PRE-MIDTERM EXAM

COVERAGE

Also study: Calculation of Depreciation, Bad Debts expense

recognition, Work Back activity and Financial Ratios.
SAMPLE TYPE OF EXAM
GENERAL DIRECTIONS: Read carefully each of the following questions and choose the one best answer
that satisfies the question from the choices provided. Answer by writing on the space preceding each item
the letter corresponding to your choice.

Note: Show your solutions in good form. Use a separate sheet of paper to write your solutions.

PROBLEM 2
PROBLEM 1

Interest income 250,700

Petty cash fund 25,200 Dividend income 448,100
Cash on hand 356,500 Sales 4,275,000
Cash in bank 2,375,000 Sales returns and allowances 25,900
Trading Securities 48,000 Sales discounts 34,500
Merchandise Inventory, End. 540,000 Purchases 1,575,000
Accounts receivable 350,000 Purchase returns and allowances 34,500
Notes receivable 112,500 Purchase discounts 25,000
Prepaid advertising 100,000 Freight-in 50,000
Prepaid insurance 120,000 Freight-out 75,000
Office equipment 150,200 Advertising expense 38,000
Delivery truck 3,850,000 Interest expense on bank loan 25,000
Investment in stocks 1,450,000 Income tax expense 768,270
Investment in bonds 700,000 Rent expense- office 60,000
Accounts payable 580,000 Rent expense- store 125,000
Notes payable 550,700 Sales salaries expense 195,100
Bonds payable 264,000 Store supplies expense 45,000
Bank loan payable 2,598,270 Utilities expense- office 30,800
Salih, Capital 5,681,800 Utilities expense- store 122,600
Salih, Drawing 1,180,000
______2.What amount should be reported as Net
Sales?
______ 1.What amount should be reported as A. 4,214,600
current assets? B. 4,027,200
A. 4,027,600 C. 4,067500
B. 4,027,200
C. 4,067500
PROBLEM 3 PROBLEM 4
The total income is 140% of the Income before tax. Total obligations accounts for 30% of the total
The Cost of sales is twice the operating expenses. liabilities and owner’s equity. Total Non-current assets
There was no other income recorded during the period. is twice the total current assets which amounted to
Income tax is at 30%. Net Income amounted to 1,500,000.
1,750,000.
______ 4. How much does the owner truly own?
______ 3.How much is the Net sales? A. 5,000,000
A. 2,500,000 B. 3,400,000
B. 525,000 C. 3,150,000
C. 3,000,000

BUSINESS FINANCE EXAM SUPPLEMENTAL REVIEWER

1. Calculate for the adjustments.
A. Depreciation

Annual Depreciation Expense= Acquisition Cost- Salvage Value

Estimated Useful Life

Information given by Mr. Kayamukat:

Acquisition Cost= 6,500,000
Salvage Value= 350,000
Estimated Useful Life= 10
The asset was acquired on March 1, 2018

Annual Depreciation Expense= 6,500,000- 350,000

10 years
Annual Depreciation Expense= P615,000/year

thus, Monthly Depreciation Expense= P615,000/12 months

= P51,250/month
To get the Depreciation for the year ended December 31, count the inclusive months the asset
was used. In this case, March to December is 10 months.

thus, P51,250/month x 10 months of use= P512,500

The journal entry for this adjustment:

Depreciation Expense P512,500 SCI

Accumulated Depreciation P512,500 SFP as a contra asset

B. Doubtful accounts

It is estimated that 15% of the accounts receivable is uncollectible.

Accounts receivable is 450,000.
Thus, 450,000 x .15= 67,500

The journal entry for this adjustment:

Doubtful Accounts Expense P512,500 SCI

Allowance for Doubtful Accounts P512,500 SFP
as a contra asset
 2. Prepare the Financial Statements
A. Prepare the Statement of Comprehensive Income (Function of Expense Method)

Statement of Comprehensive Income

(Function of Expense Method)

Net sales revenue (Note 1) xxxxxx

Costs of sales (Note 2) xxxxxx
Gross income xxxxxx
Other income (Note 3) xxxxxx
Total income xxxxxx
Expenses:
Selling expenses (Note 4) xxxxxx
Administrative expenses (Note 5) xxxxxx
Finance Cost (Note 6) xxxxxx
Net income before tax xxxxxx
Income tax expenses xxxxxx
Net income xxxxxx

B. Prepare the Statement of Changes in Owner’s Equity. Net income will be

reported in the
Statement of Changes
Statement of Changes in Owner’s Equity
in Owner’s Equity
Capital Balance, January 1 xxxxxx
Add: Additional investment xxxxxx
Net Income xxxxxx
Total xxxxxx
Less: Drawings xxxxxx
Capital Balance, December 31 xxxxxx

C. Prepare the Statement of Financial Position.

Statement of Financial Position

ASSETS
Current assets
Cash and cash equivalents (Note 1) xxxxxx
Trading securities (Note 2) xxxxxx
Trade and other receivables (Note 3) xxxxxx
Merchandise inventory (Note 4) xxxxxx
Prepaid expenses (Note 5) xxxxxx
Total current assets xxxxxx

Non-current assets
Property, plant and equipment (Note 6) xxxxxx
Long-term investment (Note 7) xxxxxx
Intangibles (Note 8) xxxxxx
Other non-current assets (Note 9) xxxxxx
Total non-current assets xxxxxx
Total assets xxxxxx Capital Balance, End
will be reported in the
LIABILITIES AND OWNER’S EQUITY
Current liabilities Statement of Financial
Trade and other payables (Note 10) xxxxxx Position in the
Owner’s Equity
Non-current liabilities xxxxxx
Total liabilities xxxxxx
portion.
Owner’s Equity
Capital End xxxxxx
Total liabilities and owner's equity xxxxxx

REMINDERS:

1. Use only black ballpen when shading.

2. Bring your own scientific calculator. NO sharing.
3. Write your name on your questionnaire and answer sheet.
4. You may use 1 whole sheet intermediate paper for your solutions.
5. Show your solutions in good form. You may use abbreviation for the solutions. Submit your
solution paper together with your test papers. Points will be credited for every correct
solution.
6. Failure to follow the directions above will have corresponding deductions from your total
scores.

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