Cash to Accrual Basis of Accounting (2021 AC20063 BSMA2-3)

Points:

38/60
Multiple Choice questions

3.Under cash basis of accounting, income is recognized when they are

(2/2 Points)
measurable and earned
received
earned and collected
collected
Correct answers: received

4.Under accrual basis of accounting, income is recognized when they areRequired to answer.
Single choice.
(2/2 Points)
earned
collected
earned and collected
earned and measurable
Correct answers: earned

5.Under cash basis of accounting, expense is recognized when

(2/2 Points)
paid regardless of when incurred
in the same period that costs expire or assets used
in the same period when the expense needed to received revenue
in the same period when the expense needed to produce revenue
Correct answers: paid regardless of when incurred

6.The cash basis of accounting is an approach that does not recognizeRequired to answer. Single
choice.
(2/2 Points)
accounts payable
Salaries Expense
Interest expense
Cost of sales
Correct answers: accounts payable
7.Under the cash basis of accounting,Required to answer. Single choice.
(2/2 Points)
accounts payable appear on the liabilities at the end of the year
accounts payable appear on the liabilities at the beginning of the year
matching principle is not applied
matching principle is applied
Correct answers: matching principle is not applied

8.Merchandise inventory of the Company have decreased during the period while the accounts
payable increased during the same period. How would these increases of decreases be added to
or deducted from cash payment to merchandise suppliers to arrive at accrual basis cost of goods
sold?
(0/2 Points)
Merchandise inventory decreased - Added, The accounts payable increased - Deducted
Merchandise inventory decreased - deducted, The accounts payable increased - Added
Merchandise inventory decreased - added The accounts payable increased - Added
Merchandise inventory decreased - deducted, The accounts payable increased – deducted

Correct answers: Merchandise inventory decreased - deducted, The accounts payable increased
– Added

9.When converting from cash to accrual basis of accounting which of the following adjustments
should be made to cash collections from customers to arrive at the accrual basis sales?Required
to answer. Single choice.
(2/2 Points)
Add ending Accounts receivable
Deduct the ending Accounts receivable
Add beginning Accounts receivable
Deduct the beginning Accounts receivable

Correct answers: Add ending Accounts receivable

10.When converting from cash to accrual basis of accounting which of the following
adjustments should be made to cash payments for expenses to arrive at the accrual basis
expenses?
(2/2 Points)
Deduct the beginning Prepaid expenses
Add beginning Prepaid expenses
Add beginning Accrued expense
 Add ending Prepaid expenses
Correct answers: Add beginning Prepaid expenses

11.Under cash basis of accounting below statements are correct except for.
(2/2 Points)
This basis is simple, less costly and more reliable since estimates and judgement is not
required.
It is useful in evaluating performance because it reflect the results of all profit-directed
activities which took place during the period and cash receipt and payments
The measure is the difference between cash receipts and cash payments from transactions
related to providing goods and services to customers during a reporting period.
It doesn’t present the financial position or operating result of an enterprise in conformity
with generally accepted accounting principles.
Correct answers: It is useful in evaluating performance because it reflect the results of all profit-
directed activities which took place during the period and cash receipt and payments
12.On accrual basis of accounting below statements are correct except for:Required to answer.
Single choice.
(2/2 Points)
There is recognition accounts receivable, accrued expense and prepaid expenses
Recognizes income when earned regardless when cash is received
It present the financial position or operating result of an enterprise in conformity with
generally accepted accounting principles.
estimates and judgement is not required.
Correct answers: estimates and judgement is not required.
Assessment Problems

13.Elite Company a provider of medical supplies and keeps limited accounting records. Below
are the data for assets and liabilities at the beginning and end of the current year :
Cash in bank ( Beg) 12,000 ( End) Credit Balance of 5,000
Accounts Receivable (Beg) 68,000 ( End) 70,000
Medical Supplies (Beg) 30,000 ( End) 15,000
Accounts Payable (Beg) 40,000 ( End) 20,000
Notes Payable - bank (Beg) 20,000 ( End) 25,000
Medical Equipment(Net)(Beg) 150,000 ( End) 125,000
During the year, the owner withdrew cash of P12,000 and an additional investment of
P50,000. The amount of profit / (loss) of the company for the year is?
(0/5 Points)
P(2,000)
P8,000
P(78,000)
P(68,000)
Your answer to question 13 is wrong. Correct answers: P(2,000)

14.Nicko Corporation have the accounts balances as follows:

January 1, 2019 Assets P9,000,000
Liabilities P3,200,000

December 31, 2019 Assets P12,000,000

Liabilities P4,500,000

During the year 2019 NIcko issued 10,000 ordinary shares with P100 par value which was sold
at P150 / share and declared dividends of total amount of P280,000. There were no other
changes affecting the equity accounts. The amount of profit for 2019 is?
(0/5 Points)
P480,000
P420,000
P80,000
P980,000

Your answer to question 14 is wrong. Correct answers: P480,000

15.Missy Company reported the following balances at the end of each year: 2019-
InventoryP2,900,000 2020- InventoryP2,600,000 2019 -Accounts Payable750,000 2020- Accounts
Payable500,000 The entity paid suppliers P4,900,000 during the year ended December 31, 2020.
What should be the amount of Purchases in 2020?Required to answer. Single choice.
(5/5 Points)
P5,400,000
P4,650,000
P4,900,000
P5,150,000
Correct answers: P5,150,000
16.M Company reported the following balances at the end of each year: 2019-
InventoryP2,900,000 2020- InventoryP2,600,000 2019 -Accounts Payable750,000 2020- Accounts
Payable500,000 The entity paid suppliers P4,900,000 during the year ended December 31, 2020.
What should be the amount to be the reported for cost of goods sold in 2020?Required to
answer. Single choice.
(5/5 Points)
P10,650,000
P5,150,000
P5,450,000
P5,200,000
Correct answers: P5,450,000
17.For the year ended Dec. 31, 2020, Philippians Company paid interest totaling P100,000. The
prepaid interest expense is P23,500 and P18,000, respectively,on December 31, 2019 and 2020.
The interest payable is P45,000 and P53,500, respectively,on December 31, 2019 and 2020. The
amount of interest expense that should be reported on December 31, 2020?Required to answer.
Single choice.
(5/5 Points)
P141,500
P114,000
P103,000
P123,500
Correct answers: P114,000
18.For the year 2020, Wallace Corp. received P8,000,000 from tenants. The Statement of financial
position shows the following data: 2019 - Rentals receivable P 960,000 2020 -P1,240,000 2019 -
Unearned rentals 3,200,000 2020 - 2,400,000 What amount of rental revenue should be reported
for 2020?Required to answer. Single choice.
(5/5 Points)
P9,080,000
P8,280,000
P8,800,000
P10,400,000
Correct answers: P9,080,000
19.Filemon owned a 20% royalty interest in an oil well. Filemon received royalty payments on
January 31 for the oil sold between the previous June 1 and November 30, an on July 31 for oil
between December 31 and May 31. Production revealed the following sales. June 1, 2019
-November 30, 2019 P 3,000,000 December 1, 2019 -December 31, 2019 P500,000 December 1,
2019 -May 31, 2020 P4,000,000 June 1, 2020 -November 30, 2020 P3,250,000 December 1, 2020
-December 31, 2020 P700,000 The amount that should be reported as royalty revenue for 2020?
Required to answer. Single choice.
(0/5 Points)
P2,290,000
P1,490,000
P7,450,000
P11,450,000
Your answer to question 19 is wrong. Correct answers: P1,490,000
20.Teresa Company reported the following changes in all the account balances for 2019, except
for retained earnings: Note amount in parenthesis (Decrease) indicates decreases Cash P 790,000
Accounts payable P (380,000) Accounts receivable, net2,400,000 Bonds payable 820,000
Inventory 1,270,000 Share capital 1,250,000 Investments(470,000) Share premium 130,000. There
were no entries in retained earning account except for the net income and a dividend
declaration of P190,000 which was paid in the current year. the amount of net income in the
current year is?Required to answer. Single choice.
(0/5 Points)
P2,360,000
P5,910,000
P5,120,000
P4740,000
Your answer to question 20 is wrong. Correct answers: P2,360,000
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