ACTBAS1 MIDTERM REVIEWER

TERM 3 AY 2014-2015
True or False
1. Cash is the most liquid asset.
2. Pro-forma entry for owners permanent withdrawal includes a credit to owners capital.
3. Total assets will be overstated if prepayment for school supplies under asset method was
not adjusted.
4. Information is material if its omission or misstatement could influence the economic
decision the users make on the basis of financial information.
5. Operating cycle is the operating time of an entity to convert credit into cash.
6. Accrued interest expense is a nominal account.
7. Receivables collectible beyond one year but are within the entitys operating cycle are
considered as current assets.
8. Interest expense is found in the operating activities section of the statement of the cash
flows.
9. The owners use of the companys money to pay his own bills is treated as an expense of
the company.
10.Auditing is a public accounting practice.
11.Going concern views the accounting entity to continue operating infinitely.
12.Bookkeeping is the procedural element in accounting.
13.Real accounts comprise of only asset and liability accounts.
14.The account form of statement of financial position presents the assets of the left and
liabilities and owners equity on the right.
15.Unearned revenues are revenues that are received but not yet earned.
16.Cash is measured at face value.
17.The focus of government accounting is the custody and administration of public funds.
18.Liquidity is the availability of capital to cover currently maturing obligations.
19.Statement of financial position reports the assets, liabilities and owners equity of an entity
for a time period.
20.Gain is an increase of owners equity resulting from the ordinary course of business.
21.Debits must always equal credits.
22.Drawings decrease the capital and thus increase the credit side.
23.The start of the accounting cycle is recording transactions in a journal.
24.A journal provides a chronological record of transactions.
25.Under the accrual basis of accounting, revenues are reported in the accounting period
when cash is received.
26.Assets are usually recorded at their cost.
27.Entries to expenses such as Rent Expense are usually debits.
28.A merchandising business produces a product it sells.
29.Assets are a companys net worth.
30.Liabilities are items with money value that are owned by a business.
31.Each transaction has a dual effect on the basic accounting elements.
32.Summaries of financial activities are called financial statements, which are prepared on a
regular basis only at the end of each accounting year.
33.Notes to Financial Statements is a required disclosure to be done by companies.
34.Notes to Financial Statements is one of the five financial statements to be done by
companies.
35.The Statement of Financial Position is a listing of the firms assets, liabilities, and owners
equity for the year just ended.
36.Income Statement is a summary of a businesss revenue and expenses only for a specific
period of time.
37.Accounting is the process of recording, summarizing, analyzing, and interpreting financial
(money- related) activities to permit individuals and organizations to make informed
judgments and decisions.
38.When faced which uncertainties, the accountant traditionally leans towards the direction
of caution, choosing the method that would give the business a more favorable financial
condition and lowers net income.

39.Consistency concept states that once a method is adopted, it must not be changed from
year to year to allow comparability of financial statements between years and between
businesses.
40.Entity concept refers to relative importance of an item or event.

Problem Solving
1.
Cash
Equipment
Furniture and Fixtures
Account Payable
Notes Receivable
Prepaid Expense
Bonds Payable
Bonds Receivable
Notes Payable
Accrued Income
Accued Expense
Inventory
Investment in Trading
Securities

P50,0
00
40,00
0
60,00
0
55,00
0
34,00
0
37,00
0
25,00
0
60,00
0
50,00
0
41,00
0
28,00
0
37,00
0
35,00
0

How much is current asset?

2.
Total Assets, Dec 31
Noncurrent Assets, Dec 31
Liabilities, Dec 31
Account Payable
Note Payable
Bond Payable
Accrued Expense
Prepaid Expense
Additional Investment
Net Loss
Owner's drawing
How much is Owners Capital, beginning?
3. A business has the following items in it:
- Land P1,000,000
- Machinery P20,000
- Cash P10,000
- Loan P500,000

P1,000,
000
700,000
10,000
20,000
30,000
40,000
50,000
200,000
400,000
150,000

How much is the Owners equity?

4. A business has the following items in it:
-Owners equity P 400,000
-Total liabilities P 1,600,000
How much is the Total Assets?
5. If a building was bought for P750,000 5 years ago with an estimated useful life of 10 years
and with no salvage value, what is its carrying value in the balance sheet?
6. Iron Bank has the following information regarding its business:
Assets, End
5,000,000
Liabilities, Beg
2,500,000
Owners Equity, End
2,000,000
Revenues
500,000
How much is the increase in Liabilities by the end of the year?
7. On its first operating year, Westeros Enterprises increased its Assets by 2,000,000. The
business maintains a 2:1 increase with regards to Assets : Current Liabilities relationship in
order to manage its liquidity. The ending Owners Equity amounts to 900,000. How much
is the ending balance of the Non-Current Liabilities?
8. The following information pertains to Winterfell:
Service Revenue
Interest Income
Supplies Expense
Salaries Expense
Prepaid Expense
Miscellaneous Income
Miscellaneous Expense

400,000
250,000
100,000
200,000
90,000
50,000
40,000

How much is the Net Income (Loss) for the year?

9.
Arya, Capital Beginning
Interest Expense
Interest Income
Salaries Expense
Service Revenue
Other Income
Miscellaneous Expense
Supplies Expense
Dividend Income
Arya, Capital End
Assets End
Liabilities End
Assets Beginning

4,000,000
25,000
40,000
50,000
1,000
3,000
2,500
60,000
40,000
?
?
500,000
200,000

How much is the ending balance of Assets?

10.Cersei made a monthly withdrawal of 10,000 from Lannister Company. The Net Income of
the said company amounts to 400,000. She made additional investment of 40,000 and
60,000 on November 30, 2013 and February 14, 2014. She started the business at August
1, 2013 with an initial investment of 250,000. How much is the ending equity of
Cersei at December 31, 2013?

11.The Net Income of Riverrun Enterprises amounts to 90,000. Additional Investment and
Owners Drawing amounts to 40,000 and 10,000, respectively. How much is the net
increase in the Owners Equity?
12.
Operating Activities Cash Flow
Investing Activities Cash Flow
Financing Activities Cash Flow
Proceeds from Bank Loan
Cash Flow from Non-Operating Activities
Cash Flow from Dividends
Cash Flow from Disposal of Furniture

100,000
(40,000)
50,000
50,000
40,000
30,000
40,000

How much is the ending balance of Cash if the initial cash investment is 45,000?

13.The following information is taken from the account balances of CRAZY Enterprise.
Crazy, Capital- Dec 31, 2012
500,000
Service Revenue
200,000
Unearned Service Revenue
300,000
Dividend Income
20,000
Accumulated Depreciation
700,000
Unearned Interest Income
50,000
Accounts Payable
300,000
Cash
20,000
Depreciation Expense
90,000
Interest Income
50,000
Rent Receivable
60,000
Bonds Payable
100,000
Investment in Trading Securities
300,000
Advertising Expense
100,000
Office Supplies Expense
20,000
What is the beginning balance of Crazy, Capital?
14. Shae company has the following accounts in its Financial Statements (December 31,
2013):
Cash
200,000
Investment in Trading
250,000
Securities
PPE, net
1,000,000
Accumulated Depreciation
200,000
Sales
500,000
Utilities Expense
20,000
Accrued Expense
50,000
Prepaid Expense
50,000
Total Current Liability
500,000
Accounts Payable
300,000
Long Term Debt
400,000
Shae, Capital
700,000
How much is the Trade and Other Receivables?
15. Tommen made neither additional investment nor withdrawal in his Kingdom Company. The
operations of the business positively resulted to 20,000,000. However, it was discovered
by his accountant, Petyr, that a 200,000 Prepaid Expense was included twice in the
computation of the companys results of operations. Also, service revenue of 40,000 from
a small time customer was disregarded. If the proper adjustments are made, how much
is the correct ending balance of Tommens Equity if the beginning asset and
liability balance are 40,000,000 and 15,000,000?

Preparation of Financial Statements

Accommodation Expenses
Accounts Payable
Accounts Receivable
Accumulated Depreciation
Additional Investment
Advances to Employees
Advertisement Expense
Agent Commissions
Bonds Payable, due 2015
Cash in Bank
Cash on Hand
Commission Receivable
Depreciation Expense
Entertainment Expense
Equipment Rent
Gasoline and Oil Expense
Insurance Expense
Interest Expense
Interest Payable
Light and Water Expense
Loans Payable, due 2016
Merchandise Commission
Revenue
Miscellaneous Expense
Monteriggioni, Capital - Beg
Monteriggioni, Capital - End
Monteriggioni, Drawing
Office Rent
Office Supplies
Prepaid Advertising
Prepaid Insurance
Salaries and Wages Expense
Supplies Expense
Taxes and Licenses Expense
Telephone and Communication
Expense
Tourist Fees
Transportation Equipment
Transportation Rent

Php
200,000
50,000
430,000
750,000
500,000
20,000
700,000
1,800,000
350,000
4,250,000
250,000
100,000
200,000
80,000
300,000
100,000
600,000
70,000
28,000
23,000
200,000
770,000
8,000
2,000,000
?
50,000
150,000
50,000
57,000
373,000
320,000
60,000
80,000
27,000
7,000,000
1,200,000
150,000

In addition to these accounts, he was also given the following information with regards to cash
inflows and outflows:
Cash Paid for Expenses
Php
3,248,000
Cash Received from Sales and
7,262,000
Commissions
Dividends Received
21,000
Interest Paid
55,000
Interest Received
40,000
Investment in Medici Banks Common
130,000
Shares
Issuance of Bond Indenture
400,000
Proceeds from Sale of Investment in
150,000
Shares
Proceeds from Sale of Land
500,000
Purchase of New Equipment
500,000
Rent Payment
1,400,000
Resale of Old Equipment
190,000
Beginning Cash Balance is Php 1,320,000.

Prepare a complete set of financial statements including accompanying notes.

Answer Key:
True or False
1. True
2. False
3. True
4. True
5. False
6. False
7. True
8. True
9. False
10.True
11.False
12.True
13.False

14.True
15.True
16.True
17.True
18.False
19.False
20.False
21.True
22.False
23.False (analyzing
transactions)
24.True
25.False

26.True
27.True
28.False
29.False
30.False
31.True
32.False. There are
interim financial
statements.
33.True
34.False. It is not a
financial; rather,
it is a disclosure.

Furthermore,
there are only 4
FS
35.False (as of a
given period of
time)
36.True
37.False
38.False
39.True
40.False
(materiality)

41.

Problem Solving

1.
42.
43.
44.
45.
46.
19.Total Assets, Dec 31
20.
21.
22.P1
47.
1. Cash
2.
,0
4. Prepaid Expenses
5.
2.
00
48.
,0
49.
00
23.Less: Total Liabilities, Dec
24.
25.50.
51.
31
26.
52.
27.
Account Payable
28.
29.P
7. Accrued Income
8.
53.
1
54.
0
,55.
56.
0
57.
0
58.
0
30.
10.Inventory
11.
3.
31.
Note Payable
32.
33.2
Land
0 59.
P
1,000,000
,
Machinery
0 60.
20,000
0
Cash
0 61. 34.
13.Investment
in
14.
35.
Bond Payable
36.
37.3
10,000
Trading Securities
0 62.
Loan
,
(500,000)
0 63.
Owners equity
0
P
0
38. 530,000
16.Current
Assets
17.
39.
Accrued
Expense
40.
41.4
64.
0
4.
, 65.42.10
Owners equity
0
0,
P
400,000
0 66. 00
Total liabilities
0
0
1,600,000
43.Owner's Capital, Dec 31
44.
45.
46.P9
67.
Total assets
00
P
2,000,000
,0
68.
00
5.
50.20
69.
Building
0,
(750,000 x 5/10) P
47.Less: Additional
00
375,000
Investment
48.
49.
0
70.
54.40
6.
63.Assets, End
64.P5,000,000
0,
71.
65.OE, End
66.(2,000,000)
00
67.Liabilities, End
68.P3,000,000
72.
51.Net Loss Beg
52.
53.
0
69.Liabilities,
70.2,500,000
73.
58.15
71.Increase in
72.P500,000
74. 0,
Liabilities
75. 00
76.
55.Owner's drawing
56.
57.
0
7.
62.P
77.As
78. 79.Cu
80. 81.Non82. 83.Owners
1,
se
=
rre
+
Current
+
Equity
6
ts
nt
Liabilitie
5
Lia
s
0,
0
60.
0
59.Owner's Capital, Jan 1
61.
0
3. P
5
0
,
0
0
0
6. 3
7
,
0
0
0
9. 4
1
,
0
0
0
12.3
7
,
0
0
0
15.3
5
,
0
0
0
18.P
2
0
0
,
0
0
0

bili
tie
s
84.P2
,0
0
0,
0
0
0

86.P1,
00
0,0
00

88.

P
100,00
0

90.P900,00
0

91.
73.Service Revenue
75.Interest Income
77.Supplies Expense
79.Salaries Expense
81.Miscellaneous Income
83.Miscellaneous Expense
85.Net Income

74.P400,000
76.250,000
78.(100,000)
80.(200,000)
82.50,000
84.(40,000)
86.P360,000

8.
92.
93.
94.
95.
96.
97.
98.
87.Arya, Capital Beginning
89.Interest Expense
91.Interest Income
93.Salaries Expense
95.Service Revenue
97.Other Income
99.Miscellaneous Expense
101.
Supplies Expense
103.
Dividend Income
105.
Arya, Capital End
107.
109.

88.P4,000,000
90.(25,000)
92.40,000
94.(50,000)
96.1,000
98.3,000
100.
(2,500)
102.
(60,000)
104.
40,000
106.
P3,946,50
0
108.
500,000
110.
P4,446,5
00

Liabilities End
Assets End

9.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
111.
Initial
Investment
113.
Additi
121.onal Net
Income
Investment
123.
115.
Additi
Net
onal
Income
117.
Withdr
Investment
125.awal (10,000
Owne
rs
x 5)
Drawing
127.
119.
Net
Endin
Increase
g Equity

112.

P250,
000

114.
122.

40,00
P90,0
0
00
40,00
400,0
0
00

124.
116.
118.
126.
128.
120.

(50,00
(10,0
0)
00)
P120
P640,
,000
000

109.
110.
10.
111.
112.
113.
114.
115.
11.

116.
117.
118.
119.
12.
129.
Cash,
130.
P45,000
120.
Beginning
131.
Operating
121.
Activities Cash
132.
100,000
122.
Flow
123.
133.
Investing
134.
(40,000)
124.
Activities Cash
13.
139.
Crazy, Capital
140.
P500,000.0
Flow
Dec 31, 2012
0125.
135.
Financing
136.
50,000
141.
Service Revenue
142. 126.
Activities Cash
127.
(200,000.00)
Flow Dividend Income
143.
144.
(20,000.00
128.
137.
Cash, End
138.
P155,000
)
129.
145.
Depreciation
146.
130.
Expense
90,000.00
131.
148.
132.
147.
Interest Income
(50,000.00)
133.
149.
Advertising
150.
134.
Expense
100,000.00
135.
151.
Office Supplies
152.
14.
155.Expense
Total Current
156.
P500,000
20,000.00
LiabilityCrazy, Capital
153.
154.
P440,000. 136.
137.
157.Jan 1,Long
Term
158.
400,000 00
2012
138.
Debt
139.
159.
Shae, Capital
160.
700,000
161.
Total Equity
162.
P1,600,000
140.
163.
Cash
164.
200,000
141.
165.
Investment
166.
250,000
142.
167.
Prepaid
143.
168.
50,000
Expenses
144.
169.
Net PPE
170.
1,000,000
15.
173.
Unadjusted
174.
P20,000,000
171.
Trade and Net
172.
P100,000
145.
Income
Other Receivables
175.
Prepaid Expense
176.
400,000
146.
(200,000 x 2)
177.
Service Revenue
179.
Adjusted Net
Income
181.
Tommen Equity,
Beginnning (A L)
183.
Tommen Equity,
150.
End
152.
153.

157.
161.
166.

171.
176.

178.
180.

P20,440,000

182.

25,000,000

184.
P45,440,000
Monteriggioni Castle Tours, Inc.

147.
148.
149. Prepare
Financial
Statements

151.
Income Statement
For the Year Ended December 31, 2013
154. 155.
156.
N

Revenues
162.
Tourist Fees
167.
Merchandise
Commission
Revenue
172.
Total
Revenue

177.

40,000

158. 159.
164.
Php
163.
7,000,000
168.
169.
770,0
00

160.
165.
170.

175.

173.
178.

174.
179.

Ph
p
7,770,00
0
180.

181.

185.

190.
195.

200.

205.

210.
215.
220.
225.

230.
235.
240.
245.
250.

Less: Expenses
186.
Accommodation
Expense
191.
Advertisement
Expense
196.
Agent
Commissions
201.
Depreciation
Expense
206.
Entertainment
Expense
211.
Salaries
and Wages
Expense
216.
Gasoline
and Oil Expense
221.
Insurance
Expense
226.
Interest
Expense
231.
Miscellaneous
Expense
236.
Rent
Expense
241.
Supplies
Expense
246.
Taxes and
Licenses Expense
251.
Utilities
Expense

255.

Net Profit

182.

183.
188.

187.
193.
192.
198.
197.
203.
202.
208.
207.
213.
212.
218.
217.
223.
222.
228.
227.

232.
237.
1

233.
238.
243.

242.
248.
247.
252.
2

256.

253.

184.

Php
200,000

189.

700,0
00
1,800
,000

194.
199.

200,0
00

204.

80,00
0

209.

320,0
00
100,0
00
600,0
00
70,00
0

8,000
600,0
00
60,00
0
80,00
0
50,00
0

257.

214.
219.
224.
229.

234.
239.
244.
249.
254.
4,
868,000
258.
Ph
p
2,902,00
0

259.
260.

Monteriggioni Castle Tours, Inc.

261.
Statement of Changes in Owner's Equity
262.
For the Year Ended December 31, 2013
263.
264.
Monteriggioni,
266.
Php
Capital - Beg.
265.
2,000,000
267.
Add: Additional
268.
Php
Investment
500,000
269.
270.
Net
271.
272.
Revenue
2,902,000
3,402,000
275.
Php
273.
Subtotal
274.
5,402,000
276.
Less:
278.
Monteriggioni, Drawing
277.
50,000
279.
Monteriggioni,
281.
Php
Capital - End
280.
5,352,000
282.
283.
284.
285.
286. 287.

Monteriggioni Castle Tours, Inc.

Statement of Financial Position
As of December 31, 2013
288. 289.
290. 291.

292.
ASSETS
297.
Current Assets
303.
Cash and
302.
Cash Equivalents
309.
Trade and
308.
Other Receivables
315.
Prepaid
314.
Expenses
321.
Total Current
320.
Assets
326. 327.
332.
Non-Current
Assets
338.
Property,
Plant, and
337.
Equipment
343. 344.

293.
298.
304.
3
310.
4
316.
5

294.
299.
305.
Php
4,500,000
311.
550,
000
317.
480,
000

322.
328.

323.
329.

319.
325.
Php
324.
5,530,000
330.
331.

333.

334.

335.

349.
TOTAL ASSETS
354. 355.
360.
LIABILITIES &
OWNER'S EQUITY
365.
Current
Liabilities

350.
351.
356. 357.

348.
353.
Php
352.
5,980,000
358. 359.

361. 362.

363. 364.

366. 367.

368. 369.
375.

371.
Trade and
370.
Other Payable
376. 377.
382.
Non-Current
Liabilities
388.
Bonds
387.
Payable, due 2015
394.
Loans
393.
Payable, due 2016
400.
Total Non399.
Current Liabilities

372.
7
378.

405.

407.

406.

339.
6
345.

340.
346.

307.

312.

313.

318.

374.
380.

383.

384.
385.
390.
Php
389.
350,000 391.
396.
200,
395.
000 397.
401.

336.

341.
347.

373.
379.

408.

413.
419.
424.

429.

430.

433.

435.

409.

414.
420.
425.
431.
436.

440.

450
,000

Ph
p
78,000
381.
386.
392.

398.
404.
550
403.
,000

402.

412.
418.
423.

439.
TOTAL LIABILITIES
AND OWNER'S EQUITY

306.

342.

411.
Total Liabilities
416. 417.
422.
Owner's Equity
428.
Monteriggioni,
427.
Capital
434.

295. 296.
300. 301.

415.

410.

Ph
p
628,000
421.
426.
432.
5,3
52,000

437.

438.

442.
Php
441.
5,980,000

443.
444.
Monteriggioni Castle Tours, Inc.
445.
Statement of Cash Flows
446.
For the Year Ended December 31, 2013
447.
448.
Cash Flows from
Operating Activities
449. 450.
451.
455.
Ph
453.
Cash Received from
p
452.
Sales and Commissions
454.
7,262,000
456.
460.
(3,248,00
457. 458.
Cash Paid for Expenses 459.
0)
461.
465.
462. 463.
Interest Paid
464.
(55,000)
466.

467. 468.

Rent Payment

472. 473.
Interest Received
477. 478.
482.
Cash Flows from
Investing Activities
487.
Purchase of New
486.
Equipment
492.
Resale of Old
491.
Equipment
497.
Proceeds from Sale of
496.
Investments in Shares
502.
Investment in Medici
501.
Bank's Common Shares
507.
Proceeds from Sale of
506.
Land
511. 512.
516.
Cash Flows from
Financing Activities

469.

474.
479.
483.

488.
493.
498.
503.
508.
513.
517.

520. 521.
Dividends Received
526.
Issuance of Bond
525.
Indenture

522.

530. 531.
535. 536.

532.
537.

Monteriggioni, Drawing

527.

470.
(1,400,00
0)

475.
40,000
480.
484.
489.

Ph
p
(500,000)
494.
190,000
499.
150,000
504.
(130,000)
509.
500,000
514.

518.
523.

Ph
p
21,000
528.
400,000
533.
(50,000)
538.

540.
Net Increase (Decrease)
in Cash

541.

542.

544.
Add: Beginning Cash
Balance

545.

546.

548.

Ending Cash Balance

549.

550.

553.

Notes to Financial Statements

554.
Note 1 - Rent Expense

471.
476.

Ph
p
2,599,00
0
481.
485.

490.
495.
500.
505.
510.
210,000
515.
519.

524.
529.
534.
371,000
539.
543.
Ph
p
3,180,00
0
547.
1,320,00
0
551.
Ph
p
4,500,00
0

552.

556.

558. 559.

Equipment Rent

561. 562.

Office Rent

564. 565.

Transportation Rent

567. 568.
570. 571.
573.
575. 576.

Total
Note 2 - Utilities Expense
Light and Water Expense

555.
557.
560.

Ph
p
300,000
563.
150,000
566.
150,000
569.
Ph
p
600,000
572.
574.
577.
Ph

578. 579.

Telephone and Communications Expense

581. 582.
584. 585.
587.

Total
Note 3 - Cash and Cash Equivalents

589. 590.

Cash in Bank

592. 593.

Cash on Hand

595. 596.
598. 599.
601.

Total
Note 4 - Trade and Other Receivables

603. 604.

Accounts Receivable

606. 607.

Commission Receivable

609. 610.

Advances to Employees

612. 613.
615. 616.
618.

Total
Note 5 - Prepaid Expense

620. 621.

Office Supplies

623. 624.

Prepaid Advertising

626. 627.

Prepaid Insurance

629. 630.
632. 633.
635.

Total
Note 6 - Property, Plant, & Equipment

637. 638.

Transportation Equipment

640. 641.

Less: Accumulated Depreciation

643. 644.
646. 647.
649.

Carrying Value
Note 7 - Trade and Other Payables

651. 652.

Accounts Payable

654. 655.
657. 658.

Interest Payable
Total

p
23,000
580.
27,000
583.
Ph
p
50,000
586.
588.
591.
Ph
p
4,250,000
594.
250,000
597.
Ph
p
4,500,000
600.
602.
605.
Ph
p
430,000
608.
100,000
611.
20,000
614.
Ph
p
550,000
617.
619.
622.
Ph
p
50,000
625.
57,000
628.
373,000
631.
Ph
p
480,000
634.
636.
639.
Ph
p
1,200,000
642.
750,000
645.
Ph
p
450,000
648.
650.
653.
Ph
p
50,000
656.
28,000
659.
Ph
p

78,000
660.
661.
662.

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