University of Caloocan City

Fundamentals of Accounting
Midterm Examination

A. THEORIES
1. Investment made by the owner
a. Increases both assets and liabilities
c. Increases both liabilities and owners
equity
b. Decreases both assets and liabilities
d. Answer not given
2. In preparing worksheet and the entity is profitable in the current period, the total of the statement
of financial position credit column will be
a. Larger than the total statement of financial position debit column
b. Smaller than the statement of financial position debit column
c. Larger than the total of the income statement debit column
d. Larger than the total of the income statement credit column
3. The credit balance in the income summary account represents
a. Net income
c. Liability
b. Net loss
d. Capital
4. A common business transaction that would not affect the amount of owners equity is
a. Signing a note payable to purchase equipment
b. Payment of property taxes
c. Billing of customers for services rendered
d. Withdrawal of owner
5. A debit is either an increase or decrease. It
a. Decreases expense
b. Decreases liabilities
c. Increases income
d. Decreases assets
6. Adjustment for unearned revenues
a. Decrease liabilities and increase revenues.
b. increase assets and increase revenues.
c. decrease revenues and decrease assets.
d. increase assets and increase liabilities
7. The entity concept means that
a. Accounts must be prepared for every firm
b. The financial affairs of a firm at its owner are always kept separate for the purpose of preparing
accounts
c. Because a firm is separate and distinct from its owners, those owners cannot have access to its
assets unless the firm ceases to trade
d. None of the above
8. Revenues should be recorded when
a. They are earned
b. A contract is signed
c. Work has begun on a job
d. Cash is received from the customer
9. Another way of stating the accounting equation is
a. Owners Equity + Assets = Liabilities
b. Assets + Liabilities = Owners Equity
c. Assets = Liabilities Owners Equity
d. Assets Liabilities = Owners Equity
10. An investment by owner in a business increases
a. Assets only
b. Assets and liabilities
c. Assets and owners equity
d. Liabilities and owners equity

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11. Withdrawals by the proprietor has all of the following effects except
a. Reduction of cash balance
b. Reduction of total assets
c. Reduction of owners equity
d. Reduction of profit for the period
12. The expectation of a future payment from a customer for goods sold is
a. A prepaid expense
b. A note receivable
c. An Accounts receivable
d. All of the above
13. A credit entry decreases the balance of
a. Owners equity
b. Liabilities
c. Income
d. Assets
14. Balance sheet accounts are
a. Temporary accounts
b. Adjusting accounts
c. Permanent accounts
d. Accounts with debit balances only
15. Office supplies are expensed
a. When they are paid for
b. When they are purchased
c. At no time, since they are assets
d. When they are consumed or used up
B. JOURNAL ENTRIES PREPARATION
Augustus, after receiving a degree in computer science, started the business TFIOS Techologies. The entity
completed the following transactions during the month (2015):
May
2
Deposited P900,000 in the bank and contributed a systems library valued at P390,000 to
start the business.
3
Paid office rent for the month, P36,000.
9
Acquired computer equipment for cash, P700,000.
10
Purchased computer supplies on credit P60,000.
11
Received payment from a client for programming done, P280,0000.
12
Billed a client on completion of a programming project, P71,000.
16
Paid salaries, P80,000.
23
Received a partial payment from the client billed on May 12, P61,000.
27
Withdrew P25,000 for personal expenses.
30
Made a partial payment on the supplies purchased, P30,000.
Required:
1. Prepare journal entries of the above transaction using the following accounts: Cash; Accounts
Receivable; Computer Supplies; Computer Equipment; Systems Library; Accounts Payable; and Augustus,
Capital.

C. WORKSHEET PREPARATION

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Enrique Delos Santos is a lawyer specializing in corporate tax law. Provided below is a trial balance
taken on December 31, 2012:
Delos Santos Legal Services
Trial Balance
December 31, 2012

Cash
Office Supplies
Prepaid Insurance
Office Equipment
Computer Equipment
Notes Payable
Accounts Payable
Delos Santos, Capital
Delos Santos, Withdrawal
Consulting Revenues
Rent Expense
Salaries Expense
Telephone Expense
Utilities Expense

Deb
it
75,000.00
8,000.00
12,000.00
150,000.00
60,000.00

Credit

50,000.00
5,000.00
114,000.00
35,000.00
390,000.00
50,000.00
120,000.00
10,000.00
39,000.00
559,000.00

559,000.00

Information for year-end adjustments:

a. Office supplies on hand at year-end amounted to P3,000
b. On January 1 of the current year, Delos Santos purchased office equipment which cost P150,000
with an expected life of 5 years and P5,000 salvage value.
c. Computer equipment costing P60,000 with an expected life of three years and no salvage value
was purchased on July 1 of the current year.
d. A premium of P12,000 for one-year insurance policy was paid on December 1.
e. Salaries earned by legal aide, which have not yet been paid, amounted to P3,000.
Required:
1. Journalize the adjusting entries.
2. Prepare the adjustments on the worksheet and complete the worksheet.

***END OF EXAMINATION***
GOD BLESS!

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