned. How
much is the earned and unearned portion on December 31, 2017?
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a. 10,000 earned; 38,000 unearned

b. 8,000 earned; 40,000 unearned
c. 34,000 earned; 14,000 unearned
d. 24,000 earned; 14,000 unearned
21. The worksheet is a
a. Financial Statement c. Convenient device for completing the accounting cycle.
b. Ledger d. Journal
22. On January 1, 2016, Labh Yu invested cash worth 100,000 and a computer set worth 55,000
to start her own business. If the company earned 450,000 and the ending capital balance on
December 31, 2016 is 275,000, how much is the cost of sales?
a. 20,000 c. 330,000
b. 295,000 d. (20,000)
23. A CPA in public practice who examines financial statements and render opinion that is free from
bias is said to be engaged in
a. Management Accounting c. Bookkeeping
b. External Auditing d. Internal Auditing
24. The most commonly used basis of measuring Financial Statements is
a. Historical Cost c. Present value
b. Realizable Cost d. Current Cost
25. Statement 1: Written promise to pay is a Note payable to the eyes of the lender.
Statement 2: If a client pays in advance for a service, the income of the business is increased
a. Statement 1 is true; Statement 2 is False c. Both statements are true
b. Statement 1 is false; Statement 2 is true d. Both statements are false
26. Statement 1: Estimated Uncollectible Accounts is neither an asset nor a liability, but it can be
found in the balance sheet.
Statement 2: If the business has credited Prepaid Insurance Expense, It is said that it has not yet
paid the insurance.
a. Statement 1 is true; Statement 2 is False c. Both statements are true
b. Statement 1 is false; Statement 2 is true d. Both statements are false
27. Statement 1: A contra asset account shall be debited when the business wishes to reduce it.
Statement 2: Materiality is an accounting principle that dictates practicability to rule over theory
in determining the valuation of an item.
a. Statement 1 is true; Statement 2 is False c. Both statements are true
b. Statement 1 is false; Statement 2 is true d. Both statements are false
28. Statement 1: Relevance is a quantitative characteristic which means that financial statements
are prepared intended to help users make informed economic decisions.
Statement 2: Accrued expenses are expenses incurred by the enterprise but are not yet paid.
a. Statement 1 is true; Statement 2 is False c. Both statements are true
b. Statement 1 is false; Statement 2 is true d. Both statements are false

29. Statement 1: Under the doctrine of Conservatism, when alternatives exist, the alternative which
has the least effect on OE should be chosen.
Statement 2: Conservatism is also known as prudence.
a. Statement 1 is true; Statement 2 is False c. Both statements are true
b. Statement 1 is false; Statement 2 is true d. Both statements are false

30. Statement 1: Current assets are assets which are held for sale in the ordinary course of
business; in the process of production for such sale; or in the form of materials or supplies to be
consumed in the production process or in the rendering of services.
Statement 2: Folio is a general ledger heading which shows the number of an account in a ledger
or page of a ledger to which it was transferred. This term is actually a Latin word for page.
a. Statement 1 is true; Statement 2 is False c. Both statements are true
b. Statement 1 is false; Statement 2 is true d. Both statements are false
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31. A flash flood on Jun physical count on 30, 2016 damaged the merchandise of OK COMPANY. A
physical count was conducted after the flood and found out that P1,800,000 cost of
merchandise were saved.
The following facts were gathered:
Beg. Inventory, Jan.1 P 5,000,000
Purchases (Jan.5 to June 28 ) 4,600,000
Purchase Discount ?
Sales 11,850,000
Sales return ?
Cost of Goods available for sale 9,550,000

The gross profit rate based on sales was 25%

The cost of estimated ending inventory was P4,700,000

The sales return is:

a.P50,000 c.P5,383,333.33
b.P100,000 d.P6,466,666.67
32. Based on the information on item 31, the Purchase discount is:
a. P50,000 c. P17,500
b. P32,500 d.P100,000
33. Based on the information on item 31, the cost of estimated ending inventory is
a.P4,700,000 c.P4,850,000
b.P2,900,000 d.P6,500,000
34. Based on the information on item 31, the cost of goods sold is
a.P4,700,000 c. P6,500,000
b.P2,900,000 d. P4,850,000
35. Based on the facts in item 31, the net sales is
a.P5,383,333.33 c.P4,878,888,89
b.P6,466,666.67 d.P4,700,000
36. The following concern the Accounts Receivable and Accounts Payable accounts of
CALCUPAMORE Company

Accounts Receivable, beg. 200,000

Services on Account 30,000
Direct Write-off 5,000
Accounts Receivable,end. 50,000
Accounts Payable,beg. 67,000
Cash Purchases 33,000
Accounts Purchases 40,000

The estimated collection from customers account would be-

a.P225,000 c.P180,000
b.P175,000 d.P185,000
37. Based on item 36. If Accounts Payable, end showed a credit balance of 90,000, how much
payment was made during the year?
a.P17,000 c.P90,000
b.P107,000 d.P12,000
38. On January 1, 2016, KAYALAGINI COMPANY bought a machinery under a contract that required
a downpayment of 100,000, plus 24 monthy payments of P50,000 each, for total cash payments
of P1,300,000. The cash price of the machinery was P1,100,000. The machinery has a useful life
of 10 years and residual value of P50,000. The company uses straight line depreciation. What
amount should be reported as depreciation for 2013?
a.105,000 c. 125,000
b.110,000 d.130,000
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39. If the accrued interest payable of the debtor is not recorded both in the books of the debtor and
creditor, the effect would
a.Overstate the interest expense of the debtor
b.Overstate the liability of the debtor
c. Understate the asset of the creditor
d.Overstate the net assets of the creditor
40. A prepaid expense can be best described as an amount
a.Paid and currently matched with earnings
b.Paid and not currently matched with earnings
c.Not paid and currently matched with earnings
d.Not paid and not currently matched with earnings

For items 41 to 51
2014 2015 2016
Cash 50,000 ? 60,000
A/R 25,000 10,000 15,000
Inventory ? ? 70,000
Prepaid Rent 5,000 6,000 ?
Equipment 85,000 85,000 85,000
Accumulated Depreciation ? 14,000 ?
Accounts Payable 40,000 ? 20,000
HUGOT,Capital 200,000 160,000 200,000

Additional Information:
1. The equipment was purchased on July 1, 2012. It has a useful life of 20 years with a salvage
value of P5,000
2. On Jan 2, 2015, Hugot purchased inventory amounting to P25,000. The Company sold one-
half of the total goods available for sale before year-end.
3. The cash balance on Dec. 31, 2015 is 95% of the ending inventory account balance of that
year.
41. Remaining useful life of the equipment on Dec. 31`,2017
a.14.5 years c.15 years
b.14 years d.15.5 years
42. Book value of the equipment on Dec 31, 2017 assuming no changes in estimates regarding
depreciation
a.P67,000 c.P71,000
b.P63,000 d.P59,000
43. Prepaid rent on Dec.31, 2016
a.P6,000 c.P7,000
b.P8,000 d.P9,000
44. Accumulated depreciation as of Dec.31 2016
a.P18,000 c.P10,000
b.P14,000 d.P22,000
45. Total assets in 2014 increased(decreased) by how much in 2015?
a.P40,000 c. (P45,750)
b.(P35,750) d.P35,750
46. Accounts Payable balance on Dec. 31 2015
a.P34,000 c.P34,750
b.P34,500 d.P34,250
47. Cash balance on December 31, 2015
a.P50,000 c.P55,000
b.P52,250 d.P57,250
48. Inventory at Dec. 31,2015
a.P55,000 c.P50,000
b.P60,000 d.P65,000
49. Inventory at Dec. 31, 2014
a.P83,000 c.P85,000
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b.P87,000 d.P81,000
50. How much was the accumulated depreciation on Dec. 31, 2014?
a.P10,000 c.P11,000
b.P12,000 d.P14,000
51. How much is the annual depreciation of the equipment?
a.P1,000 c.P3,000
b.P2,000 d. P4,000
52. What is the method of accounting for inventories in which the cost of goods sold is recorded
each time a sale is made?
a.Professional system c.Periodic System
b.Perpetual system d.Planned system

For items 53-60:

SAYONRAGURO Company began operations on January 1, 2016. Its Financial statements for the
years ended Dec. 31, 2016 and 2017 contained the following errors:
Merchandise Inventory Ending
A.2016 understated P160,000
B.2017 overstated 150,000
Accrued salaries expense:
C.2016- unrecorded, but recorded in 2017 30,000
Accrued interest income:
D.2016-unrecorded but received and recorded in 2017 10,000
The income statements for 2016 and 2017 have a net income of P100,000 and P200,000,
respectively.
53. Assuming that the nominal or temporary accounts for the year 2017 have not been closed, the
correcting entry for A would be
a. Merchandise inventory, beginning 160,000
Owners Capital 160,000
b. Owners Capital 160,000
Merchandise inventory, beginning 160,000
c. Merchandise inventory, end 160,000
Owners Capital 160,000
d. Owners Capital 160,000
Merchandise inventory, end 160,000
54. Assuming that the nominal or temporary accounts for the year 2017 have not been closed, the
correcting entry for B would be
a. Merchandise inventory, ending 150,000
Income summary 150,000
b. Income summary 150,000
Merchandise Inventory, ending 150,000
a. Merchandise inventory,beginning 150,000
Income summary 150,000
b. Income summary 150,000
Merchandise Inventory,beginning 150,000

55. Assuming that the nominal or temporary accounts for the year 2017 have not been closed, the
correcting entry for C would be
a.. Owners Capital 30,000
Salaries Payable 30,000
b. . Salaries expense 30,000
Owners Capital 30,000
c. Owners Capital 30,000
Salaries expense 30,000
d. Salaries Payable 30,000
Salaries expense 30,000
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56. Assuming that the nominal or temporary accounts for the year 2017 have not been closed, the
correcting entry for D would be
a. Interest Income 10,000
Owners Capital 10,000
b. Owners Capital 10,000
Interest Income 10,000
c. Income summary 10,000
Owners Capital 10,000
d.Owners Capital 10,000
Income summary 10,000
57. Assuming that the nominal or temporary accounts for the year 2017 have already been closed
to owners capital, the only correcting entry would be the error on letter:
a.A
b.B
c.C
d.D
58. The only correcting entry mentioned in item 57 is recorded as:
a. Merchandise Inventory Beginning 160,000
Owners Capital 160,000
b. Interest Income 10,000
Owners Capital 10,000
c. Owners Capital 150,000
Merchandise inventory, ending 150,000
d. Income Summary 30,000
Salaries Expense 30,000
59. What is the correct net income (loss) on 2016?
a. (240,000)
b. (90,000)
c. 240,000
d. 90,000
60. What is the correct net income (loss) on 2017?
a. (240,000)
b. (90,000)
c. 240,000
d. 90,000