POLYTECHNIC UNIVERSITY OF THE PHIUPPINUS

COLLEGE OF ACCOUNTANCY
MIDTERM DEPARTMENTAL EXAMINATION
ACCO2016
FIRST SEMESTER 2 0 1 0 - 2 0 1 1
AUGUSTS, 2010
t
GENl-RAl INSTRUCTION: Multiple Choice. Select the letter of the best answer by marking properly
the scannable form. Place all supporting computations In the worksheet provided.

1. If a transaction causes total liabilities to decrease but does not affect the total owner's equity, what
change, If any will occur In totalassets?
a. assets will be increased • c.^ no change in total assets -
' U ; assets wlil be decreased d. none of these

2. Iti any transaction, the total amount of debits must e<|ual tlie
cj. Lota! number of accounts debited c. net value of the trcinsc. :tion
t), total number of accounts credited ^ total peso amount of crcHllts

3. What Is the effect upon the total assets of a business when an account receivable has been
collected?
a. Increases the total assets no change In the total assets
b. decreases the total assets d. none of these

4. At the end of the current accounting period. Bar Co. failed to record the expiration of a prepaid
expense. As a result, current period assets, liabilities, ownei^s equity and net income, respectively
will l)ecome
a. overstated, correct, ovenstdted, correct c- overstated, correct, overstated, understated
^B.^ overstated, correct, overstated, overstalied d, overstated, correct, understated, understated

5. Wlilch is an Incorrect adjusting entry?

a. debit Prepaid Insurance and credit'lnsurancq Expense using liic expense) method
(D. debit Unearned Rent and credit Rent Income using the income? method
c. debit Interest Expense and Cftdli Interest Payable
d. debit Kent Collected in Advance and credit Rent Revenue using Uie liability method

6. In pttjparing a worksheet and tlic company luis n not loss for the current period, the total of the
incomu st-)teniont debit column will bo
'fj; larger than the Income sbitement credit column
b. smaller than the Incorrte statement credit cxDlumn
c. larger than the balance sheet debit column *
d. larger than the balance sheet credit column .

7. An owner paid P10,000 of personal Kxpenses by using his company's cash. The company's
ii. expenses Increased by P10,000 assets decrenscd by P10,000' .
b, revenues decreased by P10,000 • liabilities decreased by Pi 0,000

8. (Viynient of P2,S00 on account to a supplier will cause

il. Ilabliilhss to Increase by P2,500 c. exi)en£.es to Increase by P2,fj00
^ liabilities to decrease by P2,500 ''• d. ('vpenses to decreaso by P2,500

9. r'tiHure to adjurjt an accrued wages at yearend will, result In an

a. oversuitement of liabiiily ''c> overstatement of prollls
b. understatement of owner's equity cT, understatement of assct5

10. If the trial balance Is In balance, then

a. no errors have occurrcvj /cl^jlotal debits equal total credits
b. all accounts hav(*correct balances S j f none of thesa

11. Tli(2 entity assumption holds that an organl;:ation'musl; be viewed as a unit that Is
a. part of Its owner , c. owned pgrtlally by creditors and partially by the owners ,
separate from Its owner d. owned exclusively by ont3 owner '\

12. The post-closing trial balance Is prepared after

a. combining the tiial balance and adjustment figures
 b^reparing the trial balance
/c^/journali2ing and posting the dosing entries ;
d. conripleting the worksheet

13. The credit column total Is greater than the debit column total In the income statement column of the
worksheet. This means that
a. mistakes were made In the preparation of the adjusted trial balance
/HV)the company had a net Income
c the Income Summary account will have a debit balance after the nominal accounts are closed
d, the company had a net loss i.

14. An adjusting entry for accrued expense Is required when

a. cash is paid before the expense Is Incurred c. expense Is recorded as cash Is paid
b. cash is paid after the expense Is Incuned d. lone of these

15. An adjusting entry for accrued revenue Is required when

n. cash is received before the revenue Is earned n,. revenue is recorded as cash is received
b. cash Is received after tlie revenue Is earned d., none of ttiesc

16. Adjusting entries are necessary In order to

a. measure properly the Income for the pedod c. .update the balances of liability accounts
b. update the balanc(?s of asset account (S^^" ^^^^
17. Tlic entries necessary to eliminate the balances of the mmlnsl accounts In order to prepare them for
the next accounting period.
j£L adjusting entries , . c. reversing entries
fb.^closlng entries ' d. journal entries

18. During 2010, a company collected P60,000 as advance payment from a teranl, for rent of office
space. The accountant credited Rent Revenue as the cash was received, The tenant will occupy the
space starting the second week of Januan/ 2011. No adjusting entry was made at the end of 2010 on
the advance payment. The failure to adjust the bodli would caijse;
a. Assets to be overstated on December 31, 2pi0
b. Liabilities to bQ overstated on December 31, 2010
^.y Owner's equity to be overstated on December 31, 2010
H.' Owner's eqult/ to be understated on December 31, 2010

19. Rich Company uses the Income statement approach to record prepaici Insurance. Accordingly, wlilch
of dhe following statements Is true?
a. Rich will never need to prep^ra adjusting entries for tliese items
b. Rich will Initially record a one-year Insurance policy as a debit to Prepaid Insurance
c. Rich will probably have an adjustment that debits Insurance Expense
' 3" Rich will probably have an adjustment tliat debits Prepaid Insurance • . ,

20. Which of the following Is Incorrect concerning a worksheet?

a. A worksheet Is a working paper used by accountant to facilitate preparation of floancial
statements.
b. Adjusting entries must be journalized and posted, even tliough tlie Adju: iments columns are
properly completed.
(cI^The amount of net Income appears as a credit in the Income Statement column when revenue
exceeds total expenses.
d. The completed worksheet Is used to prepare formal financial statements. . .

21. Determine whether true or false

1,1 Transactions not recorded In the Journal can be detected by the preparation of trial balance.
2.1 The trial balance will balance even If wrong accounte were used.
3.1 The primary purpose-of the,trial balance Is to prove the mathematical equality of the debits and
acdits after posting in tlie ledger.
^.iJhe trial balance tests the accuracy o^journal entries In th« Journal.
a. false, false, true and true respectively . c.. true, false, true and true respecti\/e\Y
b, true, true, false and false respectively ' ( J ) ''^'s®/ t^ue, true and false respectlvelj|j

22. Determine whether true or false ,

1.1 Accrual accounting recognizes revenues when they ore earned and expenses when Incurred
regardless of .cash flow,
 2.1 Accrual basis of accounting recognizes the effects of transactions and other events when they
occur even If no cash Is received or paid.
3,1 Accrual accounting Is the recognition of accounts receivable, accounts payable, prepaid expenses,
accrued expenses, deferred income and accrued Income.
^ . 1 In cash basis accounting, revenues and expenses are accounted for only when cash are attually
received and paid.:
all statements are false rc... all statements are true
u. true, true, true and false respectively d. false, false, false end true respectively

23, A debit entry to the Cash accou It indicates i.

a. the withdrawals of funds from the business by the owner
the payment of an expe ise
the borrovving of money from a bank
d. the billing of a client for services, payment subsequent to invoicing

24, Unearned revenue can best be described as an amount

a, not collected and not currently matched with expense
b, collected and currently matched with expense
(S^ collected and not currently matched with expense
d, not collected and currently matched with expense

.:]^25, A prepaid expense can best be described as an amount

a. paid and currently matched with revenue
(6^ paid and not currently (natched with revenue
c, not paid and currently rpatched with revenue '
d, not paid and not currently matched with revenue

4ir 2G. Adjusting entries normally involve : ••

a, real accounts only c. nominal accounts Dniy
/^j) real and nominal accounts d. nominal and temporary accounts
, • - c yr) ^ c ^ b
27. Indicate the normal balances of asset, liability, drawSng, capital, l.ncome and expense
a. debit, credit,, credit, credit, debit and debit respectively
b. debit, c f ^ l t , credit, credit, debit and debit respectively
rb7 debit, credit, debit, credit, credit and debit respectively
a. credit, debit, credit, credit, credit and credit res|)ectlvely

20. Identify the following s^tements

1.1 List of ail account titles and their account nunibens
2.1 Income from the ordinary dr principal activities of a business
3.1 Chronological record of an entity's transactions • •
a. trial balance, gain and ledger respectively
b. trial balance, galri'and journal respectively ,
(t^ chart of accounts, revehue and journal re.'5pectively
oT chart of accounts, revehue and ledger respectively •

29. Whldi of the following transactions causes total assets to Increase?-

(a> purchasing land; paying 50% In cash and Issuing a note for the balance
0, purchasing an equipment for cash
c. collecting accounts receivable • •
d. all of the above

30. ABC Co. has the following transactions for JanUaiy and Februaiy:
Jan 2 - Rendered services on account.
Feb 1 - Collected custoiner's account for services rendered on Jan 2.

The accountatit did not record Jan 2 transactions but recorded Feb 1. Wtiljh basis of accounting Is
usedj* ' ^
( a y cash basis accounting ' •• c. accrual basis accounting
0, Income tax accounting • . d. none of these

l i . Golden Co. reported total revenues of P84,000 for 2010 as well tiss
Total liabilities as of December 31, 2010 P110,000
2010 net loss 10,000
2010 tctal cash payments 74,000
 The company's total expenses must have been /
a. P66,000 b. P74,000 /c.>102,000 d. P124,000

32. Yellow Co. reported the following financial Informatidn for 2010:
Accounts receivable, January 1 Pi,,200
Accounts receivable, Dfecember 31 250. • '''' ' • ? -i
Cash collections on accOiJht 1,300

Yellow's services rendered qjvaccount amounted toj:'

a. P150 (b)iW50 c. P2,250^ d, P2,750

33. Blue Co, reported an ending cash balance of P35,0Q0. An exarhinatlon of the C'Mh T-account
revealed debits of P60,000 and pedits of P45;000 during the period. The company's beginning
(normal) cash balance was:
a, P50,000 credit b, P50,000 debit, c, P20,000 credit P20,000 debit
](y
34. On January 1, 2010, White Co. owed P12,000 to suppliers for servlcc»c> rendered In the prior year.
During the nionth the company secured additional services on account that amounted to P30,000 ynd
paid suppliers a total of P20,oqo. The balance In the Accounts Payable account on Januiiry 31, 2010
was ' . '

a. P2,000 debit b. P2,000 credit g>,P22,000 credit d, P22,000 debit

35. Orange Cc. sold six advertising spaces for P400 each, to be run In the November 2010 thrc^ugh April
2011 Issues. Orange credited Unearned Advertising for P2,400 on November 1, If Orange';; year end
Is December 31, which of the following would be reflected Iri Orange's 2010 Income statement?
(a^ Revenues of P800 c. Revenues of Pl,600
^ Unearned Revenues of P800 d. Unearned Revenues of Pl,600

36. By July 31, 2010 Win Company had rendered services In the amount of Pl,'100 thflt It has yet to bill.
What adjusting entry should be recorded to state the July Income properly?
a. Service Revenue 1,400 ; I c, Unearned Service RevenuL^ 1,400
UnearnedSer/ice Revenue l','iOO Sen/Ice Revenue 1,'fOO

b. Service Revenue 1,400 f^:)Accounts Receivable 1,400

Unaccounted for Revenue 1,400 \ S e r v i c e R e v e n u e 1 ,

>
37. A new business has the following transactions: (1) the owner Invested cash of P5,000; (2) P3,000 Of
?<upplle3 were purchased for cash; (3) P2,400 was received In payment for services rendered by the
business; (4) a salary of P1,000 was paid to an employee; and (5) P4,000 wnu borrowed from the ,
bank. After these transactions were completed, the total assets, total llablliUes, and total owner's
equity of the business are:
a. P12,600, P7,000, P5,600 respectively c, P9,600, P6,400, P3,200 respectively ,
/S?) P9,600, P4,000, P5,600 respectively d, P9,600, P4,600, P5,600 res,oectlvely.

^ 38, Prepaid Insurance account has a balance of P10,800 before adjustment. This a:nount: represents
Insurance premium for three months beginning November 1, 2010, Based on these data, the amount
of Insurance expense as of December 31, 2010 is ^
a. P10,800 b. P3,600 [ y P7,200 d, none of these

3 39, Prior to adjustment. Supplies Expense account has a bslwnce of P t3,S00. Adjustment data gatl'iered
allows ttiat supplies on hand at year-end amounted to P4,500. Tfie amount of supplltis expense to be
shown In the Income staternent Is
a. P4,500 P9,000 c. P13,500 d. none of these

40, The Del Pilar Enterprises pays its weekly salary of P50,400 for a G-day work week ending on
Saturday. The company, follows the calendar year ending December 31. A,ssufTi|ng that December 31
falls on a Ttiursday, how much Is accrued salaries as^f the end of the accounting period? ' ' .
a. P16,800 b. P8,400 P33,600 d. none Of these

2 41, Unearned Rent has a credit balance of P240;000 composed of the following; .
a. January 1 balance of P45,000 representing r^nt prepaid for three montlw, Jaiiuar/ to fAakUt
b. A credit of P19S,000 represetitlng advance rental payment for twelve month.i, b«^lnnlfig April i .
Tlie December 31 adjusting entry will require a debit to Unearned Rent and a credit to Rent Revenue
of

4
 a.\pi9i;250 b. pi95,000 ' c. P240,000 d. nonv3 o,f these

42. PAN Co. purchased a deliver/ truck or. May 1/2010. Tlie truckcost P500,000 and was; estimated to
have a four-year setvlce life. The adjusting entry, that would be necessary on Decembt?.r 31,, 2010
would Include , '
(p A debit to depreciation expense for PlDO,000 /^^^ ^ ^
A debit to depreciation expense for P150,000 v-— /'
c . A debit to accumulated depreciation for P100,000 y-
d. A credit to accumula:ed depreciation for |5i50,000

43. On March 31, the ledger for Max Cleaning Service consists of the foiiowinr.]
Cleaning Equipment • P2,780 , Accounts, Receivable P2,100
Accounts Payable ' 1,570 ^ ' Cash 600
Max, Capital 3,500 / Salaries Payable 'Jt>0 y
Office Equipment 1,200 Cleaning Supplies 260
Unearned Commission 1,000 /
In a trial balance prepared on March 31, the total of the credit column is
a. P3,530 b. P10,530 (c^P7,030 d. F'9,560

44. Before month-end adjustments are made, the January 31 trial balance of Rover Excursions cofitalas
revenue of P5,300 anc| expenses of Pl,780, Adjustments are necessary for the following Itetris;
• Portion of prepaid r$nt applicable to Januar/, P900 v
• Depreciation for Januar/, P480 , '
• Portion of fees collected In advance earned In January, PI, 100 ' •' <^'
• Fees earned In January, not yet billed to customers, peso ;
9^H''r>t

Net income in Rover Excursions' January income statement Is

a. P2,590 ^P3,890 ' c. P3,520 d, P5,lV;0

4!J, The assets of Sun Co. amounted to P540,000 on December 31, 2009 but lncr(>ased to Pa7n,000 t)y
December 31, 2010. During the same period, liabilities Increaski by P18C; 000. Owner's equity o.<
December 31, 2009 amounted to P330,000, Whiit wos the amount of the owner's eqully on
December 31,2010? ^ I
a. P390,000 (^•P480,0C0 c. P720,000 d. P690,000

4(., The Ij-ial balance of Speedy Tours Includes Salar/ Expense with a debit bal.iru c of P6,200. Oi ic
adjusting entiy In July requires an accrual of salary expense, P900. What will be ttie correct balanco
1(1 Salary' Payable end Salary Expense In the Adjusted Trial Balance columns of the workihfiat?
Salary Payable Salar/ Expense
a. PO P5,300 debit
P900 debit P900 debit
P900 credit ^ p7,100 debit
d, P7,100 credit' '900 debit

'I?, If Supplies account has a debit balance of P36,000 as of December 31, 20:0 with a' debit ^yj.sttng cf
P74,000 and credit posting of P86,200, what Is Its beginning balance?
a. P23,800 b. P12,200 c. P3G,800 _ d. P4y,200 '

lu. Angel Enterprise shows the following data:

Capital, January 1 P127,000
Drawing 41,000 *
Additional Investments 78,000
Capital, December 31 284,000
Total expenses during the year 122,000
How much Is tlie total revenues during the year?
a. P120,000 - b. P242,000 c. P42,000 d. I'12,0a0
19. Tlie liabilities of Dor Co. equal one-Uiird of the total assets, and Uie owner s eciully Is P240,000.
What Is the amount of the liabilities? ' •
a. P360,000 b. P120,000 ' c. P240,000 d. P90,0a0 .

Nos. 50 to 52 are based on the following Information: '

At the end of February 2010, the first montli of operations, the following selected data wer.e taken
from the financial records of Orange House C0mp3any.
 ProOt for february P 39,750
Total assets at February 28 189,700
Total liabilities at February 28 20,200

In preparing the financial statements, the following adjustmenb^ were overlooked:

a. Supplies used during February, Pl,750
b. Unbilled fees earned at February 28, P2,g00
c. Depreciation of equipment for Februar/, Pi,500
d. Accrued salaries at Feti'uary, PI,500

50, How much Is the adjusted amount of profit for the month of February?
a, P38,m b, P38,650 . c, P34,000 d, P36,900
51, How much Is the adjusted amount of assets?
a, P190,a50 b. P190,100 ' c. P188,350 d. P191,050

52, How much is the adjusted amount of liabilities?

a. P21,700 ' b, P20,200 •. c, P18700 d. P23,200

-^6s, 53 and 54 are based on t|ie following Information;

The unadjusted trial balance of Aimer's Computer Shop for the nacal year ended August 31, 2010
has a balance of P51,250 in Its Prepaid Insurance account which Is composed of the following:

m mosL^misil Psmm
Fire September 1, 2009 to August 31, 2013 P24,000 •
'
TPL March 1, 20(0 to February 28,201> 12,600
TPL May 31, 2010 to April 1, 2011. , 14,650
TJrHow much is the Insurance expensefor the fiscal ye^ir enckd August 31, 201O? ^
a. P24,995 b, P24,262,50 c, P25,625 d, P16,695 '^'"^

54, How much the Pi'epald Insurance.balance as of August 31, 2010?

a, P34,555 b. P25,625 C. P26,987,50 d. P31,250

5i;, At the beginning of the year, the assets of Kim Services were P2(5O,O0O and Its owner's equity was
P200,000, During the year, assets Increased k)y P150,000 and liability Incrtased by P40,000.
How much was the owner's equity at the end of the year?
(a^ P310,000 b. P410,000 c. P100,000 d. P260,000

mo Of EXAMINATION. GOOD LUCK.

K^MINDERSl DO NO INSenrme SCANNA'SLB FORMS mSWS YOUR WORKSHEETS, PASS

THEM SfPARA TEL Y. ALSO, DO NOT FORGET TO SUBMIT THE TEST QUESIONNAIRBS,