Simulated Mock Midterm Exam 2018

Polytechnic University of the Philippines
College of Accountancy and Finance

Junior Philippine Institute of Accountants
Simulated Midterm Examination for Freshmen
AY: 2018-2019, 1st Semester
THEORIES
1. It is known as the language of business

A. Accounting C. Financial Statements
B. English D. All of these
2. Which of the following describes “Credit”?

I. It always decreases asset accounts
II. It is always on the right side of the T-account, regardless when the account is an asset, liability
or equity
III. It is the normal balance of all contra accounts
IV. It is used to close all revenue accounts for the period
A. I only
D. I, II, II
B. II only
E. All of these
C. I, II
3. Select the incorrect equation. If Assets= Liabilities + Capital, then

A. Assets- Liabilities = Net Assets
B. Net Increase in Capital = Increase in Assets - Increase in Liabilities - Drawings
C. Change in Capital = Additional Investments ± Net Income/loss for the period - Drawings
D. Assets=Liabilities + Owner’s Investments + Drawing + Net Income
E. Choices A and D are correct
4. If a company uses special journals, purchases of merchandise should be recorded using

A. Purchase journal only
B. Purchase journal or Cash payments journal
C. Cash payments journal only
D. Voucher register
E. General journal
5. They encompass the conventions, rules and procedures necessary to define what is accepted
accounting practice
A. Generally Accepted Accounting Principles
B. Accounting Constraints
C. Conceptual Framework
D. Accounting Assumptions
6. Which type of accounts needs to be closed at the end of the accounting period?
A. Real accounts C. Mixed accounts E. Adjunct accounts
B. Nominal accounts D. Contra accounts
7. What do function do general ledgers serve in the accounting process?

A. Classifying C. Reporting E. Communicating
B. Summarizing D. Recording
1|Mock Midterm Examination

8. Under the “income method”, the adjusting entry for income not yet earned but already collected or
recorded will
A. Increase asset, increase in revenue
B. Decrease asset, increase in liability
C. Increase liability, decrease in revenue
D. Increase liability, increase in expenses
E. Increase in Cash, increase in revenue
9. After the accounts have been closed,

A. all the accounts will have zero balance
B. the real accounts will have zero balances
C. the revenue, expense, income summary and retained earnings accounts will have zero
balances
D. the revenue, expense and income summary accounts will have zero balances
E. adjusting entries will have to be journalized
10. Which of the following account titles appear in the Income Statement columns of the worksheet?
A. Unearned Fees C. Accumulated Depreciation E. Owner, Drawing
B. Freight-out D. Accrued Expenses
11. Adjusting entries are dated in the journal as of:

A. First day of the accounting period
B. Middle of the accounting period
C. Last day of the accounting period
D. Date they are actually journalized
E. First day of the next accounting period
12. An entry to recognize accrued income in a partnership business involves

A. A debit to Cash C. A debit to Accounts Receivable E. A credit to Drawing
B. A credit to Cash D. A credit to partners’ Capital accounts
13. To arrive at Cost of Sales,

A. sales discounts and sales returns and allowances must be deducted from gross sales net
of VAT
B. sales discounts and sales returns and allowances must be added back to net sales
C. Add beginning inventory balance and purchases for the period and freight-in
D. Deduct cost of ending inventory from the sum of beginning inventory and net purchases
for the period
E. Correct answer not given
14. The major expense of a merchandising business is

A. Purchases C. Selling Expense E. Cost of Goods Sold
B. Delivery Expense D. Advertising Expense

15. Which of the following statements regarding trade discounts and sales discounts is incorrect?
A. Trade discounts are presented as deductions from sales price in Statement of
Comprehensive Income.
B. Trade discounts are usually offered to customers who buy in large volumes.
C. Sales discounts are usually offered to regular customers on credit only.
D. Sales discounts reduce the risk of uncollectibility of receivables because it encourages
early payment of accounts.
E. None of the above
16. A certain VAT-registered grocery store uses Point-of-Sale (POS) terminals (with barcode reader
and cash register) in its cash sale of merchandise. The machines keep a database of all sales
transactions “punched”. At the end of every business day, the cashier prepares a report of all sale
transactions during the day. Assuming the company uses special journals, the information reported
on POS daily summaries will most properly make its way to
A. Sales journal C. Cash receipts journal E. Choices A and C are correct
B. General journal D. Cash payments journal
17. All of these are terms of shipment except

A. FOB Shipping Point
B. FOB Seller
C. Free Along Side (FAS)
D. Cost, Insurance, Freight (CIF)
E. Express Delivery
18. In performing an aging of receivables, the resulting amount computed by multiplying the
receivable balance classified by age by the probability of collection is
A. Bad Debts Expense to be presented in the period’s Income Statement
B. Required ending balance of Allowance for Bad Debts
C. Required adjustment for Allowance for Bad Debts account
D. Net Accounts Receivable balance to be presented in the Balance Sheet
E. It serves no meaningful amount
19. When a company issues a credit memorandum, it means that

A. The company sold merchandise on credit to a customer
B. The company credited “Cash” account
C. The company credited customer’s “Accounts Receivable” account
D. The supplier credited customer’s “Accounts Payable” account
E. The company is informing the bank that there is an erroneous bank charge
20. Select the Incorrect statement

A. The Balance Sheet has two forms, account form and report form.
B. Friar Luca Pacioli discovered the use of double-entry bookkeeping in 1494.
C. A merchandise shipped through FOB Shipping Point, transfer the legal title from the
seller to the buyer at point of receipt of goods.
D. In a merchandising business, Output VAT minus Input VAT is equals to VAT Payable
E. One of the advantages of a Sole Proprietorship is easy to establish a dissolve

21. Accountants prepare financial statements at arbitrary points in time during the lifetime of an entity.
This is in accordance with which basic accounting concept?
A. Going concern
B. Periodicity
C. Unit of measure
D. Accrual
22. Which of the following is an adjunct account?

A. Cash
B. Accounts Receivable
C. Premium on bonds payable
D. Allowance for bad debts
23. The correct order of the following steps of the accounting cycle is
A. Posting, closing, adjusting, reversing
B. Posting, adjusting, closing, reversing
C. Posting, reversing, adjusting, closing
D. Adjusting, posting, closing, reversing
24. What is the purpose of nominal accounts?

A. To provide temporary accumulations of certain account balances for a meaningful period of
time
B. To facilitate accounting for small amounts
C. To correct errors as they are detected
D. To record all transactions initially
25. The purchase of office equipment on account will

increase an asset and increase owner’s
A C increase an asset and increase a liability
equity
increase one asset and decrease another
B D increase an asset and decrease a liability
asset
26. The performance of service for a customer or client and immediate receipt of cash will
increase one asset and decrease another decrease an asset and decrease a
A C
asset liability
increase an asset and increase owner’s
B D increase an asset and increase a liability
equity
27. Regarding one purchase of merchandise, the following entries were made by Z Company.
Purchases 17,000
Accounts Payable - Supplier 17,000
Transportation - in 1,900
Accounts Payable - Supplier 1,900
What are the shipping terms regarding this transaction?

A FOB destination, freight prepaid C FOB destination, freight collect
B FOB shipping point, freight prepaid D FOB shipping point, freight collect

28. Failing to post the transaction of purchasing P 600 of office supplies on account would have what
effect on the trial balance?
A debit total would equal the credit total
B debit total would be P 600 greater than the credit total
C debit total would be P 1,200 greater than the credit total
D debit total would be P 600 less than the credit total
29. A company declared a cash dividend on its common stock on December 15, 2013, payable on
January 12,2014. How would this dividend affect stockholder’s equity on the following dates?
December 15,2013 December 31,2013 January 12,2014
A. Decrease No effect Decrease
B. Decrease No effect No effect
C. No effect Decrease No effect
D. No effect No effect Decrease
30. To arrive at the book value of a PPE, you should:

Divide the cost of the PPE by its estimated useful life and not deducting a trade-in value,
A
if there is a given amount
B Multiply the semi-annual depreciation by two, then multiply that amount by the useful life
C Deduct the salvage value and the accumulated depreciation to the cost of PPE
Add all depreciation expense from prior years and current years, then deduct the sum to
D
the cost of PPE
PROBLEMS
31. A business received cash of P30,000 in advance for service that will be provided later. The cash
received entry debited Cash and credited Unearned Revenue for P30,000. At the end of the
period, P11,000 is still unearned. The adjusting entry in this situation is
A. debit Unearned Revenue and credit Revenue for P19,000
B. debit Unearned Revenue and credit Revenue for P11,000
C. debit Revenue and credit Unearned Revenue for P19,000
D. debit Revenue and credit Unearned Revenue for P11,000
32. At December 31, 2015, the JPIA Company had P990,000 balance in its Advertising Expense
account before any year-end adjustments relating to the following:
• Radio advertising spots broadcast during December 2015 were billed to JPIA on January 4,
2016. The invoice cost of P50,000 was paid on January 15, 2016.
• Included in the amount reported as expense is P60,000 for newspaper advertising for a
January 2016 sales promotional campaign.
JPIA’s advertising expense for the year ended December 31, 2015 should be:
A. P1,040,000 B. P1,000,000 C. P980,000 D. P930,000

33. MOMOLAND Company recorded accrued salaries of P25,000 at December 31, 2014. During 2015,
the company paid salaries of P872,000. Unpaid salaries at December 31, 2015 amounted to
P34,000. Eagle prepares adjustments for the year-ended only on the first working day of the
following period and journalizes the adjusting entries as of December 31 and reversing entries are
dated January 1. The balance of Salaries Expense account that would appear in the post-closing
trial balance at December 31, 2015 is
A. P881,000 B. P34,000 C. P847,000 D. -0-
34. Finest Enterprises failed to accrue interest on its Note Receivable on December 31, 2015. The note
was dated August 11, 2015, matures in six months and had a face value of P13,000. Interest rate
stipulated is 10%. As a result, 2015 net income is __________. Round off the dates to the nearest
fifteen days and assume a 360-day year.
A. P1,300 understated C. P487.50 understated E. P487.50 overstated
B. P975 understated D. P975 overstated
35. On April 8, 2015, Ela Trading purchased goods from a supplier for an invoice price of P113,600
with credit terms 2/10, 1/15, n/30; shipment terms FOB shipping point, freight prepaid. Freight
charges amounted to P1,530. On April 21, Ela settled its account in full. On Ela’s cash payments
journal, how much should appear as credit to “Cash” relating to the transaction?
A. P113,600 B. P115,130 C. P113,978.30 D. P112,464 E. P113,994
36. Daphne Co., a VAT-registered company sold merchandise at invoice price of P185,000, inclusive
of 12% VAT, to James Co., another VAT-registered company on credit. Trade discounts granted
are 5% and 10%. Credit terms are 2/10, n/30; shipment terms FOB seller, freight collect. Freight
charge is P2,500. In Daphne’s books, Sales amounts to:
A. P185,000 B. P165,179 C. P158,175 D. P141,228 E. P139,194
37. Use the same information in #6. Assuming James Co. uses periodic inventory system, the debit to
Purchases based on foregoing transaction is:
A. P185,000 B. P165,179 C. P167,679 D. P141,228 E. -0-
38. How much is the monthly depreciation expense considering the following: Trade-in value-P3,500;
Est. Useful Life – 5 years; Depreciable amount P69,500
a. P13,900 c. P13,200
b. P1,158.33 d. P1,100
39. At the end of the first month of operations, St. Jude Co.’s bookkeeper prepared financial statements
which showered assets of P4,000,000 liabilities of P1,500,000 and net income of P500,000. In
preparing the statements, the bookkeeper overlooked the accrued wages at month-end of P30,000.
The correct owner’s equity at month-end is
a. P2,970,000 b. P2,350,000 c. P2,470,000 d. P1,970,000

40. A business received cash of P300,000 in advance for service that will be provided later. The cash
receipt entry debited cash and credited unearned revenue for P300,000. At the end of the period,
P110,000 is still unearned.
The adjusting entry for this situation will

a. Debit Unearned Revenue and Credit Revenue for P190,000
b. Debit Unearned Revenue and Credit Revenue for P110,000
c. Debit Revenue and Unearned Credit Revenue for P190,000
d. Debit Revenue and Unearned Credit Revenue for P110,000
41. Ed Sheeran paid P170,400 on June 1,2013, for a two-year insurance policy and recorded the
entire amount as Insurance Expense.
The December 31, 2013, adjusting entry is

A. Debit Prepaid Insurance and Credit Insurance Expense, P49,700
B. Debit Insurance Expense and Credit Prepaid Insurance, P49,700
C. Debit Insurance Expense and Credit Prepaid Insurance, P120,700
D. Debit Prepaid Insurance and Credit Insurance Expense, P120,700
42. The Supplies on Hand account balance at the beginning of the period was P66,000, Supplies
totaling P128,250, were purchased during the period and debited to Supplies on Hand. A physical
count shows P38,250 of the Supplies on Hand at the end of the period.
The proper journal entry at the end of the period
A. Debit Supplies on Hand and Credit Supplies Expense for P90,000
B. Debit Supplies Expense and Credit Supplies on Hand for P128,250
C. Debit Supplies on Hand and Credit Supplies Expense for P156,000
D. Debit Supplies Expense and Credit Supplies on Hand for P156,000
43. On December 31 of current year, Claire Company’s bookkeeper made an entry debiting Supplies
Expense and Crediting Supplies on Hand for P126,000. The Supplies on Hand account had a
P153,000 debit balance on January 1. The December 31 balance sheet showed Supplies on Hand
of P114,000. Only one purchase of supplies was made during the month, on account.
The entry for that purchase was
A. Debit Supplies on Hand, P87,000 and Credit Cash, P87,000
B. Debit Supplies Expense, P87,000 and Credit Accounts Payable, P87,000
C. Debit Supplies on Hand, P87,000 and Credit Accounts Payable, P87,000
D. Debit Supplies on Hand, P165,000 and Credit Accounts Payable, P165,000
44. A trial balance has debit and credit totals of P 7,000. The purchase of P 4,000 of office supplies on
account was omitted from the original journal entries. After recording and posting this transaction,
the new debit and credit totals for the trial balance would be
A P 11,000 C P 9,000
B P 7,000 D P 3,000
45. From this list of account balances, calculate the total credit column for the post-closing trial balance:
Cash, P 15,000; Accounts Receivable, P 3,000; Prepaid Rent, P 2,000; Building, P 30,000;
Accumulated Depreciation, P 13,000; Accounts Payable, P 6,000; Unearned Revenue, P 1,000;
Jiyeon Park, Capital, P 30,000.
A P 69,000 C P 45,000
B P 50,000 D P 20,000

46. The Balance Sheet of You Are My World Company shows that capital is P 540,000 that is equal to
1/3 of its total assets. How much are the total liabilities?
A P 180,000 C P 1,080,000
B P 720,000 D P 1,620,000
47. The assets of Sharmaine Company amounted to P 810,000 on December 31, 2008, but increased
to P 1,305,000 by December 31, 2009. During the same period, liabilities increased by P 270,000.
Owner’s equity on December 31, 2008 amounted to P 495,000. What was the amount of the
Owner’s Equity on December 31, 2009?
A P 585,000 C P 1,035,000
B P 720,000 D P 1,080,000
48. Peter Pan Child Care Center paid P 9,000 for three months of rent in advance. The Prepaid Rent
account had a remaining balance of P 3,000 at the end of the accounting period. The adjusting
entry to reflect this must have been
A debit Rent Expense and credit Prepaid Rent for P 3,000
B debit Rent Expense and credit Prepaid Rent for P 6,000
C debit Prepaid Rent and credit Rent Expense for P 12,000
D debit Prepaid Rent and credit Cash for P 9,000
49. The balance in the capital account of Holy Spirit Co, at the beginning of the year was P650,000.
During the year, the company earned revenue of P4,300,000, incurred expenses of P3,600,000,
the owner withdrew P500,000 in assets and the balance in the cash account increased by
P100,000.
At year-end, the company’s net income and the year-end balance in the capital account were,
respectively:
a. P200,000 and P950,000 c. P600,000 and P750,000
b. P700,000 and P950,000 d. P700,000 and P850,000
50. Before the month-end adjustments are made, the January 31, trial balance of Jessmar Company
contains revenues of P580,000 and expenses of P178,000. Adjustments are necessary for the
following items: a) depreciation for January, P48,000; b) portion of fees collected in advance in
January, P110,000; c) fees earned in January, not yet billed to customers P65,000; d) portion of
prepaid rent applicable to January, P90,000.
Net income of Jessmar Co. in January is
b. P569,000 b. P439,000 c. P352,000 d. P259,000

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Polytechnic University of the Philippines

College of Accountancy and Finance

1. It is known as the language of business

2. Which of the following describes “Credit”?

3. Select the incorrect equation. If Assets= Liabilities + Capital, then

4. If a company uses special journals, purchases of merchandise should be recorded using

7. What do function do general ledgers serve in the accounting process?

1|Mock Midterm Examination

9. After the accounts have been closed,

11. Adjusting entries are dated in the journal as of:

12. An entry to recognize accrued income in a partnership business involves

13. To arrive at Cost of Sales,

14. The major expense of a merchandising business is

2|Mock Midterm Examination

17. All of these are terms of shipment except

19. When a company issues a credit memorandum, it means that

20. Select the Incorrect statement

3|Mock Midterm Examination

22. Which of the following is an adjunct account?

24. What is the purpose of nominal accounts?

25. The purchase of office equipment on account will

What are the shipping terms regarding this transaction?

4|Mock Midterm Examination

30. To arrive at the book value of a PPE, you should:

5|Mock Midterm Examination

6|Mock Midterm Examination

The adjusting entry for this situation will

The December 31, 2013, adjusting entry is

7|Mock Midterm Examination

b. P569,000 b. P439,000 c. P352,000 d. P259,000

8|Mock Midterm Examination

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