1.

At 31st December 2018, a company’s receivables totaled $400,000 ad an allowance for bad
debts of $50,000 had been brought forward from the year ended 31st December 2017. Write
off totaled $38,000 during the year. It was decided to adjust the allowance for bad debts to
10% of the receivables.

How much is the bad debts expense that should be reflected in the Company’s income
statement for the year ended 31st December 2018?

o 28,000
o 24,200
o 74,200
o 51,800

2. In which of the following circumstances would a provision be made by a company in its

financial statements in accordance with IAS 37 Provisions, contingent liabilities and contingent
assets in the financial statements?

A. The company expects to make operating losses from a new business operation next
year. The losses are expected to be $3 million.
B. The company has just purchased a new asset and it is expected that when the asset is
decommissioned in ten years' time, the company will be required under current
environmental laws to incur $4 million in decontamination costs.
C. A decision was made by the board of directors to shut down one of its business
divisions. The closure is likely to cost $8 million. Details of the closure arrangements
have been announced to the employees and the media.

o A only
o A and B only
o B and C only
o C only

3. On August 15 of the current year, an entity sold goods for which it received a note bearing the
market rate of interest on that date. The 4-month note was dated July 15 of the current year.
Note principal, together with all interest, is due November 15 of the current year. When the
note was recorded on August 15, which of the following accounts increased?

o Cash
o interest receivable
o interest revenue
o unearned discount
o prepaid interest
4. What is the effect on the elements of the accounting equation when a company receives
payment from a customer for an account receivable?

o Assets are increased and liabilities are increased

o Assets are both increased and decreased and total assets remains the same overall
o Assets are increase and equity is increased
o Liabilities are increased and equity is decreased
o Assets are decreased and equity is decreased

5. Beginning capital was $10,000. Withdrawals were $24,000. The owner made additional
investments during year of $60,000. The ending capital balance was $90,000. What was the
net income or net loss for the period?

o Net income, $30,000

o Net loss, $44,000
o Net income, $44,000
o Net income, $56,000
o None of the above

6. At 31st March 2017 a company had oil in hand to be used for heating costing $8,200 and an
unpaid heating oil bill for $3,600.

At 31st March 2018 the heating oil in hand was $9,300 and there was an outstanding heating
oil bill of $3,200. Payments made for heating oil during the year ended 31st March 2018
totaled $34,600.

Based on these figures, what amount should appear in the company's profit and loss (income
statement) for heating oil for the year 2018?

o $33,100
o $45,300
o $36,100
o $23,900

7. Keith Farfalle withdrew $5,000 from his pet store, KM's Pets. Recording the withdrawal will
result in which of the following changes to the components of the accounting equation?

o Increase in an asset and increase in equity

o Decrease in an asset and decrease in equity
o Increase in an asset and increase a liability
o Increase in one asset and decrease in another asset
o Decrease in an asset and decrease a liability
8. Which of the following statements is true?

o An account shows increase and decreases, but does not show the balance
o Journalizing precedes posting
o Journalizing errors should be erased and a correct entry made
o Debit entries are entries involving the right-hand side on an account
o Revenue accounts are increased by debit entries

9. At the beginning of the year, a business had a two-year, $2,400 insurance policy on its office
equipment. On July 1, it purchased a three-year, $3,600 policy on a newly constructed
building. Which of the following will be the December 31, year-end, adjusting entry?

o None of the journal entries in this group

o Insurance Expense, debit, $2,400; Prepaid Insurance, credit , $2,400
o Insurance Expense, debit, $2,100; Prepaid Insurance, credit, $2,100
o Insurance Expense, debit, $1,800; Prepaid Insurance, credit, $ 1,800
o Insurance Expense, debit, $6,000; Prepaid Insurance, credit, $6,000

10. Homer, a company, purchased an office building on 1st January 2013 for $800,000. The
property was depreciated at 2% on a straight-line basis. On 1st January 2018 it was decided to
revalue the building to $1,125,000. The useful life was not revised.

What is the balance on the revaluation reserve at 31st December 2018?

o $396,000
o $398,500
o $405,000
o $325,000

11. Company A sells its single product for $30 per unit. The contribution margin ratio is 45% and
the company has fixed costs of $ 10,000 per month. If 3,000 units are sold in the current
month, the operating profit would be:

o $40,500
o $10,000
o $30,500
o $49,500
o $90,000

12. ANGELO received $5,000 after he completed excavation work for a local home builder.
Recording the transaction requires which of the following?

o Withdrawal to be debited, an asset to be credited

o A liability to be debited, an asset to be credited
o An option other than these provided
o An asset to be debited, revenue to be credited
o An asset to be debited, a liability to be credited
13. Client Jay pays ABC Co. $1,000 in December for ABC to perform services for Jay in 45 days.
ABC uses the accrual basis of accounting. In December ABC will debit Cash for $1,000. What
will be the other account involved in the December accounting entry prepared by ABC (and
what type of account is it)?

o Service Revenues (revenue)

o Accounts Receivable (asset )
o Cost of services (PL)
o Unearned Revenues (liability)
o Prepaid Services (asset)

14. Total revenues were $ 105,000, total expenses, except for wage expense were $50,000, and
net income was $35,000. What was the amount of wage expense?

o $55,000
o Cannot be determined from information provided
o $20,000
o $70,000
o $15,000

15. On 31 May 2018, ABC Company disposed of a non-current asset by way of a part-exchange
agreement. Details were as follows:

Cost of old asset, purchased on 31 May 2010 46,000

Part exchange allowance 5,000
Cost of new asset 50,000

ABC Company depreciates similar assets straight line over ten years on a pro rata basis, to a nil
residual value. What is the loss on disposal of the old asset and what should be the recorded
cost of the new asset?

o Loss on disposal $5,500: new asset recorded at $45,000

o Loss on disposal $5,500: new asset recorded at $50,000
o Loss on disposal $4,200: new asset recorded at $50,000
o Loss on disposal $4,200: new asset recorded at $45,000

16. The Allowance for Doubtful Accounts account has a year-end credit balance, prior to
adjustment, of $ 1,500. The bad debts are estimated at 6% of outstanding accounts receivable
of $ 180,000. What is the amount of the credit in the journal entry that needs to be made to
adjust the Allowance for Doubtful Accounts?

o $ 9,300
o $13,600
o $10,800
o $12,300
o None of the above
17. The issuance of a note by an entity for services received should be recorded as

o An unearned revenue
o An accounts receivable
o A prepaid expense
o A notes payable
o A note receivable

18. Revenue from sale of goods is recognized when:

o The sale order has been received

o None of the above
o The cash has been received for the sale of goods
o The goods have been delivered to the buyer
o Significant risks and rewards of ownership have been transferred to the buyer

19. Which will not require an adjusting entry on the depositor's books?

o Collection from customer deposited in the amount of P100,000 but recorded by the
depositor only as P10,000
o Check in payment of account payable amounting to P50,000 is recorded by the
depositor as P5,000
o Bank service charge
o Deposit of another company is credited by the bank to the account of the depositor
o None of the above

20. The company collected in full an account receivable. Considering this transaction alone

o Total assets will remain the same

o Total assets will decrease
o Total assets will increase
o None of the above
o Equity will increase

21. An NBA basketball team sells season tickets worth $40 million before the basketball season
starts late in the year. Assume this $40 million is debited to Cash and credited to Unearned
Ticket Revenue. By the end of the year, 15% of the games have been played. What adjusting
journal entry should be made at the end of the year?

o Ticket Revenue, debit, $6 million; Cash, credit, $6 million

o None of the above
o Unearned Ticket Revenue, debit, $6 million; Cash, credit, $6 million
o Ticket Revenue, debit, $6 million; Unearned Ticket Revenue, credit, $6 million
o Unearned Ticket Revenue, debit, $6 million; Ticket Revenue, credit, $6 million
22. A bank reconciliation is

o a schedule that accounts for the difference between an entity’s cash balance as shown
on its bank statement and the cash balance shown in its general ledger
o a merger of two banks that previously were competitors
o a formal financial statement that lists all of the bank account balance of an entity.
o a statement sent by the bank to depositor on a monthly basis
o None of the above

23. The bookkeeper recorded a bank deposit at $960, but the bank recorded the deposit at its
correct amount of $690. How will this error be treated on the bank reconciliation?

o Deduction per bank statement balance

o None of the above
o Addition per book balance of cash
o Addition per bank statement balance
o Deduction per book balance of cash

24. A provider of health insurance received payment of $24,000 cash from a customer for
insurance coverage for the next two years. Recording the receipt of this cash will require
which of the following?

o A liability to be debited, an asset to be credited

o One asset to be debited, another asset to be credited
o An asset to be debited, a liability to be credited
o An asset to be debited, capital to be credited
o Withdrawals to be debited, an asset to be credited

25. Dilby forgot to record depreciation for the year. What will be the effect on the financial
statements of Dilby's omission?

o An overstatement of income and an understatement of assets

o An overstatement of income and an understatement of capital
o An understatement of income and an understatement of capital
o An overstatement of income and an overstatement of assets
o An understatement of income and an overstatement of capital

26. Which of the following concept or principle assumes that the business has a real existence
that is separate and distinct from that of the owner or owners?

o Going concern assumption

o Periodicity concept
o Business entity principle
o Accrual basis accounting
o None of the above
27. The non-current assets of a business entity had a carrying value of $340,000. An asset which
had cost $23,000 was sold for $15,000, at a profit of $2,000. What is the revised carrying value
of non-current assets?

o $317,000
o $327,000
o $323,000
o $325,000

28. The notion that the life of a business is divisible into time-periods of equal length is known as
which of the following?

o Time-period principle
o Going concern
o Monetary unit principle
o Recognition principle
o Business entity principle

29. East Company's trial balance reflected the following account balances at December 31, 2018.

Accounts receivable $200,000

Trading securities 100,000
Accumulated depreciation 300,000
Cash and cash equivalents 150,000
Inventory 500,000
Equipment and furniture 1,000,000
Patent 50,000
Prepaid expenses 20,000
Land held for undetermined use 250,000

In East Company's December 31, 2018 balance sheet, the current assets total is

o $950,000
o $0
o $870,000
o $970,000
o $850,000
30. The records for Uptown Pet Shop showed the following:

Sales $225,000
Beginning merchandise inventory 30,000
Purchases 135,000
Cost of goods sold 150,000

What was the ending merchandise inventory?

o $135,000
o $150,000
o $210,000
o $360,000
o None of the above