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COLEGIO DE DAGUPAN MIDTERM EXAMINATION ACCTG 1 & 2 – FUNDAMENTALS OF ACCOUNTING I

Instructions: • Turn off your cell phone/s. Use of CP is not allowed during exam. • Write ALL YOUR ANSWERS legibly on your TEST BOOKLET. Name: Course, Year and Block: Subject Code & Description: Date:

SET A Part I. MULTIPLE CHOICE. Choose the letter that best corresponds to your answer. 1. Which of the following best describes accounting? a. Can be thought of as the “language of business” b. Is of limited or little use by individuals outside of the business c. Records economic data but does not communicate the data to users d. Relies upon concepts and principles that are independent of specific user needs 2. Equipment with an estimated market value of $80,000 is offered for sale at $85,000. The equipment is acquired for $10,000 in cash and a note payable of $65,000. The amount used in the buyer’s accounting records to record this acquisition is: a. $80,000 b. $85,000 c. $10,000 d. $75,000 3. The business entity concept means that: a. An entity is organized according to state or federal statutes. b. An entity is organized according to the rules set by the FASB c. The entity is an individual economic unit separate and apart from its owners d. The owner is the entity. 4. Properties owned by a business are referred to as: a. stockholder’s equity b. liabilities c. assets d. equities 5. If total assets decreased by $1,000 during a period of time and liabilities increased by 2,000 during the same period, then the amount and direction (increase or decrease) of the period’s changes in owner’s equity is: a. $1,000 increase

Cindy’s Maid Service began the year with total assets of $120. Balance sheet 9. $110. a. Net income of $15. Statement of cash flows c. calculate the net income if drawings of $35. Total assets at the end of the year were $215.000 were made and $10.000 in net income and withdrawals amounting to $20. withdrawals made.000 increase c. liabilities increase c. Net loss of $15.000 b. a.000 of additional investments were infused. only the investments to the business and net income or loss c.000 respectively. Assets increase.000 decrease d.000 . Net income of $10.000. only the withdrawals made and investments to the business b. Which of the following financial statements reports information as of a point in time? a. $1.000 b. Owner’s equity at the end of the year was: a. only withdrawals made and net income or loss d.000 c. Net income of $25.000 respectively and at the end of the year were $225. owner’s equity increases d. Which of the following would not appear on the income statement? Service Revenue Interest Expense Unearned Revenue Fees Earned 11. b. owner’s equity increases 7.000 d. During the year the company earned $90.000 were made. How does the rendering of services on account affect the accounting equation? a. investments to the business. owner’s equity decreases b. Assets decrease. Retained earnings statement b. and net income or loss 10. c.b.000 and owners’ equity of $40. Assets increase. $3. Liabilities increase. $130.000 8. Income statement d. Transactions affecting owner’s equity include: a. d.000 and $140.000 and $175. $3.000 decrease 6.000. If assets and liabilities at the beginning of the year were $205.

000 Drawings 4. $135. d. Debts or obligations the company owes resulting from past transactions. a. b. b. Statement of financial accounting. The amounts that owners have invested in the business. $090.000 d. Amounts the company expects to collect in the future from customers.000 Liabilities 5.000 $04. Use the following appropriate amounts to calculate net income: Revenues $12. b. b.000 d. Liabilities are best defined as: a.000 Assets 19.000 13.c. Statement of cash flows.000 Expenses 4. d. $150. Using the information in Question 11. d. The financial statement that represents activity over the entire life of the company is the: a. Statement of cash flows. c. 14.000 $06. 16. $110. c. $080. 15. Statement of changes in equity. c. total liabilities at the end of the year were: a. c.000 $08. .000 a. Balance sheet.000 $14. Distributions to the owner.000 12. Income statement. Which financial statement is prepared at a point in time? Income statement Balance sheet.000 c. $105. d.000 b.

S1: The accounting model for the balance sheet is: Assets + Liabilities = Stockholders' Equity. Only statement 2 is correct c. the accounting and reporting for ------the business must be kept separate from other economic affairs of its owners. S1: Companies prepare financial statements at the end of each year and more often as ---------0needed. c. a. S2: Assets are recorded at market value or replacement cost. S2: Accounts payable and accounts receivable are reported on the income statement. S2: The financial statement that shows an entity's economic resources and its liabilities is -----------0the statement of cash flows. S1: The accounting period in which service revenue is recognized (i. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect 19. a. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect S1: Stockholders are creditors of a company. Both statements are incorrect 18. Both statements are correct d. b. revenue for --------000services rendered) is generally the period in which the cash is collected. S2: The income statement equation is Expenses . Only statement 2 is correct . S1: Accounting is a system that collects and processes financial information about an -------------organization and reports that information to decision makers. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect 20. 21.e. b. Only statement 1 is correct b. c. a. S2: In accounting and reporting for a business entity.. a.17. Only statement 1 is correct b. d. b. c. a.Revenues = Net Income. d. d.

b. d. 26. S1: Expenses are the necessary costs a business incurs to earn revenue. . b. S2: Borrowing cash from the bank causes assets to increase and liabilities to increase. b. d. Both statements are incorrect 22. c. Both statements are correct d. a. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect 23. b. S2: Receiving cash in advance from a customer for services to be provided in the future --------------0causes assets to increase and capital to increase. a. c. a. S2: Revenue is reported on the income statement only if cash was received at the point of sale. d. d. notes payable and wages payable are liability accounts. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect 24.c. total assets must equal total liabilities plus capital. c. S1: After recording each transaction. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect S1: Expenses have the effect of decreasing Owner’s equity. S1: The stockholders' equity of a company is the difference between assets and liabilities. S2: Accounts payable. 25. c. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect S1: Providing services to customers for cash causes capital to increase. a.

Credit When a journal entry consists of a debit to Accounts Payable Assets increased Liabilities increased Revenue increased Liabilities decreased Which of the following is a nominal or income statement account? Salaries expense Accounts receivable Salaries payable . a. a. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect 27. Debit Credit. 31. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect Normal balances for assets & liabilities Debit. b. d. c. b. a. b. d. S2: Paying employees' salaries for the current period is recorded with a debit to Salaries --------0Expense. d. c. b. 29. c. there must be at least one debit amount and one credit amount. a.S2: The Drawing account increases with a credit and decreases with a debit. Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect 28. c. d. a. c. Debit Debit. S1: For each transaction. b. c. a. S2: A credit to an account balance always results in the balance decreasing. d. 30. S1: A journal provides a chronological record of all transactions affecting a firm. Credit Credit. b.

b. Assets c. Owner’s capital 32. a. The unearned revenue account is a/an: Asset account Liability account Expense account Revenue account 33. Expenses 34.d. d. Balance Sheet b. Statement of Financial Performance c. Properties and rights owned by the business a. c. Notes to Financial Statements d. Income b. The financial statement that reports the portion of change in owner’s equity resulting from revenues and expenses during a specified time interval. Cash Flow Statement . Liabilities d. a.

Income exceeds Expenditure c. b. Expense. 42. c. d. In which of the following types of accounts are increases recorded by credits? a. If an expense is incurred but not paid. d. The credit side of an account: Is the right-hand side of the account Is the left-hand side of the account Depends on whether the account is an asset. c. Asset b.35. d. Revenue d. Going Concern 37. c. Cash Inflow exceeds Cash Outflow d. A Profit is earned if: a. Liability. a. b. A debit may signify a(n): Increase in liability accounts Increase in the capital account Decrease in expense accounts Increase in asset accounts 40. a. Expense. Stable Monetary Unit c. Revenue. a. Assets exceed Expenditure b. Accrual d. a. d. a. Income exceeds Liabilities 38. or capital Can be either side of the account depending on how the accountant set up the system. Entity Concept b. 39. b. then Owner’s equity will increase Assets will decrease Liabilities will increase Expenses will decrease Which of the following is a category or element of the balance sheet? Expenses Gains Liabilities . a. c. Remaining claims on the assets after deducting all liabilities Assets Liabilities Profit Capital 36. Principle stating that revenues should be recognized when earned and expense should be recognized when incurred regardless of cash transactions. b. Liability c. b. liability. Withdrawal 41. c.

a. Do not reflect money amounts. a. are credited. are debited and credited. are debited. d. d. Debit Utilities Payable. Credit Accounts Payable d. b. b. Decrease accounts receivable with credits and the normal balance is credit. a. 44. b. Which of the following applications of the rules of debit and credit is true? a. The process of initially recording a business transaction is called: Sliding Posting Journalizing Transposing 49. Debit Utilities Expense. Which of the following is an asset account? Accounts Payable Prepaid Insurance Unearned Revenue Salaries Expense If the business collected payment from charge customers. When assets increase. When assets increased. Increase accounts payable with debits and the normal balance is credit. d. b. Which of the following entries records the payment of an account payable? a. d. Cash in the firm’s safe Loan obtained from a bank Factory owned by the firm 47. c. Are only used by large entities with many transactions. c. b. Decrease cash with debits and the normal balance is credit. 50. are not entered into the books When assets increase.d. a. Debit Accounts Payable. b. d. d. 45. Accounts: a. Which of the following entries records the payment of rent for the current month? . Losses 43. c. 46. a. Credit accounts Payable b. c. Are records of increases and decreases in individual financial statement items. d. c. 48. c. Credit Utilities Payable c. c. b. Are used only by entities that manufacture products. Credit Cash 51. Increase rent expense with debits and the normal balance is debit. Debit Accounts Payable. then: Total assets will increase Total liabilities will decrease Total assets will remain the same Owner’s equity will increase Which of the following is correct? When assets increase. Which of the following is not an asset? Money owed to the firm by its debtors.

Fees Earned. credit Rent Expense.500 Cash 0 Unearned Rentals 10. Recording b. Debit Accounts Payable.60. credit Rent expense. use the following data pertaining to Mada Lee Lhang Etoh Trading: P150. Cash. credit b. the total revenues amount to a. Rent expense.a. credit Utilities Payable c. Fees earned. Accounts Payable. Recording 57. All debits are listed before credits. Classifying c. credit Accounts Payable. For numbers 58 . Fees Earned. Debit Utilities Payable. The name of the month should be repeated for each entry. credit 52. c. d. Cash. P182. When cash is debited. Using the data above. debit.500 b.500 58. debit. credit Accounts Payable b. a. The posting reference column is filled in prior to posting. b. What function do journals serve in the accounting process? a. Which of the following entries records the collection of cash from cash customers? a. Cash.500 d. debit.500 c. expenses 56. Which of the following entries records the payment of a utilities bill from the power company? a. debit. withdrawals c.000 Withdrawals 7. debit. Accounts Receivable. credit c. Rent expense. b. debit. Debit Accounts Payable. c. debit. credit d. Debit Utilities Expense. credit Utilities Expense 53. credit 54.0 Service Revenue 00 Expense 00 Telephone Interest Expense 5.0 Salaries P32.000 Revenue 2. Which of the following statements is true about a proper journal entry? An explanation must follow each debit and each credit. d. Summarizing d. a typical credit is to a. accounts payable d. Which of the following is an asset? Prepaid Expense Accrued Expense Unearned Revenue Professional Fees 55. debit. Cash.00 Expense 2. a. accounts receivable b. credit Accounts Payable d. c. P162. d.500 .500 Supplies 20. Accounts Receivable. Fees Earned. P172. P152. b.

for advertisements placed in the local -----------0newspaper during the month of August. PREPARATION OF JOURNAL ENTRIES. Macko P. d.580 26 – Received a bill to be paid in September. P3.000 31 – Made a partial payment on Notes Payable.000 P125. The total expenses for the period to be shown in the income statement P47. Prepare the journal entries concerning the following transactions. b.000 P39.500 PART II.500 P32.500 30 – Paid salaries for the last fifteen days of August.600 8 – Billed customers for services rendered. 7 and agreed to pay for them in 30 days 15 – Paid salaries for the first fifteen days. The following were the transactions that transpired during the month of August. P26.000 30 – A client made a partial payment of his account.485 22 – Paid the utility bill for August.000 12 – Received the supplies ordered on Aug.returned for a full credit. Aug.000 31 – Withdrew cash for personal use. P51. a.920 29 – Billed a customer for services provided. d.000 covering office rent for 3 months. P16. P50.410 20 – Received cash from a customer for services provided. 60. 3 – Paid P18.500 P07. c.200 25 – Paid the telephone bill due to Smart for August.750 16 – Discovered some of the supplies were of a different specifications as ordered and --------.500 P133. P15. P43. P45. a. c.000 P135.000 Net profit for the period would be P113.59. P86. P30.000 7 – Ordered automotive supplies.000 10 – Made payments on accounts payable. 5 – Received cash from customers on account. P40. P12. Yah is operating Toyo Motor Service Center.000 . P115. P2. b. Mr. P2.

Notes Payable. Notes Receivable. Capital. Accounts Payable. Personal. Miscellaneous Prepared by: Rusty L. Macko P. Mortgage Payable. Macko P. Advertising Expense. Yah. Maintenance Expense. Yah. Automotive Equipment.Record the following transactions using the accounts: Cash. Salaries Expense. Service Revenues. Lopez. Automotive Supplies. Repairs Telephone & Expense. Interest Revenue. Accounts Receivable. CPA . Utilities Expense. Expense. Prepaid Rent.