1.

An adjusting entry to record utilities used during a month for which no bill has yet been
received is an example of?
a. Allocating assets to expense to reflect the actual operating expenses incurred during the
accounting period
b. Allocating revenues received in advance to revenue to reflect actual revenues earned
during the accounting period
c. Accruing expenses to reflect expenses incurred during the accounting period that are
not yet paid or recorded
d. Accruing revenues to reflect revenues earned during the accounting period that are not
yet received or recorded
2. The word “accrued” implies which of the following?
a. Money has been paid and the services have been provided
b. Money has been paid but no services have been provided
c. Money has been paid for a service to be performed during the next period
d. Money has not been paid or received but the service has already been performed
3. An adjusted trial balance is prepared to?
a. Both test that the ledger is still in balance after the accounts have been adjusted and
facilitate the preparation of financial statements
b. Facilitate the preparation of adjusting entries
c. Facilitate the preparation of financial statements
d. Test that the ledger is still in balance after the accounts have been adjusted
4. Which of the following accounts would normally be found on the credit side of the adjusted
trial balance?
a. Accumulated depreciation- Equipment
b. Depreciation expense- Equipment
c. Ronald Dela Rosa, Withdrawals
d. Prepaid insurance
5. A customer’s promise to pay for goods or services
a. Creates a liability of the company
b. Decreases the company’s liabilities
c. Increases the assets of the company
d. Increases the company’s Cash account
6. Which of the following is not a reason for sales discounts to be offered to the debtors?
a. Increase the amount paid by the debtors
b. Improve liquidity by turning the accounts receivable into cash
c. Encourage earlier settlement of debts by debtors
d. Reduce the level of bad debts
7. Which of the following is correct about credit period?
a. If a customer purchases goods within the credit period, a cash discount will be available
to the customer
b. If a customer settles payment within the credit period, a cash discount will be available
to the customer
c. It refers to the period in which customers must settle their debts due
d. It refers to the period in which customers need to settle one-third of the debts in order
to avoid further interests charged
8. Which of the following is correct about purchases discount?
a. It refers to the discount offered by a third party for some reasons
b. It refers to the discount enjoyed by customers due to bulk purchases
c. It refers to the discounts offered by the supplier to customers due to the earlier settlement
of debts
d. It refers to a reduction in the list price
9. Which of the following is a correct definition of gross profit?
a. Gross profit= Profit – Other Expenses
b. Gross profit= Net sales – Net purchases
 c. Gross profit= Net sales – Cost of Goods Sold
d. Gross profit= Net Purchases + Cost of Goods Sold
10. What is the meaning of transportation in?
a. The expenses spent on carrying the returned goods from customers
b. The expenses spent on carrying the goods returned to suppliers
c. The expenses spent on carrying the goods sold to customers
d. The expenses spent on carrying the goods purchased from suppliers to the entity
11. The principal difference between depreciation and most other types of expenses is that
depreciation
a. Can be avoided if the asset is in as good condition as when it was purchased
b. Does not require a cash outlay
c. Is not deductible if it will cause a loss
d. Is subject to more precise measurement
12. Deferred expenses should be reported as
a. Assets on the balance sheet
b. Expenses on the income statement
c. Income on the income statement
d. Liabilities on the balance sheet

PROBLEMS

1. On April 1, 2019, John Dela Cruz sets up a firm and brings in office equipment of P50,000 and
inventory of P30,000 to the business. John Dela Cruz puts P80,000 into the firm’s cash box and
P100,000 into the firm’s bank account. Meanwhile, the firm lends P50,000 cash to SJ and
Associates and borrows P200,000 from the bank to acquire a piece of premises. What is the
amount of the firm’s capital on April 1, 2019?
a. P510,000
b. P210,000
c. P260,000
d. P460,000
2. Salaries payable were P3,500 at the end of September and P2,800 at the end of October.
Salaries expense for October was P18,000. How much cash was paid for salaries during October?
a. P18,700
b. P24,100
c. P17,300
d. P11,700
3. The December 31, 2019 trial balance for Magnolia Company included the following: Purchases
P40,000; Purchase returns and allowances P2,000; Transportation In P3,000; and the Beginning
and Ending inventory was P8,000 and P10,000 respectively. What was the cost of goods sold for
2019?
a. P39,000
b. P33,000
c. P38,000
d. P35,000
4. Olive Oil Traders purchased merchandise from Baby Oil Suppliers for P3,600 list price, subject to
a trade discount of 25%. The goods were purchased on terms of 2/10, n/30, F.O.B. destination.
Olive Oil Traders paid P100 transportation costs and later paid the amount due within the
discount period. The amount due to Baby Oil Suppliers paid by Olive Oil Traders was?
a. P2,456
b. P2,546
c. P2,645
d. P2,465
5. Susan Real Estate owns an office building and leases the office under a variety of rental
agreements involving rent paid in advance monthly or annually. Not all tenants make timely
payments of their rent. Susan’s balance sheet contained the following data:

2018 2019
Rental Receivable P192,000 P248,000
Unearned Rentals P640,000 P480,000
During 2019, Susan Received P1,600,000 from tenants. What amount of rental revenues should
Susan report for 2019?

a. P1,816,000
b. P1,708,000
c. P1,440,000
d. P1,332,000
6. Purchases P12,000; Terms are 2/10, n/30 FOB shipping point; Freight cost amounting to P1,000
was paid by the seller; and Purchase returns was P3,000 made one day after the delivery of
goods. How much cash was remitted by the buyer if payment was made within the discount
period?
a. P9,000
b. P9,900
c. P8,920
d. P9,820
7. List Price P224,000; Trade discount 30%; Terms 2/10, n/30 FOB shipping point; Freight cost
P4,000; Purchase returns and allowances P21,000 and are made one day after the delivery of
goods. Calculate the amount needed to settle the purchase within the discount period.
a. P135,089
b. P153,089
c. P137,084
d. P173,048
8. Wilson started business on Jan.1 2019. During the year, the company purchased merchandise
with an invoice price of P5,000,000. Wilson paid P200,000 freight on the merchandise. During
the year, he returned P800,000 worth of merchandise to its suppliers. All purchases were paid
for in a timely manner and a P100,000 cash discount was taken. P4,180,000 of the merchandise
was sold for P6,270,000. What was the Dec. 31 balance in the inventory account?
a. P820,000
b. 320,000
c. P120,000
d. P20,000