Comprehensive Review-Acctg 1n21

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UNIVERSITY OF THE CORDILLERAS

COLLEGE OF ACCOUNTANCY
ACCOUNTING 1/2
DJOASUNCION
INSTRUCTIONS: CHOOSE THE BEST ANSWER FOR EACH OF THE FOLLOWING. SHADE THE LETTER OF YOUR
CHOICE ON THE ANSWER SHEET PROVIDED. STRICTLY NO ERASURES ARE ALLOWED. FOR PROBLEM SOLVING
QUESTIONS, PRESENT YOUR SOLUTIONS IN TEN-COLUMN WORKSHEET PRESENTED CHRONOLOGICALLY. (80
items x 1point=80)
1. The amount of purchases to be recorded under the gross method if the invoice is paid within the discount period on
a purchase of goods having a list price of P20,000 subject to a trade discount of 15 percent with terms 2/10, n/30, is
a. 20,000
c. 16,660
b. 17,000
d. 19,600
2. Assume the same data above, on the date of payment (payment within the discount period), the journal entry would
require
a. debit to accounts payable of P16,660
b. credit to purchase discount of P340
c. credit to cash of P19,600
d. credit to cash of P20,000
3. The amount of purchases to be recorded under the net method if the invoice is paid within the discount period on a
purchase of goods having a list price of P20,000 subject to a trade discount of 15 percent with terms 2/10, n/30, is
a. 20,000
c. 16,660
b. 17,000
d. 19,600
4. Assume the same data above, on the date of payment (payment within the discount period), the journal entry would
require
a. debit to accounts payable of P16,660
b. credit to purchase discount of P340
c. credit to cash of P19,600
d. credit to cash of P20,000
5. Assume the same data above, except that the date of payment is beyond the discount period. What is the journal
entry on the date of payment?
a. debit Accounts payable 16,660, credit to cash P16,660
b. debit accounts payable P20,000 and credit to cash P20,000
c. debit accounts payable P17,000 and credit to cash P17,000
d. debit accounts payable P16,660, debit purchase discount lost P340 and credit to cash P17,000.
6. Ending merchandise inventory is P22,000, purchases are P85,000, Purchase discounts are P1,800, freight in is
P3,500, and beginning inventory is P28,000, Cost of goods sold is
a. 80,700
c. 79,700
b. 90,300
d. 92,700
7. Purchases are P100,000, Purchase discounts are P1,000, freight in is P2,500, and beginning inventory is P20,000,
Cost of goods sold is P110,000, Ending merchandise inventory is
a. 16,500
c. 6,500
b. 8,500
d. 11,500
8. Ending merchandise inventory is P40,000, purchases are P150,000, Purchase discounts are P2,000, freight in is
P4,000, and, Cost of goods sold is P132,000 beginning inventory is
a. 20,000
c. 16,000
b. 30,000
d. 52,000
9. Assuming Net Sales are P164,000; Cost of Goods sold is P83,000; Selling expenses, P23,000; and General
Expenses, P24,000, Net income is
a. 200,000
c. 128,000
b. 80,000
d. 34,000
10. Bella Company purchased merchandise on account, P3,000, with terms 2/10, n/30. The entry required of Bella
Company to record the transaction in the cash payments journal assuming payment is made within the discount
period, is
a. debit Accounts payable P3,000, credit Sales discount P60, credit cash P2,940.
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b. debit Accounts payable P2,940, credit cash P2,940.
c. debit Accounts payable P3,000, credit cash P3,000.
d. debit Accounts payable P3,000, credit Purchase discount P60, credit cash P2,940.
11. Which of the following accounts normally has a credit balance?
a. Sales discount
c. Purchases
b. Sales returns and allowances
d. Purchase returns and
Allowances
12. The amount of discount to be recorded if the invoice is paid within the discount period on a purchase of goods having
a list price of P1,600 subject to a trade discount of 25 percent with terms 2/10, n/30, is
a. 450
c. 21
b. 30
d. 29.40
13. The discount on an invoice for P590 dated July 20 and paid July 29 with terms 2/10, n/30 is
a. Zero
c. 5.90
b. 11.80
d. 578.20
14. The amount due on an P835 invoice dated March 12, a P25 return, terms 2/10, n/30, paid March 18 is
c. 810
c. 793.80
d. 16.70
d. 16.20
15. The amount due on an P835 invoice dated March 12, a P25 return, terms 2/10, n/30, paid March 23 is
a. 810
c. 793.80
b. 16.70
d. 16.20
16. The amount of list price of a merchandise purchase on January 10 subject to a trade discount of 20, 10 with terms
2/10, n/30, paid within the discount period, the amount paid is P7,056, is
a. 7,200
c. 8,000
b. 7,056
d. 10,000
17. On January 10, B, buyer, acquired a merchandise with a list price of P20,000 subject to a trade discount of 20
percent with terms 3/10, n/30, freight terms of FOB destination, freight collect. The freight paid is P200. How much is
to be paid by the buyer on January 20?
a. 16,000
c. 15,520
b. 15,720
d. 15,320
percent with terms 3/10, n/30, freight terms of FOB destination, freight prepaid. The freight paid is P200. How much
is to be paid by the buyer on January 20?
a. 16,000
c. 15,520
b. 15,720
d. 15,320
percent with terms 3/10, n/30, freight terms of FOB shipping point, freight collect. The freight paid is P200. How much
is to be paid by the buyer on January 20 to the seller?
a. 16,000
c. 15,520
b. 15,720
d. 15,320
percent with terms 3/10, n/30, freight terms of FOB shipping point, freight prepaid. The freight paid is P200. How
much is to be paid by the buyer on January 20 to the seller?
a. 16,000
c. 15,520
b. 15,720
d. 15,320
21. B, buyer paid P13,580 on its purchase on account within the discount period. The terms of the purchase is 30%,
3/10, n/30. How much is the list price of the merchandise purchased?
a. 20,000
c. 18,818
b. 9,220.82 d. 9,800
22. B, buyer paid P13,580 on its purchase on account within the discount period. The terms of the purchase is 30%,
3/10, n/30. How much is the purchase discount?
a. 6,420
b. 420
c. 5,238
d. 3,780
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23. A buyer paid his balance on July 13, 2008. A P78,000 credit purchase was made on July 11,2008 at terms 2%/15,
n/60. Compute the amount of the settlement.
a. P78,000
b. P76,400
c. P79,592
d. P76,440
24. The company recorded P30,000 credit sales at 1%/10, n/30. The journal entry to record the collection after the
discount period is
a. Cash
29,700
Accounts receivable
29,700
b. Cash
29,700
Sales discount
300
Sales
30,000
c. Cash
10,000
Sales
10,000
d. Cash
30,000
Accounts receivable
30,000
25. The journal entry to record collection within the discount period of a P40,000 sale on credit at terms 2/10, n/30 is
a. Cash
40,000
Sales
40,000
b. Cash
40,000
Accounts receivable
40,000
c. Cash
39,200
Sales discounts
800
Accounts receivable
40,000
d. Cash
39,200
Sales
39,200
26. The journal entry to record the payment of
terms 2/15, n/60 is
a. Accounts payable
50,000
Purchase discounts
Cash
b. Accounts payable
50,000
Cash
c. Cash
50,000
Accounts payable
49,000
Cash
d. Purchases
50,000
Cash
a P50,000 credit purchase made on June 1, 2008 on June 14, 2008 at

1,000
49,000
50,000
1,000
50,000
27. The beginning capital of A, proprietor of Forest Swines, was P120,000. During the period A made drawings of
P40,000; but his ending capital was determined to be P180,000. How much is the net income reported during the
period?
a. P180,000
c. P100,000
b. P160,000
d. P80,000
28. If beginning inventory is 2 times larger than ending inventory and purchases is P240,000, how much is the ending
inventory if cost of goods sold is 280,000?
a. P60,000
c. P40,000
b. P80,000
d. P30,000
29. Compute purchases if sales and gross profit are P1,200,000 and P400,000 respectively and beginning and ending
inventory are P200,000 and P300,000, respectively.
a. P900,000
c. P800,000
b. P700,000
d. P1,000,000
30. The gross profit ratio is 40%. Compute for the amount of sales if cost of goods sold is P60,000.
a. P60,000
c. P80,000
b. P36,000
d. P100,000
31. Company A sold goods worth P 20,000 to Company B for P 22,000. Shipping Costs incidental to the purchase
amounted to P3,000. The purchase was made on credit and on the terms FOB Destination. Freight was paid by the
buyer. What is the journal entry to be made by Company A to record the transaction?
a. Freight out
3,000
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Accounts receivable
Sales
Cash
b. Freight out
Accounts receivable
Sales
c. Accounts receivable
Sales
22,000
3,000
19,000
22,000
22,000
3,000
22,000
22,000
d. Accounts receivable
25,000
Sales
22,000
Cash
3,000
seller. What is the journal entry to be made by Company A to record the transaction?
a. Freight out
3,000
Accounts receivable
22,000
Sales
22,000
Cash
3,000
b. Freight out
3,000
Accounts receivable
19,000
Sales
22,000
19,000
Freight in
3,000
Sales
22,000
d.
Freight in
Accounts receivable
Sales
Cash
3,000
22,000
22,000
3,000
buyer. What is the journal entry to be made by Company B to record the transaction?
a. Purchases
22,000
Accounts payable 19,000
Cash
3,000
b. Purchases
20,000
Freight in
3,000
Cash
3,000
c. Purchases
20,000
Freight in
3,000
d. Purchases
17,000
Freight in
3,000
seller. What is the journal entry to be made by Company B to record the transaction?
a. Purchases
20,000
Cash
3,000
b. Purchases
20,000
Freight in
3,000
Cash
3,000
c. Purchases
20,000
Freight in
3,000
d. Purchases
20,000
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amounted to P3,000. The purchase was made on credit and on the terms FOB Shipping point. Freight was paid by
the buyer. What is the journal entry to be made by Company A to record the transaction?
a. Freight out
3,000
Accounts receivable
22,000
Sales
22,000
Cash
3,000
b. Freight out
3,000
Accounts receivable
19,000
Sales
22,000
22,000
Sales
22,000
Sales
Cash
25,000
22,000
3,000
the seller. What is the journal entry to be made by Company A to record the transaction?
a. Freight out
3,000
Accounts receivable
22,000
Sales
22,000
Cash
3,000
b. Freight out
3,000
Accounts receivable
19,000
Sales
22,000
19,000
Freight in
3,000
Sales
22,000
Sales
Cash
25,000
22,000
3,000
the buyer. What is the journal entry to be made by Company B to record the transaction?
a. Purchases
22,000
Cash
3,000
b. Purchases
20,000
Freight in
3,000
Cash
3,000
c. Purchases
20,000
Freight in
3,000
d. Purchases
17,000
Freight in
3,000
the seller. What is the journal entry to be made by Company B to record the transaction?
a. Purchases
20,000
Cash
3,000
b. Purchases
20,000
Freight in
3,000
c. Purchases
20,000
Freight in
3,000
d. Purchases
17,000
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39.
a.
b.
c.
d.
40.
a.
b.
c.
d.
41.
a.
b.
c.
d.
42.
a.
b.
c.
d.
Freight in
3,000
The purchase invoice shows the amount of P 500,000; 2/10; 1/20; n/30; FOB destination freight prepaid, P 1,000. If
the account is paid 15 days after the invoice date, the net payment should be:
490,000
491,000
495,000
496,000
The purchase invoice shows the amount of P 500,000; 2/10; 1/20; n/30; FOB destination freight collect, P 1,000. If
the account is paid 15 days after the invoice date, the net payment should be:
489,000
491,000
494,000
495,000
The purchase invoice shows the amount of P 300,000; 2/10 n/30; FOB shipping point freight prepaid, P 1,000. If the
account is paid 10 days after the invoice date, the net payment should be:
294,000
293,000
295,000
296,000
The purchase invoice shows the amount of P 300,000; 2/10 n/30; FOB shipping point freight prepaid, P 1,000. If the
account is paid 15 days after the invoice date, the net payment should be:
294,000
293,000
295,000
296,000
43. If a merchandising company ended a period with a larger inventory that it had at the beginning of the period, which of
the following statements must be true?
a. The cost of goods sold was greater than net purchases
b. Net income was greater than gross profit
c. The cost of goods available for sale was smaller than cost of goods sold
d. The cost of goods sold was smaller than net purchases
44. If a merchandising company ended a period with a smaller inventory that it had at the beginning of the period, which
of the following statements must be true?
a. The cost of goods sold was greater than net purchases
b. Net income was greater than gross profit
c. The cost of goods available for sale was smaller than cost of goods sold
d. The cost of goods sold was smaller than net purchases
45. Kerby Keith paid its account on the 11th day, with the following terms; 7/10, 5/15, EOM; FOB destination, Collect. The
journal entry to record the payment includes;
a. Dr Accounts receivable
b. Cr Accounts payable
c. Dr Cash (invoice amount less 5% discount less freight paid)
d. Cr Cash (invoice amount less 5 % discount)
46. Hendricks Construction purchased a crane on January 1, 2001, for P102,750. At the time of purchase, the crane was
estimated to have a life of six years and a residual value of P6,750. If Hendricks uses the straight-line method of
depreciation, what will be the depreciation expense for the crane in 2003?
a. 16,000
c. 9,464
b. 13,250
d. 8,000
47. Assuming the same data above, how much is the book value at December 31, 2002?
a. 70,750
c. 89,500
b. 64,000
d. 86,750
48. Andrews Manufacturing Company purchased a new machine on July 1, 2001. Total cost of the machine was
P600,000, and salvage value was estimated to be P60,000 and estimated useful life is 10 years. How much is the
depreciation expense in 2001?
a. 54,000
c. 27,000
b. 60,000
d. 30,000
49. Assume the same data above, how much is the book value at December 31, 2001?
a. 546,000 c. 573,000
b. 540,000 d. 570,000
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50. Assume the same data above, what is the adjusting entry to record the depreciation expense in 2002?
a. Depreciation expense
54,000
Accumulated depreciation
54,000
b. Depreciation expense
60,000
60,000
c. Accumulated depreciation
54,000
Depreciation expense
54,000
d. Accumulated depreciation
60,000
60,000
51. X Co acquires a machinery on April 1, 2003 at a cost of P820,000. The machine has an estimated useful life of 4
years and an estimated salvage value of P20,000. What is the adjusting entry on December 31, 2003?
a. Depreciation expense
205,000
205,000
b. Depreciation expense
150,000
150,000
c. Accumulated depreciation
205,000
205,000
d. Accumulated depreciation
150,000
150,000
52. Assume the same data above, what would be the net book value on December 31, 2004?
a. 470,000
c. 520,000
b. 410,000
d. 450,000
53. An example of an adjusting entry involving a deferred revenue is
a.
Cash
xxx
Unearned Rental Revenue
xxx
b.
Rental Revenue
xxx
Cash
xxx
c.
Unearned Rental Revenue xxx
Rental Revenue
xxx
d.
Accounts Receivable
xxx
Sales
xxx
54. The Supplies on Hand account balance at the beginning of the period was P6,600. Supplies totaling P12,825 were
purchased during the period and debited to Supplies on Hand. A physical count shows P3,825 of Supplies on Hand
at the end of the period. The proper journal entry at the end of the period
a. debits Supplies on Hand and credits Supplies Expense for P9,000.
b. debits Supplies Expense and credits Supplies on Hand for P12,825.
c. debits Supplies on Hand and credits Supplies Expense for P15,600.
d. debits Supplies Expense and credits Supplies on Hand for P15,600.
55. Arid Company paid P1,704 on June 1, 2001, for a two-year insurance policy and recorded the entire amount as
Insurance Expense. The December 31, 2001, adjusting entry is
a. debit Prepaid Insurance and credit Insurance Expense, P497.
b. debit Insurance Expense and credit Prepaid Insurance, P497.
c. debit Insurance Expense and credit Prepaid Insurance, P1,207.
d. debit Prepaid Insurance and credit Insurance Expense, P1,207.
56. L. Lane received P12,000 from a tenant on December 1 for four months' rent of an office. This rent was for
December, January, February, and March. If Lane debited Cash and credited Unearned Rental Income for P12,000
on December 1, what necessary adjustment would be made on December 31?
a. Unearned Rental Income 3,000
Rental Income
3,000
b. Rental Income
3,000
Unearned Rental Income 3,000
c. Unearned Rental Income
9,000
Rental Income
9,000
d. Rental Income
9,000
Unearned Rental Income 9,000
57. Ingle Company paid P12,960 for a four year insurance policy on September 1 and recorded the P12,960 as a debit to
Prepaid Insurance and a credit to Cash. What adjusting entry should Ingle make on December 31, the end of the
accounting period?
a. Prepaid Insurance 810
Insurance Expense
810
b. Insurance Expense 1,080
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Prepaid Insurance
Insurance Expense 3,240
Prepaid Insurance
d. Prepaid Insurance 11,880
Insurance Expense
c.
1,080
3,240
11,880
58. X Co is engaged in constructing and renting office space to various businesses. On November 1, 2003, one tenant
gave P360,000 cash for one years rent. The company recorded this transaction a debit to Cash and credit to
Unearned rent income. What is the adjusting entry on December 31, 2003?
a. Rent income
60,000
Unearned rent income
60,000
b. Rent income
300,000
300,000
c. Unearned rent income
60,000
Rent income
60,000
d. Unearned rent income
300,000
Rent income
300,000
59. X Co is engaged in constructing and renting office space to various businesses. On November 1, 2003, one tenant
gave P360,000 cash for one years rent. The company recorded this transaction a debit to Cash and credit to Rent
income. What is the adjusting entry on December 31, 2003?
a. Rent income
60,000
60,000
b. Rent income
300,000
300,000
c. Unearned rent income
60,000
Rent income
60,000
d. Unearned rent income
300,000
Rent income
300,000
60. X Co purchased a two-year insurance policy on September 1, 2003 for P57,600. The company recorded this
transaction by a debit to prepaid insurance and credit to Cash. What is the adjusting entry on December 31, 2003?
a. Insurance expense
9,600
Prepaid Insurance
9,600
b. Insurance expense
48,000
Prepaid Insurance
48,000
c. Prepaid Insurance
9,600
Insurance expense
9,600
d. Prepaid Insurance
48,000
Insurance expense
48,000
61. X Co purchased a two-year insurance policy on September 1, 2003 for P57,600. The company recorded this
transaction by a debit to Insurance expense and credit to Cash. What is the adjusting entry on December 31, 2003?
a. Insurance expense
9,600
Prepaid Insurance
9,600
b. Insurance expense
48,000
Prepaid Insurance
48,000
9,600
Insurance expense
9,600
d. Prepaid Insurance
48,000
Insurance expense
48,000
62.
a.
b.
c.
Depreciation is
an expense that is incurred during an accounting period.
An estimate of the loss of usefulness of equipment during an accounting period.
Used to show more proper balance in the equipment account by subtracting accumulated depreciation from the
equipment account.
d. All of these
63.
a.
b.
c.
d.
Accumulated depreciation, Equipment, is shown as

an expense on the income statement.
A liability on the balance sheet.
A deduction from net income on the statement of owners equity.
A contra account on the balance sheet.
Page 9 of 27
64.
a.
b.
c.
d.
Accrued wages are

wages that have been paid.
Wages that have been earned but not paid.
Wages that have neither been earned nor paid.
Wages that were earned and have been paid.
65.
a.
b.
c.
d.
66.
a.
b.
c.
d.
The type of account and normal balance of Accumulated depreciation is

contra asset, debit.
Asset, credit.
Asset, debit.
Contra asset, credit.
The adjusting entry to record depreciation of equipment is
debit accumulated depreciation, credit depreciation expense.
Debit Depreciation expense, credit equipment.
Debit Equipment, credit Accumulated depreciation.
Debit Depreciation expense, credit Accumulated depreciation.
67.
a.
b.
c.
d.
The difference between the balance of the Equipment account and its related Accumulated Depreciation is called
trade-in value.
A contra asset
Book value
An Accrued asset.
68. Porter Company bought equipment on January 3 of this year for P10,000. At the time of purchase, the equipment
was estimated to have a useful life of nine years and no salvage value at the end of nine years. Using the straightline method, the amount of one years depreciation is
a. 1,111.11
b. 1,222.22
c. 9,000
d. 1,000
69. It is the accounting standard body created by PRC upon recommendation of the Board of Accountancy to assist the
Board of Accountancy in carrying out its powers and functions under R.A. No. 9298.
a. Accounting Standards Council
b. Auditing and Assurance Standards Council.
c. Philippine Accounting Standards Board
d. Financial Reporting Standards Council
70.
a.
b.
c.
d.
The conceptual framework specifically mentions two underlying assumptions, namely

accrual and going concern
accrual and accounting entity
going concern and time period
time period and monetary unit
71. The cost of services is 60% of service income. If the service income is P 750,00, what is the gross profit?
a. P 300,000
b. P 450,000
c. P 30,000
d. None of the choices
72. The cost of services is 75% of the service income. If the gross profit is P 50,000, how much is the service income?
a. P 37,500
b. P 66,667
c. P 200,000
d. None of the choices
73. The total assets of X firm is P 350,000 of which P 50,000 is accounts receivable. Subsequently, P 22,500 of accounts
receivable was collected. What is the new balance of its total assets?
a. P 377,500
b. P 322,500
c. P 350,000
d. P 400,000
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74. The net asset (capital) of Y was P 125,000. An account payable of P 11,700 was paid. What is the new balance of
Ys net asset?
a. P 136,700
b. P 113,300
c. P 125,000
d. P 101,600
75. The total liability of A is P 150,000 of which P 80,000 was paid in cash and P 10,000 was issued with promissory
note. The balance of As liability is
a. P 60,000.
b. P 70,000.
c. P 80,000.
d. P 150,000.
76. Who was the inventor of double-entry bookkeeping and a partner of a merchant partnership
a. Amatino Manucci
b. Luca Pacioli
c. Napoleon Bonaparte
d. Eugen Schmalenbach
77. Who is known as the Father of Accounting even if he was not an accountant or merchant?
a. Amatino Manucci
b. Luca Pacioli
c. Napoleon Bonaparte
d. Eugen Schmalenbach
78. Ending merchandise inventory is P145,000, purchases are P285,000, Purchase discounts are P1,000, purchase
returns and allowances are P4,000, freight in is P15,000, and beginning inventory is P100,000, Cost of goods sold is
a. 395,000
b. 250,000
c. 255,000
d. 200,000
79. On January 2, B Company purchase P20,000 worth of merchandise from S Company. The terms of the purchased
are 2/10, n/30. Payment was made on January 15. What is the journal entry on the part of B Company under the net
method on the date of payment?
a. Accounts payable
19,600
Purchase discount
400
Cash
20,000
b. Accounts payable
19,600
Cash
19,600
c. Accounts payable
19,600
Purchase discount lost
400
Cash
19,200
d. Accounts payable
19,600
Purchase discount lost
400
Cash
20,000
80. Assume the same data above, except that the date of payment was January 12, What is the journal entry on the part
of S Company under the net method on the date of payment?
a. Cash
19,600
Sales discount 400
Accounts receivable
20,000
b. Cash
19,600
Accounts receivable
19,600
c. Cash
19,600
Sales discount forfeited 400
Accounts receivable
19,200
d. Cash
20,000
Sales discount forfeited 400
Accounts receivable
19,600
1
2
3
4
5
6
B
B
C
A
D
D
41
42
43
44
45
46
C
E 301,000
D
A
C
A
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33
34
35
36
37
38
39
40
D
A
D
D
D
E 24
B
C
A
D
D
C
C
B
A
B
D
D
C
A
C
C
A
D
B
A
A
D
C
D
B
B
C
C
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
A
C
C
A
B
A
C
D
D
A
B
C
B
A
D
D
D
B
D
D
C
A
D
A
A
C
C
C
B
A
B
B
D
B
1.
Accounts
a. do not reflect money amounts
b. are not used by entities that manufacture products
c. are records of increases and decreases in individual financial statement items
d. are only used by large entities with many transactions
ANS: C
DIF:
Easy OBJ: 02-01
NAT: AACSB Analytic | AICPA FN-Measurement
2.
A group of related accounts that comprise a complete unit is called a

a. journal
b. liability
c. ledger
d. transaction
ANS: C
DIF:
Easy OBJ: 02-01
Page 12 of 27
3.
Accounts are classified in the ledger

a. chronologically
b. alphabetically
c. in accordance with their appearance in the financial statements
d. so that accounts used most often are listed first
ANS: C
DIF:
Moderate
OBJ: 02-01
4.
Revenue should be recognized when

a. cash is received
b. the service is performed
c. the customer places an order
d. the customer charges an order
ANS: B
DIF:
Moderate
OBJ: 02-01
5.
Which of the following accounts is an stockholders' equity account?

a. Cash
b. Accounts Payable
d. Retained Earnings
ANS: D
DIF:
Easy OBJ: 02-01
6.
The gross increases in stockholders' equity attributable to business activities are called
a. assets
b. liabilities
c. revenues
d. net income
ANS: C
DIF:
Easy OBJ: 02-01
7.
A chart of accounts is
a. the same as a balance sheet
b. usually a listing of accounts in alphabetical order
c. usually a listing of accounts in financial statement order
d. used in place of a ledger
ANS: C
DIF:
Moderate
OBJ: 02-01
8.
The debit side of an account

a. depends on whether the account is an asset, liability or stockholders' equity
b. can be either side of the account depending on how the accountant set up the system
c. is the right side of the account
d. is the left side of the account
ANS: D
DIF:
Moderate
OBJ: 02-01
9.
An account is said to have a debit balance if

a. the amount of the debits exceeds the amount of the credits
b. there are more entries on the debit side than on the credit side
c. its normal balance is debit without regard to the amounts or number of entries on the debit side
d. the first entry of the accounting period was posted on the debit side
ANS: A
DIF:
Difficult OBJ: 02-01
10. Which statement(s) concerning cash is (are) true?
a. cash will always have more debits than credits
b. cash will never have a credit balance
c. cash is increased by debiting
d. all of the above
ANS: C
DIF:
Moderate
OBJ: 02-01
Page 13 of 27
11. A debit may signify a(n)
a. decrease in asset accounts
b. decrease in liability accounts
c. increase in the capital stock account
d. decrease in the dividend account
ANS: B
DIF:
Moderate
OBJ: 02-01
12. Which of the following types of accounts have a normal credit balance?
a. assets and liabilities
b. liabilities and expenses
c. revenues and liabilities
d. capital stock and dividends
ANS: C
DIF:
Easy OBJ: 02-01
13. Which of the following groups of accounts have a normal debit balance?
a. revenues, liabilities, stockholders equity
b. stockholders equity, assets
c. liabilities, expenses
d. assets, expenses
ANS: D
DIF:
Easy OBJ: 02-01
14. Which one of the statements below is not a purpose for the journal?
a. to show increases and decreases in accounts
b. to show a chronological order by date
c. to show a complete transaction in one place
d. to help locate errors
ANS: A
DIF:
Moderate
OBJ: 02-01
15. A credit signifies a decrease in
a. dividends
b. liabilities
c. capital stock
d. revenue
ANS: A
DIF:
Moderate
OBJ: 02-01
16. A credit may signify a
a. decrease in assets
b. decrease in liabilities
c. decrease in capital stock
d. decrease in revenue
ANS: A
DIF:
Moderate
OBJ: 02-01
17. A debit signifies a decrease in
a. assets
b. expenses
c. dividends
d. revenues
ANS: D
DIF:
Moderate
OBJ: 02-01
18. Which of the following applications of the rules of debit and credit is true?
a. decrease Prepaid Insurance with a credit and the normal balance is a credit
b. increase Accounts Payable with a credit and the normal balance is a debit
c. increase Supplies Expense with a debit and the normal balance is a debit
d. decrease Cash with a debit and the normal balance is a credit
ANS: C
DIF:
Page 14 of 27
19. Which of the following describes the classification and normal balance of the fees earned account?
a. asset, credit
b. liability, credit
c. stockholders' equity, debit
d. revenue, credit
ANS: D
DIF:
Easy OBJ: 02-01
20. The classification and normal balance of the accounts payable account is
a. an asset with a credit balance
b. a liability with a credit balance
c. stockholders' equity with a credit balance
d. revenue with a credit balance
ANS: B
DIF:
Easy OBJ: 02-01
ADJUSTING ENTRIES
6.
If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the
following describes the effect of the credit portion of the entry?
a. decreases the balance of an stockholders equity account
b. increases the balance of an liability account
c. increases the balance of an asset account
d. decreases the balance of an expense account
ANS: B
DIF:
7.
If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the
following describes the effect of the debit portion of the entry?
a. increases the balance of a contra asset account
b. increases the balance of an asset account
c. decreases the balance of an stockholders equity account
d. increases the balance of an expense account
ANS: D
DIF:
8.
The primary difference between deferred and accrued expenses is that deferred expenses have
a. been incurred and accrued expenses have not
b. not been incurred and accrued expenses have been incurred
c. been recorded and accrued expenses have not been incurred
d. not been recorded and accrued expenses have been incurred
ANS: B
DIF:
9.
Prior to the adjusting process, accrued expenses have

a. not yet been incurred, paid, or recorded
b. been incurred, not paid, but have been recorded
c. been incurred, not paid, and not recorded
d. been paid but have not yet been incurred
ANS: C
DIF:
10. Prior to the adjusting process, accrued revenue has
a. been earned and cash received
b. been earned and not recorded as revenue
c. not been earned but recorded as revenue
d. not been recorded as revenue but cash has been received
ANS: B
DIF:
Page 15 of 27
11. Deferred expenses have
a. not yet been recorded as expenses or paid
b. been recorded as expenses and paid
c. been incurred and paid
d. not yet been recorded as expenses
ANS: D
DIF:
12. Deferred revenue is revenue that is
a. earned and the cash has been received
b. earned but the cash has not been received
c. not earned and the cash has not been received
d. not earned but the cash has been received
ANS: D
DIF:
13. Adjusting entries are
a. the same as correcting entries
b. needed to bring accounts up to date and match revenue and expense
c. optional under generally accepted accounting principles
d. rarely needed in large companies
ANS: B
DIF:
Moderate
OBJ: 03-01
14. Adjusting entries affect at least one
a. income statement account and one balance sheet account
b. revenue and the dividend account
c. asset and one stockholders equity account
d. revenue and one capital stock account
ANS: A
DIF:
Moderate
OBJ: 03-01
15. The general term employed to indicate an expense that has not been paid and has not yet been recognized in the
accounts by a routine entry is
a. capital
b. deferral
c. accrual
d. inventory
ANS: C
DIF:
Easy OBJ: 03-01
16. Which of the following is not a characteristic of accrual basis of accounting?
a. Revenues and expenses are reported in the period in which cash is received or paid
b. Revenues are reported in the income statement in the period in which they are earned
c. Supports the matching concept
d. All are correct.
ANS: A
DIF:
29. The balance in the prepaid rent account before adjustment at the end of the year is $15,000, which represents three
months' rent paid on December 1. The adjusting entry required on December 31 is
a. debit Rent Expense, $5,000; credit Prepaid Rent, $5,000
b. debit Prepaid Rent, $10,000; credit Rent Expense, $5,000
c. debit Rent Expense, $10,000; credit Prepaid Rent, $5,000
d. debit Prepaid Rent, $5,000; credit Rent Expense, $5,000
ANS: A
DIF:
Page 16 of 27
30. The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and the
supplies on hand at June 30 were $2,000. The amount to be used for the appropriate adjusting entry is
a. $4,500
b. $2,500
c. $9,700
d. $5,700
ANS: D
DIF:
31. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance
before adjustment, $15,500, and unexpired amounts per analysis of policies, $4,500?
a. debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500
b. debit Insurance Expense, $15,500; credit Prepaid Insurance, $15,500
c. debit Prepaid Insurance, $11,500; credit Insurance Expense, $11,500
d. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000
ANS: D
DIF:
32. The entry to adjust for the cost of supplies used during the accounting period is
a. Supplies Expense, debit; Supplies, credit
b. Capital Stock, debit; Supplies, credit
c. Accounts Payable, debit; Supplies, credit
d. Supplies, debit; credit Capital Stock
ANS: A
DIF:
Moderate
OBJ: 03-02
33. A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry
necessary at the end of the fiscal period ending on Thursday is
a. debit Salaries Payable, $16,000; credit Cash, $16,000
b. debit Salary Expense, $16,000; credit Dividends, $16,000
c. debit Salary Expense, $16,000; credit Salaries Payable, $16,000
d. debit Drawing, $16,000; credit Cash, $16,000
ANS: C
DIF:
34. The balance in the prepaid insurance account before adjustment at the end of the year is $10,000. If the additional data
for the adjusting entry is (1) "the amount of insurance expired during the year is $8,500," as compared to additional data
stating (2) "the amount of unexpired insurance applicable to a future period is $1,500," for the adjusting entry:
a. the debit and credit amount for (1) would be the same as (2) but the accounts would be different
b. the accounts for (1) would be the same as the accounts for (2) but the amounts would be different
c. the accounts and amounts would be the same for both (1) and (2)
d. there is not enough information given to determine the correct accounts and amounts
ANS: C
DIF:
35. The difference between the balance of a fixed asset account and the related accumulated depreciation account is
termed
a. historical cost
b. contra asset
c. book value
d. market value
ANS: C
DIF:
Easy OBJ: 03-02
36. The adjusting entry to record the depreciation of equipment for the fiscal period is
a. debit Depreciation Expense; credit Equipment
b. debit Depreciation Expense; credit Accumulated Depreciation
c. debit Accumulated Depreciation; credit Depreciation Expense
d. debit Equipment; credit Depreciation Expense
ANS: B
DIF:
Moderate
OBJ: 03-02
Page 17 of 27
37. As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease
in usefulness, the cost of fixed assets is systematically allocated to expense through a process called
a. equipment allocation
b. depreciation
c. accumulation
d. matching
ANS: B
DIF:
Easy OBJ: 03-02
38. The entry to adjust the accounts for wages accrued at the end of the accounting period is
a. Wages Payable, debit; Wages Income, credit
b. Wages Income, debit; Wages Payable, credit
c. Wages Payable, debit; Wages Expense, credit
d. Wages Expense, debit; Wages Payable, credit
ANS: D
DIF:
Moderate
OBJ: 03-02
39. The supplies account has a balance of $1,000 at the beginning of the year and was debited during the year for $2,800,
representing the total of supplies purchased during the year. If $750 of supplies are on hand at the end of the year, the
supplies expense to be reported on the income statement for the year is
a. $750
b. $3,550
c. $3,800
d. $3,050
ANS: D
DIF:
Moderate
OBJ: 03-02
40. A company purchases a one-year insurance policy on June 1 for $840. The adjusting entry on December 31 is
a. debit Insurance Expense, $350 and credit Prepaid Insurance, $350
b. debit Insurance Expense, $280 and credit Prepaid Insurance, $280
c. debit Insurance Expense, $490, and credit Prepaid Insurance, $490.
d. debit Prepaid Insurance, $720, and credit Cash, $720
ANS: C
DIF:
41. If the prepaid rent account before adjustment at the end of the month has a debit balance of $1,600, representing a
payment made on the first day of the month, and if the monthly rent was $800, the amount of prepaid rent that would
appear on the balance sheet at the end of the month, after adjustment, is
a. $800
b. $400
c. $2,400
d. $1,600
ANS: A
DIF:
Moderate
OBJ: 03-02
42. Depreciation Expense and Accumulated Depreciation are classified, respectively, as
a. expense, contra asset
b. asset, contra liability
c. revenue, asset
d. contra asset, expense
ANS: A
DIF:
Easy OBJ: 03-02
43. The type of account and normal balance of Accumulated Depreciation is
a. asset, credit
b. asset, debit
c. contra asset, credit
d. contra asset, debit
ANS: C
DIF:
Easy OBJ: 03-02
Page 18 of 27
44. The type of account and normal balance of Unearned Rent is
a. revenue, credit
b. expense, debit
c. liability, credit
d. liability, debit
ANS: C
DIF:
Easy OBJ: 03-02
60. The unearned rent account has a balance of $40,000. If $3,000 of the $40,000 is unearned at the end of the accounting
period, the amount of the adjusting entry is
a. $3,000
b. $40,000
c. $37,000
d. $43,000
ANS: C
DIF:
Moderate
OBJ: 03-02
61. The following adjusting journal entry was found on page 4 of the journal. Select the best explanation for the entry.
Unearned Revenue
Fees earned
????????????????
a.
b.
c.
d.
ANS:
NAT:
4,500
4,500
Record payment of fees earned

Record fees earned at the end of the month
Record fees that have not been earned at the end of the month
Record the payment of fees to be earned.
B
DIF:
Moderate
OBJ: 03-02
AACSB Analytic | AICPA FN-Measurement
Supplies Expense
Supplies
????????????????
a.
b.
c.
d.
ANS:
NAT:
360
360
Adjust supplies inventory to actual

Record purchase of supplies
Adjust supplies expense
Record sale of supplies
A
DIF:
Moderate
OBJ: 03-02
Wages Expense
Wages Payable
????????????????
a.
b.
c.
d.
ANS:
NAT:
Record the payment of wages

Record wages to be paid this month
Record wages paid in advance
Record wages expense incurred and to be paid next month
D
DIF:
Moderate
OBJ: 03-02
2,555
2,555
Page 19 of 27
64. What affect will this adjustment have on the accounting records?
Unearned Revenue
Fees earned
a.
b.
c.
d.
ANS:
NAT:
4,500
4,500
Increase net income

Increase revenues reported for the period
Decrease liabilities
All are true.
D
DIF:
Easy OBJ: 03-02
65. What affect will this adjusting journal entry have on the accounting records?
Supplies Expense
Supplies
a.
b.
c.
d.
ANS:
NAT:
678
678
Increase income
Decrease net income
Decrease expenses
Increase assets
B
DIF:
Easy OBJ: 03-02
COMPLETING THE ACCOUNTING CYCLE

MATCHING
Identify the following transactions as either:
a. Journal entries
b. Adjusting journal entries
c. Closing journal entries
1.
Cash
500
Fees Earned
500
2. Income Summary 465
Retained earnings
465
3. Utilities Expense
123
Cash
123
4. Wages Expense
790
Wages Payable
790
5. Unearned revenue 498
Fees Earned
498
6. Income Summary
677
Rent Expense
240
Supplies Expense
220
Utilities Expense
130
Miscellaneous Exp
87
7. Dividends
175
Cash
175
8. Accounts Receivable 400
Fees earned
400
(Customer billed for services performed)
1. ANS:
A
DIF:
Moderate
2. ANS:
C
DIF:
Moderate
3. ANS:
A
DIF:
Moderate
4. ANS:
B
DIF:
Moderate
OBJ:
04-05
OBJ:
04-05
OBJ:
04-05
OBJ:
04-05
Page 20 of 27
5. ANS:
B
DIF:
Moderate
6. ANS:
C
DIF:
Moderate
7. ANS:
A
DIF:
Moderate
8. ANS:
A
DIF:
Moderate
OBJ:
04-05
OBJ:
04-05
OBJ:
04-05
OBJ:
04-05
MULTIPLE CHOICE
1.
In the accounting cycle, the last step is

a. preparing the financial statements
b. journalizing and posting the adjusting entries
c. preparing a post-closing trial balance
d. journalizing and posting the closing entries
ANS: C
DIF:
Moderate
OBJ: 04-01
2.
During the end-of-period processing which of the following best describes the logical order of this process
a. Preparation of adjustments, adjusted trial balance, financial statements
b. Preparation of Income Statement, adjusted trial balance, Balance Sheet
c. Preparation of adjusted trial balance, cross-referencing, journalizing
d. Preparation of adjustments, adjusted trial balance, posting
ANS: A
DIF:
3.
What is the major difference between the Unadjusted Trial Balance and the Adjusted Trial Balance?
a. The Adjusted Trial Balance will show the net income (loss) as an additional account.
b. Both will need to be in balance in order to continue with the end-of-period processing
c. The Adjusted Trial Balance includes the postings of the adjustments for the period in the balance of the accounts.
d. The Unadjusted Trial Balance will be used to record the adjustments for the period.
ANS: C
DIF:
4.
Once the adjusting entries are posted, the Adjusted Trial Balance will prepared to
a. verify that the debits and credits are in balance.
b. verify that all of the adjustments were posted in the correct accounts.
c. verify that the net income (loss) is correct for the period.
d. verify the correct flow of accounts into the financial statements.
ANS: A
DIF:
Moderate
OBJ: 04-01
5.
When preparing the statement of retained earnings, the beginning retained earnings balance can always be found
a. in the Income Statement columns of the work sheet
b. in the statement of cash flows
c. in the general ledger
d. in the Balance Sheet columns of the work sheet
ANS: C
DIF:
Moderate
OBJ: 04-02
6.
Accumulated Depreciation appears on the

a. balance sheet in the current assets section
b. balance sheet in the property, plant and equipment section
c. balance sheet in the long-term liabilities section
d. income statement as an operating expense
ANS: B
DIF:
Moderate
OBJ: 04-02
Page 21 of 27
7.
Notes Receivable due in 345 days appear on the

b. balance sheet in the fixed assets section
c. balance sheet in the current liabilities section
d. income statement as an expense
ANS: A
DIF:
Moderate
OBJ: 04-02
8.
Unearned Fees appear on the

b. balance sheet as a current liability
c. balance sheet in the stockholders equity section
d. income statement as revenue
ANS: B
DIF:
Easy OBJ: 04-02
9.
Which one of the fixed asset accounts listed below will not have a related contra asset account?
a. Office Equipment
b. Land
c. Delivery Equipment
d. Building
ANS: B
DIF:
Easy OBJ: 04-02
10. Prepaid insurance is reported on the balance sheet as a
a. current asset
b. fixed asset
c. current liability
d. long-term liability
ANS: A
DIF:
Easy OBJ: 04-02
11. The income statement is prepared from the
a. adjusted trial balance
b. income statement columns of the work sheet
c. either the adjusted trial balance or the income statement columns of the work sheet
d. both the adjusted trial balance and the income statement columns of the work sheet
ANS: C
DIF:
Moderate
OBJ: 04-02
12. Round-tripping is when
a. a selling company sells to a customer company with huge discounts.
b. a selling company pretends to sell to a fictitious company with the intend of inflating revenues
c. a selling company lends money to a customer company to increase assets.
d. a selling company lends money to a customer company to be used to purchase goods from the selling company.
ANS: D
DIF:
13. The Statement of Retained Earnings should be prepared
a. before the income statement and after the balance sheet
b. before the income statement and balance sheet
c. after the income statement and balance sheet
d. after the income statement and before the balance sheet
ANS: A
DIF:
Moderate
OBJ: 04-02
14. The income statement should be prepared
a. before the statement of retained earnings and balance sheet
b. after the statement of retained earnings and before the balance sheet
c. after the statement of retained earnings and balance sheet
d. after the balance sheet and before the statement of retained earnings
ANS: A
DIF:
Moderate
OBJ: 04-02
Page 22 of 27
15. When preparing the Statement of Retained Earnings the beginning balance should be followed by ____ to arrive and the
ending balance of retained earnings.
a. investments plus net income (loss)
b. investments less dividends
c. net income (loss) less dividends
d. investments plus net income (loss) less dividends
ANS: A
DIF:
Moderate
OBJ: 04-02
The following is the adjusted trial balance for Steely Company.
Steely Company
Adjusted Trial Balance
For the Year ended December 31, 2008
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accumulated Depreciation
Accounts Payable
Notes Payable
Capital Stock
Dividends
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Depreciation Expense
Miscellaneous Expense
6,130
2,300
750
13,400
870
Totals
16. Determine the net income (loss) for the period.

a. Net Income 26,500
b. Net Loss 870
c. Net Loss 3,550
d. Net Income 3,550
ANS: D
DIF:
Moderate
OBJ: 04-02
17. Determine the stockholders equity ending balance for the period.
a. $14,680
b. $11,130
c. $15,550
d. $2,680
ANS: A
DIF:
18. Determine total assets.
a. $26,500
b. $15,380
c. $21,380
d. $22,580
ANS: C
DIF:
Moderate
OBJ: 04-02
1,450
900
475
150
75
26,500
1,200
1,700
5,000
12,000
6,600
26,500
Page 23 of 27
19. Determine the current assets.
a. $22,580
b. $9,180
c. $21,380
d. $26,500
ANS: B
DIF:
Moderate
OBJ: 04-02
20. Determine the total liabilities for the period.
a. $6,700
b. $1,700
c. $5,000
d. $18,700
ANS: A
DIF:
Moderate
OBJ: 04-02
29. On which financial statement will Income Summary be shown?
a. Statement of retained earnings
b. Balance Sheet
c. Income Statement
d. No financial statement
ANS: D
DIF:
Moderate
OBJ: 04-03
30. Which is the following that is not true about closing entries?
a. There are four closing entries that update the stockholders equity account.
b. After the second closing entry, the income summary account is equal to the net income or (loss) for the period.
c. All real accounts are closed at the end of the period.
d. By closing nominal accounts at the end of the period to zero, it is possible to isolate next periods information
correctly.
ANS: C
DIF:
31. The income summary account is also called
a. the closing account
b. the clearing account
c. the nominal account
d. the temporary account
ANS: B
DIF:
Easy OBJ: 04-03
32. After posting the second closing entry to the income summary account, the balance will be equal to
a. zero.
b. stockholders equity.
c. revenues for the period
d. the net income or (loss) for the period.
ANS: D
DIF:
Easy OBJ: 04-03
33. What is the last account that should be listed in the Post Closing Trial Balance?
a. Income Summary
b. Retained Earnings
c. Cash
d. Fees Earned
ANS: B
DIF:
Easy OBJ: 04-03
Page 24 of 27
34. Which of the following account groups are all considered nominal accounts?
a. Cash, Fees Earned, Unearned Revenues
b. Prepaid Expenses, Unearned Revenues, Fees Earned
c. Capital Stock, Dividends, Income Summary
d. Dividends, Fees Earned, Rent Expense
ANS: D
DIF:
Moderate
OBJ: 04-03
35. There are four closing entries. The first one is to close ____, the second one is to close ____, the third one is to close
____, and the last one is to close ____.
a. Revenues, expenses, income summary, dividends account
b. Expenses, assets, income summary, capital stock account
c. Capital stock account, dividends account, income summary, assets
d. Dividends account, income summary, expenses, revenues
ANS: A
DIF:
Moderate
OBJ: 04-03
MERCHANDISING
6. A company using the periodic inventory system has the following account balances: Merchandise Inventory at the
beginning of the year, $4,000; Transportation-In, $450; Purchases, $12,000; Purchases Returns and Allowances,
$2,300; Purchases Discounts, $220. The cost of merchandise purchased is equal to
a. $13,930
b. $9,930
c. $9,489
d. $14520
ANS: B
DIF:
7.
A company, using the periodic inventory system, has merchandise inventory costing $140 on hand at the beginning of
the period. During the period, merchandise costing $400 is purchased. At year-end, merchandise inventory costing $180
is on hand. The cost of merchandise sold for the year is
a. $720
b. $550
c. $360
d. $140
ANS: C
DIF:
22. Using the following information, what is the amount of cost of merchandise sold?
Purchases
Merchandise inventory
April 1
Sales returns and
allowances
Purchases returns and
allowances
a.
b.
c.
d.
ANS:
NAT:
$28,000
6,500
750
1,000
25,780
23,270
31,220
24,020
A
DIF:
Purchases discounts
April 30
Sales
Transportation In
$800
7,800
57,000
880
Page 25 of 27
23. Using the following information, what is the amount of gross profit?
Purchases
$28,000
Purchases discounts
6,500
April 1
April 30
Sales returns and
750
Sales
allowances
1,000
Transportation In
allowances
a.
b.
c.
d.
ANS:
NAT:
$800
7,800
57,000
880
31,970
30,470
25,780
56,250
B
DIF:
24. Using the following information, what is the amount of net sales?
Purchases
April 1
Sales returns and
allowances
allowances
a.
b.
c.
d.
ANS:
NAT:
$28,000
6,500
750
1,000
Purchases discounts
April 30
Sales
Transportation In
$800
7,800
57,000
880
25,780
57,000
57,750
56,250
D
DIF:
Moderate
OBJ: 05-02
ACCOUNTING FOR MANUFACTURING

1. The following information was taken from Crimson Companys accounting records for the year ended December 31,
2008:
Increase in materials inventory
P 15,000
Decrease in finished goods inventory
35,000
Raw materials purchased
430,000
Direct-labor payroll
200,000
Factory overhead
300,000
Freight-out
45,000
There was no work-in-process inventory at the beginning or end of the year. The cost of goods sold is:
a. P950,000
b. P965,000
c. P975,000
d. P995,000
2. Zeta Company manufactures special machines according to customers specifications. The following data were available
at the beginning and ending of April:
Beginning
Ending
Materials inventory
P32,400
P34,000
Work in process inventory
7,200 16,240
Finished goods inventory
8,000 6,000
During April, direct materials costing P40,000 were purchased, direct labor cost totaled P33,000, and factory overhead
was P17,160. For April, the cost of good manufactured is:
a. P90,560
b. P81,520
c. P79,520
d. P88,560
3. The accounting department of Eiffel Company provided the following data for 2008:
Sales
P144,000
Page 26 of 27
Marketing expenses
Administrative expense
Other expenses
Purchases
Factory overhead
Direct labor
Cost of goods sold
Inventories, January 1:
Finished goods
Work in process
Materials
Inventories, December 31:
Finished goods
Work in process
Materials
7,200
1,440
720
?
20,000
30,000
100,000
14,000
16,000
16,000
20,400
30,000
17,000
Compute for 2008 the cost of materials purchased:

a. P82,640
b. P62,000
c. P72,000
d. P71,400
4. A manufacturing company had inventories at the beginning and end of 2008 as follows:
Beginning
End
Materials
P44,000
P 60,000
Work in process
80,000
96,000
Finished goods
50,000
36,000
During 2008, the following costs and expenses were incurred:
Raw materials purchased
P600,000
Direct labor cost
240,000
Indirect labor cost
120,000
Taxes, utilities and depreciation of factory building
100,000
Sales and office salaries
128,000
The cost of goods sold during the period was:
a. P1,028,000
b. P1,042,000
c. P1,044,000
d. P1,078,000
5. The factory ledger of Zircon contains the following cost data for the year-ended December 31, 2008:
Inventories
Opening
Closing
Raw materials
P 150,000
P 170,000
Work in process
160,000
60,000
Finished goods
180,000
220,000
Total materials used
652,000
Total manufacturing costs charged to production during the
year (including raw materials, direct labor and factory
overhead applied at the rate of 50% of direct labor costs)
1,372,000
Compute the cost of raw materials purchased and the direct labor charged to production during the year, respectively.
a. P632,000; P240,000
b. P672,000; P480,000 c. P672,000; P720,000
d. P360,000; P480,000
6. A mentally deranged employee, Mr. Amereil Umbra Katok, put a torch to a factory on February 20, 2008. The resulting
fire completely destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building.
they revealed the following for the period December 31, 2007 to February 20, 2008:
Prime cost, P301,000.
Gross profit rate on sales, 20%.
Cost of goods available for sale, P460,000.
Direct materials purchased, P170,000.
Work in process, December 31, 2007, P34,000.
Direct materials, December 31, 2007, P16,000.
Finished goods, December 31, 2007, P30,000.
Factory overhead, 40% of conversion cost.
Sales, P500,000.
Direct labor, P180,000.
The insurance company wants to know the approximate cost of the inventories as a basis for negotiating a settlement.
Page 27 of 27
Compute for February 20, 2008 the direct materials inventory; work in process inventory, and finished goods inventory,
respectively:
a. P65,000; P25,400; P60,000
c. P 6,000; P25,400; P30,000
b. P49,000; P25,000; P30,000
d. P65,000; P25,000; P60,000

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Page 1 of 27

UNIVERSITY OF THE CORDILLERAS

a P50,000 credit purchase made on June 1, 2008 on June 14, 2008 at

Accumulated depreciation, Equipment, is shown as

Accrued wages are

The type of account and normal balance of Accumulated depreciation is

The conceptual framework specifically mentions two underlying assumptions, namely

A group of related accounts that comprise a complete unit is called a

Accounts are classified in the ledger

Revenue should be recognized when

Which of the following accounts is an stockholders' equity account?

The debit side of an account

An account is said to have a debit balance if

Prior to the adjusting process, accrued expenses have

Record payment of fees earned

Adjust supplies inventory to actual

Record the payment of wages

Increase net income

COMPLETING THE ACCOUNTING CYCLE

In the accounting cycle, the last step is

Accumulated Depreciation appears on the

Notes Receivable due in 345 days appear on the

Unearned Fees appear on the

16. Determine the net income (loss) for the period.

ACCOUNTING FOR MANUFACTURING

Compute for 2008 the cost of materials purchased:

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