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26. Which of the following does not directly or indirectly affect the owners equity account?
a. cash acquisition of supplies
c. incurring of expenses
b. earning of revenues
d. withdrawals by the owner
27. Failure to record the entry for accrued salaries results in
a. total liabilities are overstated
c. total owners equity is overstated
b. total assets are overstated
d. total owners equity is understated
28. Failure to record the adjusting entry at the end of the period the unexpired insurance, the omission will cause
a. total assets to be overstated
c. total owners equity to be overstated
b. total expenses to be overstated
d. total revenues to be overstated
29. An adjusting entry must contain
a. two real accounts
c. an asset account and a liability account
b. two nominal accounts
d. a real account and a nominal account
30. The amount of accrued but unrecorded income at the end of the period is both an asset and
a. an expense
b. a liability
c. a revenue
d. a deferral
III. Multiple Choice Problems. Write the letter of the corresponding correct answer in the answer sheet provided.
STRICTLY NO ERASURES.
1. The rental collection was received in advance, P7, 600. A nominal method was used. At the end of the period, P1,
600 is not yet earned. The adjusting entry is
a. Debit unearned rent income P6, 000; credit rent income P6, 000
b. Debit rent income P6, 000; credit unearned rent income P6, 000
c. Debit unearned rent income P1, 600; credit rent income P1, 600
d. Debit rent income P1, 600; credit unearned rent income P1, 600
2. A purchase of supplies was debited P3, 800 using the real account P1, 300 cost of supplies were actually on hand
when the period ended. The adjusting entry is
a. Debit supplies P1, 300; credit supplies expense P1, 300
b. Debit supplies expense P2, 500; credit supplies P2, 500
c. Debit supplies expense P1, 300; credit supplies P1, 300
d. Debit supplies P2, 500; credit supplies expense P2, 500
3. An interest on notes receivable was received in advance in the amount of P2, 000. Real method was used. At the
end of the period P1, 600 is actually earned. The reversing entry is
a. Debit unearned interest income, P1, 600; credit interest income P1, 600
b. Debit interest income, P1, 600; credit unearned interest income P1, 600
c. Debit unearned interest income, P400; credit interest income P400
d. Not applicable
4. Paid an insurance premium amounting to P9, 000. Expense method was used, at the end of the period, P3, 500
has actually expired. The effect on net income if adjusting entry was not prepared
a. The net income is overstated by P5, 500
b. The net income is understated by P5, 500
c. The net income is overstated by P3, 500
d. The net income is understated by P3, 500
5. Total salaries paid on January 5, 2010, P5, 000. Out of the amount paid, P1, 500 is applicable on the preceding
period 2009. The effect on 2009 balance sheet accounts if no adjusting entry is prepared
Assets
a. Overstated P1, 500
b. Understated P1, 500
c. No effect
d. No effect
Liabilities
No effect
No effect
Overstated P1, 500
Understated P1, 500
Capital
Overstated P1, 500
Understated P1, 500
Understated P1, 500
Overstated P1, 500
6. The allowance for bad debts has a debit balance of P600. The accounts receivable has a debit balance of P100,
000. The allowance for bad debts should be adjusted to one percent of the outstanding accounts receivable. The
adjusting entry is
a. Debit bad debts P1, 000; credit allowance for bad debts P1, 000
b. Debit bad debts P400; credit allowance for bad debts P400
c. Debit bad debts P1, 600; credit allowance for bad debts P1, 600
d. Answer is not given
7. Machinery was acquired on March 31, 2010 P210, 000 with an estimated life of 5 years with a residual value of
P10, 000 at the end of its life. The adjusting entry on December 31, 2010 is
a. Debit depreciation expense P30, 000; credit accumulation depreciation P30, 000
b. Debit depreciation expense P33, 333.33; credit accumulation depreciation P33, 333.33
c. Debit depreciation expense P40, 000; credit accumulation depreciation P40, 000
d. Debit depreciation expense P30, 000; credit machinery P30, 000
8. A P200, 000 12%, 90-day note was issued to a supplier dated November 1, 2010. The interest was not yet paid at
the end of the year 2010. The adjusting entry for December 31, 2010 is
Debit
a. Accrued interest income P4, 000
b. Interest expense P4, 000
c. Accrued interest income P6, 000
d. Interest expense P6, 000
Credit
Interest income P4, 000
Accrued interest expense P4, 000
Interest income P6, 000
Accrued interest expense P6, 000
9. An advertising contract was signed on September 15, 2010 with a radio station for P60, 000. The contract will
commence upon payment on October 1, 2010 and will terminate on September 30, 2011. Expense method is
used in recording prepayment. The adjusting entry for December 31, 2010 is
Debit
a. Advertising expense P15, 000
b. Prepaid advertising P15, 000
c. Advertising expense P45, 000
d. Prepaid advertising P45, 000
Credit
Prepaid advertising P15, 000
Advertising expense P15, 000
Prepaid advertising P45, 000
Advertising expense P45, 000
Credit
Prepaid advertising P15, 000
Advertising expense P15, 000
Prepaid advertising P45, 000
Advertising expense P45, 000
11. The prepaid insurance account on January 1, 2010 is P10, 000 and on December 31, 2010 is P15, 000. The
insurance expense for the year is P25, 000. The amount of insurance paid during the period is
a. P35, 000
b. P30, 000
c. P25, 000
d. P20,000
12. The unearned rent income account on January 1, 2010 is P20, 000. During the year, P50, 000 was collected
representing advance rent income. The unearned rent income account as December 31, 2010 is P25, 000. The
rent income earned during the year is
a. P70, 000
b. P55, 000
c. P50, 000
d. P45, 000
13. The salaries paid during the month are P90, 000. The salary charged as expense in the income statement for the
month is P80, 000. The account Salary Payable has a balance of P20, 000 at the end of the month. The salary
payable has a balance at the beginning of the month is
a. P10, 000
b. P20, 000
c. P30, 000
d. P60, 000
14. The cash collection from interest income is P85, 000 during the month. The accrued interest income account as
of January 1, 2010 is P75, 000 and January 31, 2010 is P70, 000. The interest income earned during the month
is
a. P90, 000
b. P85, 000
c. P80, 000
d. P75, 000
15. The ledger of Lyka Service Center showed the following balances
Cash
Accounts receivable
Accounts payable
Lyka, capital
Lyka, drawing
Expenses
Service revenues
800, 000
400, 000
200, 000
560, 000
?
120, 000
640, 000
d. P100, 000
16. Jameanns Beauty Parlor has an equity of P1, 100, 000 as of January 1, 2010 and P1, 240, 000 as of December
31, 2010. The owner had an additional investment of P100, 000 and withdrawal of P120, 000 for 2010. What is
Jameanns net income/net loss for 2010?
a. P160, 000 net income
c. P160, 000 net loss
b. P120, 000 net income
d. P360, 000 net income
17. Darlenes Income Summary account has a debit balance of P120, 000 and credit balance of P150, 000 as of
December 31, 2010. The closing entry should
a. debit to Darlenes capital P30, 000and credit Income Summary P30, 000
b. debit to Income Summary P30, 000 and credit Darlene capital P30, 000
c. debit to Darlene capital P120, 000and credit Income Summary P120, 000
d. debit to Darlene, capital P30, 000and credit Darlene, drawing P30, 000
18. Eriz Enterprise had a profit of P600, 000 in 2010. Accounts receivable decreased by P80, 000 and accounts
payable increased by P90, 000. During the year depreciation expense was provided P60, 000. It started its
operation in 2010. What is net cash flows from operating activities using the indirect method?
a. P670, 000 b. P490, 000 c. P650, 000 d. P830, 000
Item 19 through 22 is based on the following data:
On September 1, 2010, Warren Farias Enterprises bought a brand new computer costing P65, 000. It has an
estimated life of 5 years and a scrap value of P5, 000 at the end of its life. the accounting period ends on December
31, 2010.
19. How much is the annual depreciation of the computer?
a. P4, 000
b. P4, 333
c. P12, 000
d. P13, 000
20. How much depreciation expense that should be recorded at the end of the accounting period?
a. P3, 000
b. P4, 000
c. P4, 333
d. P12, 000
21. How much is the carrying amount of the computer as of December 31, 2010?
a. P47, 000
b. P48, 000
c. P60, 000
d. P61, 000
22. If the computer will be sold on January 1, 2011 at an amount of P62, 000, how much is the gain or loss on
disposal?
a. P1, 000 gain
b. (P1, 000) lossc. P3, 000 gain
d. (P4, 000) loss
23. Karlo Perez Co. has an unpaid rental in the amount of P6, 000. The bookkeeper mistakenly recorded the
adjustment at P9, 000. The adjusting entry to correct the balances of accounts affected in the entry would be
Debit
a. Rent Expense, P3, 000
b. Rent Expense, P6, 000
c. Accrued Rent Expense, P3, 000
d. Accrued Rent Expense, P6, 000
Credit
Accrued Rent Expense, P3, 000
Accrued Rent Expense, P6, 000
Rent Expense, P3, 000
Rent Expense, P6, 000
UNIVERSITY OF ST LA SALLE
COLLEGE OF BUSINESS AND ACCOUNTANCY
BACOLOD CITY
ACCOUNTING 1 HM
MIDTERM EXAM
AY 2015-2016, 1st Semester
ANSWER SHEET
Name ___________________________________ Course, Yr. & Section: __________ Score _________
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