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Dynamic Society of Accounting Student

Second Basic Accounting Tutorial

Second Semester S.Y. 2017-2018

1. When a business lacks capital, it secures a loan from a bank. Its over-all effect on the business is:
a. Increase in assets c. Receiving cash and incurring a liability
b. Decrease in assets d. None of the above

2. All of the following are adjustments based on estimate, except:

a. Bad debt expense b. Depreciation c. Amortization d. Accrual

3. Which of the following accounts is included in post-closing trial balance?

a. Asset account b. Income account c. Expense account d. Drawing account

4. Which of the following is not a revenue account?

a. Interest income b. Accrued rent income c. Service account d. Dividend account

5. The drawing account of a sole proprietor is debited when:

a. The owner invests cash c. An expense is paid
b. A liability is paid d. The owner withdraws cash

6. Accounts payable of P32000 was paid and erroneously recorded as debit to notes payable and credit
to cash. The working capital,
a. Overstated b. Understated c. No effect d. None of the above

7. Which of the following is an example of a deferral?

a. The accumulation of interest in a bank account
b. Property taxes accrued but not yet paid
c. The purchase of a company vehicle
d. Legal fees already collected but not yet earned

8. When collections are made in accounts receivable:

a. Total assets remained the same c. Owner’s equity increases
b. Total assets increase d. Total assets decrease

9. Under the revenue recognition principle, revenue is recorded:

a. At earliest possible time c. At the latest acceptable time
b. After it has been earned, but not before d. At the end of the accounting period

10. Adjusting entries will increase or decrease

a. real accounts only c. capital account only
b. nominal accounts only d. at least a nominal account and a real account

11. The carrying value or net book value of a depreciable asset equals
a. the estimated cost to replace the asset
b. the original cost minus accumulated depreciation
c. the estimated amount for which the asset could be sold
d. the original cost minus depreciation expense for the current period

12. Office machine was erroneously recorded as expense. This error will
a. understate the liability c. overstate the asset
b. understate the income d. overstate the revenue

13. Collection of notes receivable of P50,000 plus interest of P500 was recorded as debit to cash of P50,500
and credit to notes receivable of P50,500. Which of the following statement(s) is/are correct?
I. Expense is overstated by P500 IV. Asset is understated by P500
II. Liability is overstated by P500 V. Revenue is understated by P500
III. Expenses are not affected VI. No error has occurred
a. I, II and V b. IV and V c. III and VI d. III, IV and V

14. Which of the following accounts would not be closed to income summary account at the end of the
a. Fees earned b. Wages expense c. Rent expense d. Accumulated depreciation

15. A journal entry composed of two or more debits or two or more credits is called:
a. Multiple journal entry c. Complex journal entry
b. Compound journal entry d. Double journal entry

16. The ending owner’s capital of the business amounts to P100,000. The beginning assets and liabilities are
P100,000 and P60,000, respectively and the owner contributed additional investment of P10,000. If the
business incurred P15,000 operating expenses, the net income would be
a. P30,000 b. P40,000 c. P50,000 d. P65,000

17. Arriesgado Company pays employees every two weeks has paid workers P375,000 in wages and
salaries for work completed during 2012. In addition, the employees earned one week's salary of P7,200 at
the end of December that will be paid as part of the P14,400 payroll at the end of the first week of January
in 2013. How much should the company report for salaries and wages expense for 2012?
a. P367,800 b. P375,000 c. P 389,400 d. P382,200

18. Wages payable were P3,500 at the end of September and P2,800 at the end of October. Wages
expense for October was P18,000. How much cash was paid for wages during October?
a. 18,700 b. 24,100 c. 17,300 d. 11,700

19. Unearned revenue was P6,000 at the end of February and P7,500 at the end of March. Service revenue
was P42,000 for the month of March. How much cash was received for services provided during March?
a. 55,500 b. 40,500 c. 28,500 d. 43,500

20. A computer – training outfit has expense of P153,000 and loss of P27,500. What is the total income during
the period?
a. 180,500 b. 125,500 c. 27,500 d. 0

21. A law firm owned and managed by Atty. Llena began November with office supplies of P16,000. During
the month, the law firm purchased supplies of P29,000. On November 30, supplies on hand totaled P21,000,
supplies expense for the period is
a. P21,000 b. P24,000 c. P29,000 d. P45,000

22. Guino-o Barber Shop acquired an equipment on July 1, 2012 for P80,000. The equipment has an
estimated useful life of 10 years and an estimated salvage value of P5,000. Madrio Barber Shop computes
depreciation on a straight line basis. How much depreciation should be recorded in 2012?
a. P8,000 b. P7,500 c. P4,000 d. P3,750

23. Ayco purchased a one-year insurance policy on April 1, 2012, for P6,000. The amount of prepaid
insurance reported on the statement of financial position and the amount of Insurance expense reported
on the statement of comprehensive income at December 31, 2012, respectively:
a. P1,500; P4,500 b. P4,500; P1,500 c. P2,000; P4,000 d. P4,000; P2,000

24-27. The following are selected account balances of NoSweat Company

Debit Credit

Prepaid insurance P15,000 Accumulated depreciation- building 10,000

Building 50,000 Allowance for bad debts 10,000

Accounts receivable 80,000 Unearned interest income 5,000

Notes receivable 10,000 Notes payable 15,000

SayonRaKaayo, drawing 10,000 SayonRaKaayo, capital 100,000

24. If the end of the period, the expired portion of the prepaid insurance is P5,000, what is the adjusting
b. Insurance expense 5,000 Prepaid insurance 5,000
c. Prepaid insurance 10,000 Insurance expense 10,000
d. Insurance expense 10,000 Prepaid insurance 10,000

25. Referring to NoSweatCo., if the accounts receivable is estimated to be 80% realizable, the entry for bad
debts is:
a. Allow. for bad debts 6,000 Accounts receivable 6,000
b. Bad debts 6,000 Allow. for bad debts 6,000
c. Bad debts 16,000 Allow. for bad debts 16,000

26. Referring to NoSweat Co., if the end of the period, 40% of the unearned interest is realized, what is the
a. Interest income 3,000 Unearned interest income 3,000
b. Unearned interest income 3,000 Interest income 3,000
c. Unearned interest income 2,000 Interest income 2,000

27. Referring to NoSweat Co., if the building is depreciated 12.5% every year, what is the entry for expense?
a. Depreciation expense 16,250 Accumulated depreciation 16,250
b. Building expense 6,250 Accumulated depreciation 6,250
c. Depreciation expense 6,250 Accumulated depreciation 6,250
d. Depreciation expense 8,250 Accumulated depreciation 8,250

28. On May 1, 2014, Skype borrowed P420,000 from Trust Bank. He issued promissory note that carried a 20%
interest per annum. Both interest and principal will be payable in one year.

How much interest should be recorded for the year ended December 31, 2014?

29. Lynnie, an attorney, collects retainer’s fees from all his clients. At the beginning of the current month,
the Unearned Retainer’s Fees account had a balance of P12,000. Lynnie collected additional retainer’s
fees totaling P43,000 from his clients during the month. The month-end statement of financial position
reported an P7,000 balance in the Unearned Retainer’s Fees account. How much of the retainer’s fees
were earned by Lynnie during the month? 48,000

30. The fixed rent per month is P5,000. The salary and supplies expenses are P50 for every P100 services
rendered. Total service income is P100,000. The operating expenses amount to55,000

“CPA’s are not born……….
………they are made”