SELF EVALUATION ACTIVITY

ACTIVITY 1: MULTIPLE CHOICE

1. Which of the following is an incorrect way of handling a voucher system?
a. Purchases are recorded in the voucher register at gross by debiting purchases
and crediting vouchers payable
b. Payment of purchases with discounts is recorded in the check register by
debiting vouchers payable at gross and crediting respectively cash in bank
and purchase discount
c. In case there are purchase returns and allowances, there is no need to cancel
the original voucher ad the issuance of a new one for the lower amount
because adjusting entries could later be prepared
d. When instalments or other payments are made on an invoice, a separate
voucher is prepared for the amount of each check issued
Theta prepares its financial statements for the year to 30 April each year. The
company pays rent for its premises quarterly in advance on 1 January, 1 April, 1 July
and 1 October each year. The annual rent was P84,000 per year until 30 June 2000. It
was increased from that date to P96,000 per year.
2. What rent expense and end of year prepayment should be included in the financial
statements for the year ended 30 April 2001?
Expense Prepayment
a. 93,000 8,000 c. 94,000 8,000
b. 93,000 16,000 d. 94,000 16,000
3. In preparing a worksheet and the entity is profitable in the current period, the total
of the statement of financial position credit column will be
a. Larger than the total of the statement of financial position debit column
b. Smaller than the total of the statement of financial position debit column
c. Larger than the total of the income statement debit column
d. Larger than the total of the income statement credit column
On March 1, a company received P3,000 cash from a client as an advance for 12
months’ worth of delivery services. The company initially recorded this receipt as a
debit to cash and a credit to delivery service revenue.
4. The adjusting entry made at December 31, would include a:
a. debit to delivery service revenue, P2,500.
b. credit to unearned delivery service revenue, P500.
c. credit to delivery service revenue, P500.
d. No adjusting entry was required because the delivery service was for a one-
year period exactly.
5. On August 1, a corporation received cash of P12,000 for one year's rent in
advance and recorded the transaction on that day as a credit to rent revenue. The
December 31 adjusting entry is:
a. Rent revenue P5,000
Unearned rent revenue P5,000
b. Rent Revenue P7,000
Unearned rent revenue P7,000
c. Unearned rent revenue P5,000
Rent revenue P5,000
d. Unearned rent revenue P7,000
Rent revenue P7,000
A corporation received a cash of P24,000 on August 1,for one year's rent in advance
and recorded the transaction on that day as a credit to an unearned rent revenue for the
full amount.
6. The December 31 adjusting entry is:
a. Rent revenue P10,000
Unearned rent revenue P10,000
b. Unearned rent revenue P24,000
Rent revenue P24,000
c. Rent revenue P14,000
Unearned rent revenue P14,000
d. Unearned rent revenue P10,000
Rent revenue P10,000
On July 1, a company paid a P600 premium for a three-year property insurance
policy; insurance expense was debited in full for the P600.
7. The adjusting entry made at the end of the year was:
a. Prepaid insurance P1,000
Insurance expense P1,000
b. Prepaid insurance P 500
Insurance expense P 500
c. Prepaid insurance P 100
Insurance expense P 100
d. Prepaid insurance P 500
Insurance expense P 500
8. In preparing a 10-column worksheet
a. The beginning inventory is extended as a credit in the income statement
columns
b. The beginning inventory is extended as a credit in the statement of financial
position columns
c. The ending inventory is extended as a debit in the income statement columns
and as a credit in the statement of financial position
d. The ending inventory is extended as a credit in the income statement columns
and as a debit in the statement of financial position columns.
9. A company paid its property taxes on April 1 for the period April 1, Year 1 to
March 30, Year 2. When the payment was made the company debited property
taxes expense and credit cash for P12,000. The adjusting entry made at the end of
the year 1 was:
a. prepaid property tax P9,000
property tax expense P9,000
b. prepaid property tax P3,000
property tax expense P3,000
c. property tax expense P3,000
prepaid tax expense P3,000
d. property tax expense P9,000
prepaid tax expense P9,000
On the May 1, a company purchased a six-month subscription to an investment
analysis service publication. The P300 cash payment was debited to subscription
expense at the time.
10. The adjusting entry made at June 30, the end of the company's fiscal year, was:
 a. subscription expense P100
subscription payable P100
b. prepaid subscriptions P100
subscriptions expense P100
c. prepaid subscription P200
subscription expense P200
d. No adjusting entry was required because the subscription was for only six
months not a full year.
11. A sole trader took some goods costing P800 from inventory for his own use. The
normal selling price of the goods is P1,600. Which of the following journal entries
would correctly record this?
a. Drawings account 800
Inventory account 800
b. Drawings account 800
Purchases account 800
c. Sales account 1,600
Drawings account 1,600
d. None of these
12. A company paid its property taxes on October 1 for the period October 1, year 1
to September 30, year 2. When the payment was made the company debited
property taxes expense and credited cash for P8,000. The adjusting entry at
December 31, year 1 would include which of the following:
a. debit prepaid property taxes, P6,000.
b. credit prepaid property taxes, P6,000.
c. credit property tax expense, P2,000.
d. debit property tax expense, P6,000.
13. The purpose of adjusting entries is to
a. Prepare revenue and expense accounts for recording the transactions of the
next period
b. Apply the realization principle and the matching principle to transactions
affecting two or more accounting periods
c. Adjust daily the balances in asset, liability, revenue and expense accounts for
the effects of business transactions
d. Adjust the capital account for the revenue, expense and withdrawal
transactions which occurred during the year
At the end of the current year, the prepaid insurance account showed a debit the
balance of P5,000; the balance at the beginning of the year was P6,000, and during the
year the insurance premiums paid amounted to P8,000.
14. Assuming insurance premium payments are initially entered in the prepaid
insurance account, the adjusting entry at the end of the year would include:
a. debit prepaid insurance P9,000
b. credit prepaid insurance P1,000
c. debit insurance expense P7,000
d. debit insurance expense P9,000
15. What is the net effect of the under mentioned errors on the trial balance of a firm?
I. Total of sales was taken as P58,726 instead of P58,762.
II. A discount of P52 allowed to Mr. X was not posted in the discount account.
III. Sale of old furniture of P130 was credited to Machinery account.
IV. A credit sale of P250 to Mr. Y was posted twice in his account.
a. Credit total of trial balance will be more than that of debit total by P234
b. Debit total of trial balance will be more than that of credit total by P234
c. Credit total of trial balance will be more than that of debit total by P104
d. Debit total of trial balance will be more than that of credit total by P264
e. Debit total of trial balance will be more than that of credit total by P286
16. Which of the following is not true of a worksheet?
a. Is included as part of the published financial statements
b. Provides a place where adjusting entries can be made Informally before they
are journalized and posted
c. Provides a balancing mechanism that helps uncover accounting errors
d. Helps facilitate the preparation of financial statements
Kat Company was incorporated on January 1, 2003, with P4,000,000 from the
issuance of stock and borrowed funds of P 1,000,000. During the first year of
operations, net income was P3,000,000. On December 15, Kat paid a P2,000,000 cash
dividend. No additional activities affected owners’ equity in 2005. At December
31,2005, Kat’s liabilities had increased to P 2,000,000.
17. In Kat’s December 31 2005, balance sheet, total assets should be reported at
a. 4,000,000 c. 7,000,000
b. 9,000,000 d. 6,000,000
The trial balance prepared at December 31, did not balance. Debit total was
P1,592,500 and credit total was P1,532,000. In determining the cause of the
difference, you discovered the following errors: a credit to Cash of P6,500 was not
posted; a P20,000 credit to be made to Sales account was credited to the Accounts
Receivable account instead; the wages payable account balance of P93,000 was listed
in the trial balance as P39,000.
18. What is the correct trial balance total?
a. P1,592,500 c. P1,612,500
b. P1,606,000 d. P1,586,000
19. The balancing figure in the worksheet is net loss if
a. The total of the credits exceeds the total of the debits in the income statement
columns
b. In the statement of financial position columns, the total of the debits exceeds
the total of the credits
c. The total of the credits is the same as the total of the debits in the income
statement columns
d. In the statement of financial position columns, the total of the credits exceeds
the total of the debits

The account balances for Villash Corp. as of December 31, 2003 follow:
Accounts payable - P100,000; Accounts receivable - P120,000; Building -
P400,000; Capital stock - P760,000; Cash - P60,000; Equipment - P160,000;
Land - P50,000; Notes payable - P280,000; Retained earnings - P100,000
20. In a trial balance prepared on December 31, 2003, the sum of the debit column is:
a. P860,000 c. P790,000
b. P1,440,000 d. P1,240,000
An analysis of the records of Wall Company disclosed the changes in an account
balances for the current year and the supplementary data listed below:
Cash P600, 000 increase
Accounts receivable 350, 000 decrease
Merchandise inventory 1, 320, 000 increase
Accounts payable 560, 000 increase
Accrued expenses 90, 0000 decrease
During the year Wall borrowed P2, 000, 000 from the bank and paid off P1, 750, 000
plus interest of P200, 000. Interest of P50, 000 is accrued on December 31. There was
no interest payable from the beginning.
Furthermore, Wall transferred equity securities to the business which were sold for
P900, 000 to finance the acquisition of merchandise. Wall made weekly withdrawals
in the current year o P15, 000.
21. The net income for the current year is:
a. 580, 000
b. 680, 000
c. 730, 000
d. 930, 000
 Chapter 1
ACTIVITY 1
1C
2D
3D
4A
5B
6D
7B
8D
9B
10 C
11 B
12 A
13 B
14 D
15 B
16 A
17 C
18 B
19 B
20 D
21 D