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Accounting Battaglia 1 Question and Answers

Easy Round:
1. What is the overall objective of accounting?
a. To supply financial information so that statement users could make informed
judgement and better decisions.
b. To provide quantitative financial information about a business that is useful to
statement users particularly owners and creditors in making economic decisions.
c. To assist management in planning and controlling the operations of the entity.
d. All the above.
2. This assumption means that the accounting entity is viewed as continuing in operations
indefinitely in the presence of evidence to the contrary: Going Concern Assumption
3. The trial balance that consist entirely of real or permanent accounts: Post-Closing Trial
Balance
4. Which accounts measure economic flows over a period of time?
a. Real Accounts
b. Nominal Accounts
c. Mixed Accounts
d. Contra Accounts
5. True or False:
a. Statement I. A fiscal year ordinarily begins on the first day of a month and ends of
the last day of the twelfth month. True
b. Statement II. In the normal accounting cycle, the financial statements are prepared
before the entries are posted. True
6. What is the area of accounting that is focused on the developing and reporting of
financial information for internal users?
a. Financial Accounting
b. Managerial Accounting
c. Financial Management
d. Private Accounting
7. The process of transferring the entries from the journal to the accounts in the ledger is
called: Posting
8. Garcia Company has supplies expense balance on Jan 1 of P31,000. During the year, the
entity paid of P800,000 for the purchase of supplies. At the end of the year, physical count
revealed remaining P60,000. How much supplies expense should be shown on Dec 31,
post-closing trial balance?
P0-, because post-closing trial balance shows only real or permanent accounts.
9. The set of guidelines that will govern how accountants will accumulate, measure, record,
and report the financial affairs and activities of the business: Generally Accepted
Accounting Principles (GAAP)
10. On December 31, 2018, the ADER Co. has cash balance of P15,000, accounts receivable
of P20,000, prepaid rent of P32,000, and liability of P24,000. How much is the total
owner’s equity? P43,000
Accounting Battaglia 1 Question and Answers

Average Round:
1. On October 1, 2012, Damon Company purchased equipment with a salvage value of
P24,000 and estimated useful life of 6 years. At the end of 2013, Accumulated Depreciation
had a balance of P145,000. At what amount should the equipment be recorded at the date
of purchase?
Cost – Salvage Value / Useful Life
Cost – 24,000/6 = Depreciation per year
Cost = P145,000 * 72 (total life in months)/15 (life expired) + 24,000
Cost = P720,000
2. Which of the following is/are NOT part of GAAP?
a. PFRS
b. IAS
c. Conceptual Framework for Financial Reporting
d. PSA
3. The accounting process can be classified into two parts, recording phase and summarizing
phase. Which of the following is not an example of the latter?
a. Preparing adjusting entries
b. Preparing post-closing trial balance
c. Preparing unadjusted trial balance
d. Posting to the ledger
4. Sally is opening a bake shop, Sally Bakery. She has P6,000 in baking equipment, and will
spend P1,000 to advertise and get the word out on social media. She has invested P1,000
of her own money and has borrowed P5,000 from her aunt. How much is Sally’s owners’
equity?
6,000 – 1,000 +1,000 – 5,000 = P1,000
5. This relates to the expense recognition principle which cost ad expenses incurred should
be reported against the related revenues in determining net income or loss for the period:
Matching Principle
6. An employee is paid P4.50 hourly and works Monday to Friday inclusive for eight hours
daily. Saturday four hours at a time-and-a-half, and Sunday five hours at double time. What
is the weekly gross pay of the employee?
4.5 * 8 * 5 = 180
4.5 * 1.5 * 4 = 27
4.5 * 2 * 5 = 45
Total: P252
7. The general term employed to indicate a delay of the recognition of an expense already
paid or of a revenue already received: Deferrals
8. Which of the following is true?
a. Classifying, characterizing, and writing information clearly and concisely makes it
understandable.
b. It would normally be necessary to disclose the underlying assumptions, the methods
of compiling the information and other factors and circumstances that support the
information.
Accounting Battaglia 1 Question and Answers

c. Materiality is an entity’s specific aspect of relevance based on the size or


magnitude, or both, of the items to which the information relates in the context of
the individual entity’s financial report.
d. Financial information is capable of making a difference in the decision if it has
predictive or confirmatory value.
9. The following accounts were closed to the Income Summary account: Salary Expense,
P500 debit; Telephone Expense P800 debit; Utilities Expense, P250 debit; Service
Revenue, P1,200 credit. The amount and entry to close Income Summary to the Capital
account would be:
P500 + 800 + 250 – 1,200 = P350 Net Loss
Capital Account 350
Income Summary 350
10. It is the law regulating the practice of Accountancy in the Philippines: RA 9298

Difficult Round:
1. What is the title of IFRS 1? First-Time Adoption of IFRS
2. Conan Industries collected P100,000 from customers in 2010. Of the amount collected,
P25,000 was from revenue earned on account in 2009. In addition, Conan earned P40,000
of revenue in 2010, which will be collected in 2011. Conan Industries also paid P70,000
for expenses 2010. Of the amount paid, P30,000 was for expenses incurred on account in
2009. In addition, Conan incurred P42,000 of expenses in 2010, which will be paid in 2011.
How much is the net income?
(P100,000 – P25,000) + P40,000 – (P70,000 – P30,000) – P42,000 = P33,000
3. The income statement of Benning Co. for the month of July shows net income of P1,400
based on Service Revenue P5,500, Wages Expense P2,300, Supplies Expense P1,200, and
Utilities Expense P600. In reviewing the statement, you discover the following:
a. Insurance expired during July of P400 was omitted.
b. Supplies Expense includes P200 of supplies that are still on hand at July.
c. Depreciation on equipment of P150 was omitted.
d. Accrued but unpaid wages at July 31 of P300 were not included.
e. Services provided but unrecorded totaled P500.

What is the corrected net income?


P1,400 – 400 + 200 – 150 – 300 + 500 = P1,250
Accounting Battaglia 1 Question and Answers

4. Dada Company had Merchandise Inventory on Jan 1, 2013 of P120,000. Purchases


amounted to P1,400,000 of which P600,000 remain unpaid. Gross Profit rate of the
company is 25%. Sales for the year amounted to P1,500,000. How much is the merchandise
inventory, ending?
Gross Profit Rate = (Revenue – Cost of Goods Sold)/Revenue
25% = (Gross Profit)/1,500,000
P1,500,000 * .25 = Gross Profit = P375,000
(P120,000 + P1,400,000) – P375,000 = P1,145,000

5. PUP JPIA Manila purchased inventory: terms 3/15, n/30. The company received an invoice
of P15,000 (inclusive of 800 for freight). If the payment of P11,664 was made to settle the
entire obligation with the discounted period, how much is the cost of merchandise
returned?
P11,664 – 800 = P10,864 (amount paid less discount) / .97 (10, 864 is 97% of?) =
P11,200. P15,000 – 800 – 11,200 = P3,000

6. Neosho River Resort opened for business on June 1 with eight air-conditioned units. The
trial balance adjustment on August 31 is as follows:
Neosho River Resort
Trial Balance
August 31, 2010

Account Number Account Titles Debit Credit


101 Cash 19,600
126 Supplies 3,300
130 Prepaid Insurance 6,000
140 Land 25,000
143 Cottage 125,000
149 Furniture 26,000
201 Accounts Payable 6,500
209 Unearned Rent Revenue 7,400
275 Mortgage Payable 80,000
301 P. Harder, Capital 100,000
306 P. Harder, Drawing 5,000
429 Rent Revenue 80,000
622 Repair Expense 3,600
726 Salaries Expense 51,000
732 Utilities Expense 9,400 00000
273,900 273,900
Accounting Battaglia 1 Question and Answers

Other data:
a. Insurance expires at the rate of P400 per month.
Insurance Expense 1,200
Prepaid Insurance 1,200
Did not affect debit
b. A count on August 31 shows P600 of supplies on hand.
Supplies Expense 2,700
Supplies 2,700
Did not affect debit
c. Annual depreciation is P6,000 on cottages and P2,400 on furniture.
Depreciation Expense 1,500
Accumulated Depreciation 1,500
Affected debit (+1,500)

Depreciation Expense 600


Accumulated Depreciation 600
Affected debit (+600)
d. Unearned rent revenue of P4,100 was earned prior to August 31.
Unearned Rent Revenue 3,300
Rent Revenue 3,300
Did not affect debit
e. Salaries of P400 were unpaid at August 31.
Salaries Expense 400
Salaries Payable 400
Affected debit (+400)
f. Rentals of P1,000 were due from tenants at August 31. Use Accounts Receivable.
Accounts Receivable 1,000
Rent Revenue 1,000
Affected debit (+1,000)
g. The mortgage interest rate is 9% per year.
Interest Expense 600
Interest Payable 600
Affected debit (+600)
How much is the total debit side in the adjusted trial balance?
273,900 + (6,000 * 3/12) + (2,400 * 3/12) + 400 + 1,000 + 600 = 278,000
Accounting Battaglia 1 Question and Answers

7. Carbon Company’s accounting records provided the following information (all amounts
in thousands of pesos)

Balances Balances
12/31/2012 12/31/2013

Current Assets P240 P?

Property, Plant, and Equipment 1,600 1,700

Current Liabilities ? 130

Long-term Liabilities 580 ?

All assets and liabilities of the firm are reported in the schedule above. Working capital of
P92 remained unchanged from 2012 to 2013. Net Income in 2013 was P64. No changes in
owner’s equity. Total long-term liabilities at the end of 2013 would be?
P240 + 1,600 = (240 – 92) + 580 + Capital?
P1,840 – 148 – 580 = P1,112 (Capital)
(P 130 +92) + 1,700 = 130 + Liabilities + 1,112
P1,922 – 130 – 1112 = P680 (Liabilities) = P680,000
8. What is the other term for accounts payable, notes payable, and accrued expenses?
Trade Payables
9. Winston Company sells magazine subscriptions for one- to three-year subscription periods.
Cash receipts from subscribers are credited to Magazine Subscriptions Collected in
Advance, and this account had a balance of P9,600,000 at December 31, 2013, before year-
end adjustment. Outstanding subscriptions at December 31, 2013 expire as follows
During 2014 P2,600,000
During 2015 P3,200,000
During 2016 P1,800,000
In its December 31, 2013 balance sheet, what amount should Winston report as the balance
for magazine subscriptions collected in advance?
P2.6M + 3.2M + 1.8M = P7,600,000
10. Corpuz Co. was formed on June 1, 2018 by investing P120,000 in cash and an equipment
with a historical cost of P60,000 and current cost of P80,000. The business also borrowed
funds totaling P150,000. Operations in 2018 resulted in an excess of income over expenses
of P300,000. Additional investment was made for a total cash of P75,000. On December
1, 2018, the owner withdraws P90,000 of cash. The business also bought P90,000 worth of
merchandise on account. At December 31, 2018, total assets increased by P590,000. The
total liabilities of Corpuz Co. at December 31, 2018 is:
Accounting Battaglia 1 Question and Answers

Assets Liabilities Capital


120,000 120,000
80,000 80,000
150,000 150,000
300,000 300,000
75,000 75,000
-90,000 -90,000
90,000 90,000
725,000 240,000 485,000
590,000 590,000 0
1,315,000 830,000 485,000