EASY

1. The first step in recording a transaction in a journal is to

a. Record the debit b. record the credit c. record the date d. write an explanation

2. A chart of account is a (an)

a. Journal b. list of names of all accounts
c. flowchart of all transactions d. accounting procedures manual

3. The general term employed to indicate a delay of recognition of an expense already paid or of a
revenue already received is
a. depreciation b. deferral c. accrual d. inventory

4. The type of account and normal balance of Unearned Rent

a. revenue, credit b. expense, debit c. liability, credit d. liability, debit

5. Which of the following is considered to be an accrued expense?

a. A computer technician has installed the latest software updates, but you have not received their
invoice for payment
b. A computer technician has just signed an agreement with you regarding pricing for future work.
c. A computer technician has been paid in advance to install software updates as they become
available.
d. A computer technician has installed the latest software updates ad was paid on the same day.

6. Which of the following is an example of accrued revenue?

a. Swimming pool cleaning that has been for three months in advance
b. Swimming pool cleaning that has been provided and paid on the same day.
c. An agreement has been signed for swimming pool cleaning for the next three months.
d. Swimming pool cleaning that has been provided but not been billed of paid.

7. Failure to record depreciation expense at the end of accounting period results in

a. understated income
b. understated assets
c. overstated expenses
d. overstated assets
8. One of the accounting concepts upon which deferrals and accruals re based is
a. matching b. cost c. price-level adjustment d. conservatism

9. If there is a balance in the unearned subscriptions account after adjusting entries are made, it
represents a (an)
a. deferral b. accrual c. expense d. revenue

10. In statement of cash flows, proceeds from issuing equity instruments shall be classified as cash
inflows from
a. lending activities b. operating activities c. investing activities d. financing activities

AVERAGE
1. If the balance shown on a company’s bank statement is less than the correct cash balance, and
neither the company nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the company.
b. Outstanding checks
c. Bank charges not yet recorded by the company
d. Deposits in transit

2. Beginning and ending Accounts Receivable balances were P28,000 and P24,000, respectively. If
collections from clients during the period were P80,000, then total services rendered on account
were apparently
a. 76,000 b. 84,000 c. 104,000 108, 000

3. The numbers and descriptions match what really existed or happened.

a. Neutrality b. Free from errors c. Faithful Representation d. Verifiability

4. The different knowledgeable and independent observer or users could reach consensus although not
necessarily complete agreement that a particular depiction is a faithful representation.
a. Neutrality b. Free from errors c. Faithful Representation d. Verifiability

5. The characteristic that separates assets such as property, plant, and equipment from intangible
assets is:
a. Separability b. lack of physical substance c. relevance d. reliability
 6. Moon Company purchased equipment on November 1, 2013, by giving its supplier a 12-month, 9
percent note with a face value of P48,000. The December 31,2013, adjusting entry is
a. Debit Interest Expense and credit Cash, P720
b. Debit Interest Expense and credit Interest Payable, P720
c. Debit Interest Expense and credit Interest Payable P1,080
d. Debit Interest Expense and credit Interest Payable, P4,320

7. Kite Company paid P24,900 in insurance premiums during 2013. Kite showed 3,600 in prepaid
insurance on its December 31,2013, balance sheet and P4,500 on December 31, 2012. The insurance
expense on the income statement for 2013 was
a. 16,800 b. 24,000 c. 25,800 d. 33,000

8. Which of the following term describes the amount of cash or cash equivalents that could currently
be obtained by selling an asset in an orderly disposal?
a. Fair Value b. Realizable Value c. Residual Value d. Value in use

9. Sky Company collected P12,350 in interest during 2013. Sky showed P1,850 in interest receivable on
its December 31, 2013, balance sheet and P5,300 on December 31, 2012. The interest revenue on
the income statement for 2013 was
a. 8,900 b. 3,450 c. 12,350 d. 14,200

10. The supplies account has a balance of P1,000 at the beginning of the year and was debited during
the year for P2,800, representing the total of supplies purchased during the year. If P750 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

DIFFICULT

1. A company received royalties from the assignment of patents to other enterprises. In the period in
which the royalties are earned, the royalties should be
a. Subtracted from the capitalizable cost of the patent.
b. Amortized to income over the remaining useful life of the patent.
c. Netted against patent amortization expense.
d. Reported as revenue.
2. Accompanying the bank statement was a debit memorandum for bank service charges. On the bank
reconciliation, the item is
a. a deduction from the balance per depositor's records
b. an addition to the balance per bank statement
c. a deduction from the balance per bank statement
d. an addition to the balance per depositor's records

3. A land acquired has an unwanted building that should be demolished. Assuming a salvage value can
be recovered from the demolition of the building, land account should be charged with the
a. Salvage value
b. Cost of demolition
c. Cost of demolition plus salvage value
d. Cost of demolition minus salvage value

4. Which one of the following term best describes the amount of cash or cash equivalents that could
currently be obtained by selling an asset in an orderly disposal?
a. Fair value
b. Realizable value
c. Residual value
d. Value in use

5. The unearned rent account has a balance of P40,000. If P3,000 of the P40,000 is unearned at the end
of the accounting period, the amount of the adjusting entry is
a. 3,000 b. 40,00 c. 37,000 d. 43,000

6. Joanne uses the conventional retail method to determine its ending inventory at cost. Assume the
beginning inventory at cost (retail) were P130,000 (P198,000), purchases during the current year at
cost (retail) were P685,000 (P1,100,000), freight-in on these purchases totaled P43,000, sales during
the current year totaled P1,050,000, and net markups (markdowns) were P24,000 (P36,000). What
is the ending inventory value at cost?
a. 153, 164 b.156,165 c. 157,412 d. 236,000

7. The sales price for a product provides a gross profit of 25% of sales price. What is the gross profit as
a percentage of cost?
a. 25% b. 20% c. 33% d. not enough information is provided
8. A 20 year bond was issued at a premium with a call provision to retire the bonds. When the bond
issuer exercised the call provision on an interest date, the call price exceeded the carrying value of
the bonds. The amount of the bond liability removed from the accounts should have equaled the
a. Cash paid
b. Face amount plus unamortized premium
c. Call price plus unamortized premium
d. Current market price

9. In a statement of cash flows, depreciation is treated as an adjustment to reported net income

because depreciation
a. Is a direct source of cash
b. Reduces reported net earnings but does not involve an outflow of cash
c. Reduces reported net earnings and involves an inflow of cash
d. Is an inflow of cash to a reserve account for replacement of assets.

10. Joanne Corporation had a 1/1/13 balance in the Allowance for Doubtful Accounts of P12,000. During
2013, it wrote off P8,640 of accounts and collected P2,520 on accounts previously written off. The
balance in Accounts Receivable was P240,000 at 1/1 and P288,000 at 12/31. At 12/31/13, Joanne
estimates that 5% of accounts receivable will prove to be uncollectible. What should Joanne report
as its Allowance for Doubtful Accounts at 12/31/13?
a. 5,760 b. 14,400 c. 8,280 d. 5,880