JOSE MARIA COLLEGE

Philippine Japan Friendship Highway, Sasa, Davao City

AUDIT QUIZZER
FINANCIAL ACCOUNTING AND REPORTING

1. On January 1, 2012, the capital of Mila Company was P2,600,000 and on December 31, 2012, the
capital was P3,600,000. During the current year, Mila, the owner, withdrew merchandise with carrying
amount of P150,000 which were marked to sell for P230,000, and paid a P400,000 note payable of the
business with interest of 10% for six months with a check drawn on a personal checking account.
The net income for 2012 is
a. 730,000 b. 810,000 c. 1,190,000 d. 1,270,000

2. An analysis of the records of Alden Company disclosed changes in account balances for the current
year and the supplementary data listed below:
Cash 600,000 increase
Accounts receivable 350,000 decrease
Merchandise inventory 1,320,000 increase
Accounts payable 560,000 increase
Accrued expenses 90,000 decrease
During the year Alden borrowed P2,000,000 from the bank and paid off P1,750,000 plus interest of
P200,000. Interest of P50,000 is accrued on December 31. There was no interest payable at the
beginning of the year.
Furthermore, Alden transferred equity securities to the business which were sold for P900,000 to
finance the acquisition of merchandise. Alden made weekly withdrawals in the current year of P15,000.
The net income for the current year is
a. 580,000 b. 680,000 c. 730,000 d. 930,000

3. The trial balance of HI Company does not balance. The debit column totaled P588,600 while the credit
column totaled P598,600. An examination of the ledger shows these errors
● Cash received from customer on account was recorded (both debit and credit) as P46,900
instead of P49,600
● Check issued to supplier was recorded (both debit and credit) as P24,800 instead of P28,400
● The purchase on account of a computer table worth P22,000 was recorded as a debit to Office
Expense and a credit to accounts payable.
● Services performed on account for a client, for P12,250 were recorded both as a debit to
Accounts receivable and a credit to service revenue of P21,250
● A payment of P2,500 for telephone charges was posted as a credit to Office Expense and a
credit to Cash
● The unearned rent account was totaled at P15,200 instead of P12,200
● The debit footings to purchases and interest income were both understated by P1,000
The correct debit/credit column totals should be
a. 582,000 b. 591,000 c. 600,000 d. 607,200

4. The trial balance prepared at December 31 did not balance. Dr total was P159,250 and Cr total was
P153,200. In determining the cause of the difference, you discovered the following errors: a credit to
cash of P650 was not posted; a P2,000 credit to be made to the Sales account was credited to the
Accounts receivable account instead; the wages payable account balance of P9,300 was listed in the
trial balance as P3,900.
The correct trial balance is
a. 153,200 b. 159,250 c. 160,600 d. 161,250

5. The following errors were made in preparing a trial balance, the P1,350 balance of inventory was
omitted; the P450 balance of Prepaid Insurance was listed as a credit; and the P300 balance of
Salaries Expense was listed as Utilities Expense.

The dr/cr totals of the trial balance would differ by

a. P1,350 b. P1,800 c. P2,100 d. P2,250
 Use the following information for questions 6 - 8:
Excess Company paid or collected during 2013 the following items:
Insurance premiums paid P 25,450; Interest collected P 53,750;
Salaries paid P 116,300

The following balances were from Excess Company’s balance sheets:

December 31, 2012 December 31, 2013
Prepaid insurance P 2,400 P 1,700
Interest receivable 4,700 3,200
Salaries payable 12,300 10,600

6. The insurance expense on the income statement for 2013 was

a. 25,450 b. 26,150 c. 24,750 d. 23,750
7. The interest revenue on the income statement for 2013 was
a. 53,750 b. 55,250 c. 52,250 d. 50,550
8. The salary expense on the income statement for 2013 was
a. 116,300 b. 118,000 c. 114,600 d. 105,700

Use the following data for nos. 9 - 10

PS Company’s trademark was licensed to FC Company for royalties of 15% of sales of the trademarked
items. Royalties are payable semi-annually on March 15 for sales in July-December of the prior year,
and on September 15 for sales in January-June of the same year. PS Company received the following
royalties from FC Company:
March 15 September 15
2012 P10,000 P15,000
2013 12,000 17,000
Estimated sales of trademarked items for July-December 2013 is P60,000

9. Under cash basis, PS Company would report royalty revenues for 2013 of
a. P26,000 b. P29,000 c. P38,000 d. P41,000
10. Under accrual method, PS Company would report royalty revenues for 2013 of
a. P26,000 b. P29,000 c. P38,000 d. P41,000

11. On January 1 of the current year a group of stockholders set up AB Corporation. They contributed
cash of P4,250,000 and borrowed P950,000. During the year, revenues from sales totaled P1,400,000,
while total costs and expenses were P750,000. AB Corporation declared a cash dividend of P300,000
on December 20, payable to the stockholders on January 30 of the following year. There were no
additional activities affecting stockholders’ equity. By December 31 of current year, liabilities
decreased to P880,000.

Total assets at the end of the current year is

a. 4,670,000 b. 5,480,000 c. 5,780,000 d. 6,430,000

12. The assets of BC Company amounted to P70,000 on January 1, but increased by P80,000 by December
31. During this same period liabilities decreased to P20,000. The owner’s equity on January 1,
amounted to P35,000.
The amount of owner’s equity at December 31 is
a. 60,000 b. 65,000 c. 130,000 d. 135,000

13. FG Corporation’s account balances during the year showed the following changes: increases
(decreases)
Current assets P 278,000 Non-current assets (P 97,000)
Current liabilities 54,000 Non-current liabilities ( 20,000)
Ordinary shares 60,000 Additional paid-in capital 12,000
Revaluation surplus 50,000 Treasury shares 10,000

There were no changes in retained earnings for the year other than a P30,000 dividend payment and
the year’s net earnings. FG Corporation’s reported net income is
a. 15,000 b. 35,000 c. 45,000 d. 65,000

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 14. On January 1, 2013, the capital of Corinthians Company was P 1,700,000 and on December 31, 2013,
the capital was P 2,400,000. During the current year, Corinthians withdrew merchandise costing P
100,000 and with sales value of P 180,000, and paid a P 1,000,000 note payable of the business with
interest of 12% for six months with a check drawn on a personal checking accounting.
The net income (loss) for 2013 is
a. 260,000 b. (260,000) c. 180,000 d. (180,000)

15. On January 1, 2013, the statement of financial position of Richway Company showed total assets of P
5,000,000 total liabilities of P 2,000,000 and contributed capital of P 2,000,000. During the current
year, the corporation issued share capital of P 500,000 par value at a premium of P 300,000.
Dividend of P 250,000 was paid on December 31, 2013. The statement of financial position on
December 31, 2013 showed total assets of P 7,500,000 and total liabilities of P3,200,000.
The net income for the current year is
a. 1,750,000 b. 1,000,000 c. 750,000 d. 500,000

16. Dec Company uses the statement of financial position approach in estimating uncollectible accounts
expense. The company prepares an adjusting entry to recognize this expense at the end of each
month. During the month of July, the company wrote off a P 1,000 receivable and made no recoveries
of previous write-offs. Following the adjusting entry for July, the credit balance in the Allowance for
Doubtful Accounts was P 2,500 larger than it was on July 1.
What amount of uncollectible account expense was recorded for July?
a. P 2,500 b. P 1,000 c. P 1,500 d. P 3,500

17. Based on the information:

Credit sales P 172,000 credit
Collections on accounts receivable during the year 170,000 credit
Cash sales 810,000 credit
Unadjusted balance in Allowance for doubtful accounts 50 debit
Sales returns and allowances for credit sales 4,000 credit
Accounts receivable, beginning of the year 14,000 credit
If bad debts are estimated to be 1 ½% of ending accounts receivable, in the adjusting entry to
recognize bad debts, you would debit bad debt expense for:
a. P 230 b. P 190 c. P 130 d. P 180

18. The credit total of a trial balance is greater than the debit total of P1,800. Which of the following is
the most likely cause of the error?
a. A debit amount of P7,950 was erroneously recorded as P9,750
b. A debit amount of P1,800 was erroneously entered in the credit side of the trial
balance
c. A credit amount of P9,750 was erroneously recorded as P7,950
d. A debit amount of P9,750 was erroneously recorded as P7,950

19. The trial balance of a company allowed a debit total which exceeded the credit total by P8,100. Which
of the following is probably responsible for this situation?
a. The balance of P89,000 in Accumulated Depreciation was entered in the trial balance as
P80,900
b. The balance of P4,050 in advertising expense was entered as a credit in the trial balance
c. The balance of P9,000 in Office Equipment was entered as a debit of P900 in the trial balance
d. The balance of P16,200 in Unexpired Insurance was entered as a credit in the trial balance

20. The capital account of Thirst Company decrease by P15,000 in 2013. During the year, Jim Water, the
owner issued a personal check to settle Thirst Company’s obligation amounting to P20,000. At the end
of the year, Jim Water took merchandise costing P10,000 for personal use. At year-end, Thirst
Company’s net income (loss) is
a. 5,000 b. (5,000) c. 25,000 d. (25,000)

21. The accounts in the ledger of CD Company contain the following balances at yearend: Accounts
receivable, P30,240; Cash, P50,985; Equipment, P172,760; Gas and oil expense, P2,650; Insurance
expense, P1,830; Notes payable, P64,575; Prepaid insurance, P6,880; Repair expense, P3,360; Service
revenue, P37,130; CD drawing, P2,450; CD capital (beg), P156,290; Salaries expense, P15,490;
Salaries payable, P2,850. Assuming no error committed during the fiscal period, the balance of
Accounts payable is

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 a. 20,900 b. 23,800 c. 25,800 d. 31,500

22. John Company received cash of P77,400 on September 1, 2012 for one year's rent in advance and
recorded the transaction with a credit to a nominal account. The December 31, 2012 adjusting entry is
a. Dr Rent revenue; Cr Unearned rent P25,800
b. Dr Unearned rent; Cr Rent revenue, P25,800
c. Dr Rent revenue; Cr Unearned rent P51,600
d. Dr Unearned rent; Cr Rent revenue P51,600

23. On March 31, the ledger for GH Services consists of the following: Cleaning equipment, P27,800;
Accounts payable, P15,700; Gail, capital, P20,000; Office equipment, P11,500; Accrued interest on
note, P1,500; Cleaning supplies, P2,600; Accounts receivable, P21,000; Accumulated depreciation,
P2,000; Cash, P7,900; Note payable, P22,000; Accrued salaries P9,600. In a trial balance prepared on
March 31, the total of the credit column is
a. 68,800 b. 69,300 c. 70,800 d. 72,300

24. The trial balance of HI Company does not balance. The debit column totaled P588,600 while the credit
column totaled P598,600. An examination of the ledger shows these errors
● Cash received from customer on account was recorded (both debit and credit) as P46,900
instead of P49,600
● Check issued to supplier was recorded (both debit and credit) as P24,800 instead of P28,400
● The purchase on account of a computer table worth P22,000 was recorded as a debit to Office
Expense and a credit to accounts payable.
● Services performed on account for a client, for P12,250 were recorded both as a debit to
Accounts receivable and a credit to service revenue of P21,250
● A payment of P2,500 for telephone charges was posted as a credit to Office Expense and a
credit to Cash
● The unearned rent account was totaled at P15,200 instead of P12,200
● The debit footings to purchases and interest income were both understated by P1,000
The correct debit/credit column totals should be
a. 582,000 b. 591,000 c. 600,000 d. 607,200

25. The following errors were made in preparing a trial balance, the P1,350 balance of inventory was
omitted; the P450 balance of Prepaid Insurance was listed as a credit; and the P300 balance of
Salaries Expense was listed as Utilities Expense. The dr/cr totals of the trial balance would differ by
e. P1,350 f. P1,800 g. P2,100 h. P2,250

26. The trial balance of HI Company does not balance. The debit column totaled P588,600 while the credit
column totaled P598,600. An examination of the ledger shows these errors
● Cash received from customer on account was recorded (both debit and credit) as P46,900
instead of P49,600
● Check issued to supplier was recorded (both debit and credit) as P24,800 instead of P28,400
● The purchase on account of a computer table worth P22,000 was recorded as a debit to Office
Expense and a credit to accounts payable.
● Services performed on account for a client, for P12,250 were recorded both as a debit to
Accounts receivable and a credit to service revenue of P21,250
● A payment of P2,500 for telephone charges was posted as a credit to Office Expense and a
credit to Cash
● The unearned rent account was totaled at P15,200 instead of P12,200
● The debit footings to purchases and interest income were both understated by P1,000
The correct debit/credit column totals should be
a. 582,000 b. 591,000 c. 600,000 d. 607,200

27. On January 1, 2013, the statement of financial position of Richway Company showed total assets of P
5,000,000 total liabilities of P 2,000,000 and contributed capital of P 2,000,000. During the current year,
the corporation issued share capital of P 500,000 par value at a premium of P 300,000.
Dividend of P 250,000 was paid on December 31, 2013. The statement of financial position on
December 31, 2013 showed total assets of P 7,500,000 and total liabilities of P3,200,000.
The net income for the current year is
b. 1,750,000 b. 1,000,000 c. 750,000 d. 500,000

28. Dec Company uses the statement of financial position approach in estimating uncollectible accounts
expense. The company prepares an adjusting entry to recognize this expense at the end of each

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 month. During the month of July, the company wrote off a P 1,000 receivable and made no recoveries
of previous write-offs. Following the adjusting entry for July, the credit balance in the Allowance for
Doubtful Accounts was P 2,500 larger than it was on July 1. What amount of uncollectible account
expense was recorded for July?
a. P 2,500 b. P 1,000 c. P 1,500 d. P 3,500

29. Based on the information:

Credit sales P 172,000 credit
Collections on accounts receivable during the year 170,000 credit
Cash sales 810,000 credit
Unadjusted balance in Allowance for doubtful accounts 50 debit
Sales returns and allowances for credit sales 4,000 credit
Accounts receivable, beginning of the year 14,000 credit
If bad debts are estimated to be 1 ½% of ending accounts receivable, in the adjusting entry to
recognize bad debts, you would debit bad debt expense for:
a. P 230 b. P 190 c. P 130 d. P 180

30. The accounts in the ledger of CD Company contain the following balances at yearend: Accounts
receivable, P30,240; Cash, P50,985; Equipment, P172,760; Gas and oil expense, P2,650; Insurance
expense, P1,830; Notes payable, P64,575; Prepaid insurance, P6,880; Repair expense, P3,360;
Service revenue, P37,130; CD drawing, P2,450; CD capital (beg), P156,290; Salaries expense,
P15,490; Salaries payable, P2,850. Assuming no error committed during the fiscal period, the balance
of Accounts payable is
a. 20,900 b. 23,800 c. 25,800 d. 31,500

END OF EXAMINATION

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