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PRELIM
ACCTG 105
QUIZ 2
Question 1
Presented below is the statement of Financial Position prepared by bookkeeper of Diamond Company on December 31,
2020:
Current Assets
Inventory P 600,000
Accounts Receivable 590,000
Cash 230,000
Treasury Shares (at cost) 330,000
Long Term Investments
Financial Assets at fair value through P/L 320,000
Financial Assets at fair value through OCI 1,030,000
Property and Equipment
Land 810,000
Office Supplies 80,000
Building and Equipment 3,560,000
Intangible Assets
Patents (net) 470,000
Prepaid Insurance 50,000
Deferred tax Assets 70,000
Discounts on Bonds Payable 100,000
Total Assets P 8,240,000
Current Liabilities
Accounts Payable 990,000
Allowance for Uncollectible Accounts 80,000
Salaries Payable 150,000
Taxes Payable 250,000
Long Term Liabilities
Bonds Payable (due 2022) 1,100,000

Unearned Rent Revenue (3months) 90,000
Equity
Retained Earnings 2,300,000
Acc. Depreciation Building & Equipment 920,000
Shares Premium 1,040,000
Ordinary Share Capital 1,200,000
Accumulated holding gains through OCI 120,000
Total Credits P8,240,000
What is the total of corrected current liabilities as of December 31, 2020 of Diamond Company?
Answer: 1,480,000
Question 2
2020:
Current Assets
Inventory P 600,000
Cash 230,000
Land 810,000
Intangible Assets
Current Liabilities
Equity
What is the total of corrected current assets as of December 31, 2020 of Diamond Company?
Answer: 1,790,000
Question 3
SME provide the following data on December 31, 2020:
Cash P 25,000
Prepayments 60,000
Inventories 60,000
Investment in Associate 110,000
Property, plant and equipment 3,250,000
Accumulated depreciation and impairment 700,000
Software - net of amortization and impairment 10,000
Deferred Tax Asset 5,000
Bank Overdraft 80,000
Bank Loan, payable in 2023 50,000
Trade Payable 430,000
Interest Payable 2,000

Current Tax Liability 270,000
Provision for Warranty 4,000
Employee Benefit Obligation (P4,000 current) 10,000
Finance Lease Liability (P20,000 current) 44,000
Share Capital 30,000
What is the total amount of stockholders equity?
Answer: 2,460,000
Question 4
Cash P 25,000
Prepayments 60,000
Inventories 60,000
What is the total amount of total assets?
Answer: 3,350,000
Question 5
2020:
Current Assets
Inventory P 600,000
Cash 230,000
Land 810,000
Intangible Assets
Current Liabilities
Equity

What is the total of corrected non-current liabilities as of December 31, 2020 of Diamond Company?
Answer: 1,000,000
Question 6
2020:
Current Assets
Inventory P 600,000
Cash 230,000
Land 810,000
Intangible Assets
Current Liabilities

Equity
What is the total of corrected non-current assets as of December 31, 2020 of Diamond Company?
Answer: 5,020,000
Question 7
2020:
Current Assets
Inventory P 600,000
Cash 230,000
Land 810,000
Intangible Assets

Current Liabilities
Equity
What is the corrected total assets as of December 31, 2020 of Diamond Company?
Answer: 6,810,000
Question 8
2020:
Current Assets
Inventory P 600,000
Cash 230,000

Land 810,000
Intangible Assets
Current Liabilities
Equity
What is the corrected total shareholders equity as of December 31, 2020 of Diamond Company?
Answer: 4,330,000
Question 9 3 / 3 points
Cash P 25,000
Prepayments 60,000
Inventories 60,000
What is the total amount of current assets?
Answer: 675,000
Cash P 25,000
Prepayments 60,000
Inventories 60,000

What is the total amount of current liabilities?
Answer: 810,000
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ACCTG 105
PRELIM EXAM
Question 1
Which of the following is the reason that the accounting equation is true by definition?
Assets are the source that funds the purchase of liabilities and owner’s equity
Liabilities are the source that funds the purchase of assets
Liabilities and owner’s equity are the sources that fund the purchase of assets
None of these are true, the accounting equation is merely a coincidence
Question 2
Unearned revenue on the books of Chocolate Company, the landlord, can be a prepaid asset on the statement of financial
position of its tenant, Cupcake, Inc.
True
False
Question 3
The comparative balance sheet for Earthwork Company is presented below.
Earthwork Company
Comparative Balance Sheet
December 31, 2020 and 2019
Assets 12/31/2020 12/31/2019

Cash P39,000 P32,500
Supplies ? 9,100
Land 52,000 52,000
Equipment 32,500 26,000
Liabilities and Stockholders' Equity

Accounts payable P23,400 P19,500
Notes payable 26,000 28,600
Capital stock 52,000 52,000
Retained earnings 35,100 ?
Additional information for Earthwork's 2020 operations revealed that the company had revenues of P65,000 for the year
and no dividends were paid.
Compute the Retained Earnings balance at 12/31/2019 -
Answer: 19,500
Question 4
Earthwork Company
Assets 12/31/2020 12/31/2019

Cash P39,000 P32,500
Supplies ? 9,100
Land 52,000 52,000
Equipment 32,500 26,000

Compute the total current assets at 12/31/2020 -
Answer: 52,000
Question 5
Which of the following would not result in unearned revenue?
Rent collected in advance from tenants
Sale of two-year magazine subscriptions
Sale of season tickets to football games
Services performed on account
Question 6
The following information was taken from the records of McDyce Corporation for the year ended December 31, 2020:
Dividends paid P 12,800

Service revenue 90,500
Accounts payable 139,750
Capital stock 378,750
Total expenses 67,000
Retained earnings (1/1/20) 43,400
The net income at December 31, 2020 was

54,100
72,750
23,500
43,400
Question 7
Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as
liabilities.
True
False
Question 8
When a company receives cash for future service, it debits unearned revenue on the income statement and credits cash
on the statement of financial position.
True
False
Question 9
Manhattan Park adjusts its books each month and closes its books on December 31 each year. The trial balance at
January 31, 2020, before adjustments, follows:
Debit Credit
Cash.............................................................................. P 6,600
Supplies........................................................................ 5,400
Unexpired Insurance..................................................... 12,600
Equipment..................................................................... 72,000
Accumulated Depreciation: Equipment......................... P 18,000
Unearned Admission Revenue...................................... 12,000
Share Capital................................................................. 20,000
Retained Earnings, January 1, 2020.............................. 38,200
Admissions Revenue..................................................... 27,600
Salaries Expense........................................................... 8,100
Utilities Expense........................................................... 5,700
Rent Expense................................................................ 5,400 _________
P115,800 P115,800
Refer to the above data. At January 31, the amount of supplies on hand is P2,300. What amount is shown on the
January income statement for supplies expense?
Answer: 3,100
Question 10
Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.
True
False
Question 11
The idea that an increase or decrease on one side of the accounting equation must be offset exactly by an increase or
decrease on the other side of the accounting equation is called -
Double-entry accounting
Monetary measurement concept
Additive concept
Going concern assumption
Question 12
The Financial statement that reports resources owned, the obligations to transfer resources to other organizations, and
the claims by the entity's owners is known as the -
Statement of cash flows
Statement of retained earnings
Balance sheet
Income statement
Question 13
The adjusting entry at the end of the period to record an expired cost may be different depending on whether the cost was
initially recorded as an asset or an expense.
True
False
Question 14
An adjusted trial balance should be prepared before the adjusting entries are made.
True
False
Question 15
Financial statements can be prepared from the information provided by an adjusted trial balance.
True
False
Question 16
A flower shop makes a large sale and provides flowers to a customer for P1,000 on November 30. The customer is sent a
statement on December 5 and a check is received on December 10. The flower shop follows PFRS and applies the
revenue recognition principle. When is the P1,000 considered to be earned?
November 30.
December 10.
December 1.
December 5.
Question 17
The time period assumption states that the economic life of a business entity can be divided into artificial time periods.
True
False
Question 18
The idea that the activities of the entity are to be separated from those of the individual owner is the
Arm's-length transaction assumption
Money measurement concept
Separate entity concept
Going concern assumption
Question 19
Because accounting often requires estimates to be made to assess the effect of a transaction, the shorter the time period,
the easier it becomes to determine the proper adjustments.
True
False
Question 20
Accrued revenues are revenues which have been received but not yet earned.
True
False
Question 21
A candy factory's employees work overtime to finish an order that is sold and shipped on February 28. The office sends a
statement to the customer in early March and payment is received by mid-March. The overtime wages should be
expensed in
The period when the workers receive their checks.
Either in February or March depending on when the pay period ends.
March.
February.
Question 22
Companies prepare classified and comparative financial statements because
They are required by international accounting principles
They show changes in a company's management policies
They are required by the IRS
They provide financial statement readers with useful information about trends in financial position and
operating performance
Question 23
Earthwork Company
Assets 12/31/2020 12/31/2019

Cash P39,000 P32,500
Supplies ? 9,100
Land 52,000 52,000
Equipment 32,500 26,000

Compute the Supplies balance at 12/31/2020 -
Answer: 13,000
Question 24
If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.
True
False
Question 25
Expenses sometimes make their contribution to revenue in a different period than when they are paid. When wages are
incurred in one period and paid in the next period, this often leads to which account appearing on the statement of
financial position at the end of the time period?
Salaries and Wages Expense.
Salaries and Wages Payable.
Due to Employer.
Due from Employees.
Question 26
Which of the following is an example of a disclosure of information NOT recognized that would be explained in the notes
to the financial statements?
The description of all the individual items that comprise notes payable
The disclosure of quarterly financial information
The method used to estimate depreciation on a piece of equipment
The disclosure of the uncertain, potential outcome of a lawsuit
Question 27
Unearned revenue is a prepayment that requires an adjusting entry when services are performed.
True
False
Question 28
Accrued revenues are revenues that have been earned and received before financial statements have been prepared
True
False
Question 29
If a company has P528,000 of sales revenue, pays P26,400 in dividends, and has net income of P158,400, how much
were the expenses for the year?
369,600
422,400
396,000
343,200
Question 30
A transaction that causes an increase in an asset may also cause
An increase in a liability
A decrease in a liability
A decrease in owners' equity
An increase in another asset
Question 31
Types of adjusting entries include deferral of unearned revenue, which requires the company to record a liability on the
statement of financial position.
True
False
Question 32
Which of the following reflect the balances of prepayment accounts prior to adjustment?
Statement of financial position accounts are overstated and income statement accounts are overstated.
Statement of financial position accounts are overstated and income statement accounts are understated.
Statement of financial position accounts are understated and income statement accounts are overstated.
Statement of financial position accounts are understated and income statement accounts are understated.
Question 33
When a prepaid expense is initially debited to an expense account, expenses and assets are both overstated prior to
adjustment.
True
False
Question 34
In general, the shorter the time period, the difficulty of making the proper adjustments to accounts
is unaffected.
is increased.
depends on if there is a profit or loss.
is decreased.
Question 35
Manhattan Park adjusts its books each month and closes its books on December 31 each year. The trial balance at
January 31, 2020, before adjustments, follows:
Debit Credit
Cash.............................................................................. P 6,600
Supplies........................................................................ 5,400
Unexpired Insurance..................................................... 12,600
Equipment..................................................................... 72,000
Accumulated Depreciation: Equipment......................... P 18,000
Unearned Admission Revenue...................................... 12,000
Share Capital................................................................. 20,000
Retained Earnings, January 1, 2020.............................. 38,200
Admissions Revenue..................................................... 27,600
Salaries Expense........................................................... 8,100
Utilities Expense........................................................... 5,700
Rent Expense................................................................ 5,400 _________
P115,800 P115,800
.
Refer to the above data. According to attendance records, P8,200 of the Unearned Admission Revenue has been earned
in January. Compute the amount of admissions revenue to be shown in the January income statement:
Answer: 35,800
Question 36
Adjusting entries are often made because some business events are not recorded as they occur.
True
False
Question 37
Distributions by a corporation to its stockholders are called
Dividends
Income
Withdrawals
Retained earnings
Question 38
The accuracy of the information contained in the financial statements is the responsibility of the
Securities and Exchange Commission
Certified Public Accountant
Stockholders
Management
Question 39
Which of the following is an example of additional information about summary totals that would be explained in the notes
to the financial statements?
The description of all the individual items that comprise notes payable
The disclosure of the uncertain, potential outcome of a lawsuit
The disclosure of quarterly financial information
The method used to estimate depreciation on a piece of equipment
Question 40
Philippine Financial Reporting Standards (PFRS) include a revenue recognition principle that states that “let the revenues
follow the expenses.”
True
False
Question 41
The following information was taken from the records of Tellers Corporation for the month ended December 31, 2020:
Advertising expense P20,625

Income tax expense 13,095
Dividends paid 14,125
Retained earnings (12/1/20) 57,860
Consulting fees revenue93,550
Rent expense 11,728
Supplies expense 16,917
Given the above information, net income is

45,110
35,310
31,185
11,385
Question 42
The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.
True
False
Question 43
Net assets are equal to -
Total assets minus net income
Total assets minus total liabilities
Total assets minus dividends paid
Total assets minus owners' equity
Question 44
Many business transactions affect more than one time period.
True
False
Question 45
Earthwork Company
Assets 12/31/2020 12/31/2019

Cash P39,000 P32,500
Supplies ? 9,100
Land 52,000 52,000
Equipment 32,500 26,000

Compute the total expenses incurred at 12/31/2020 -
Answer: 49,400
Question 46
Accrued expenses result in an adjustment to both the income statement and the statement of financial position.
True
False
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MIDTERM
ACCTG 105
ACTIVITY 1 - CASH FLOW
Question 1
The following financial statements of Bato Corporation were made available:
Balance Sheet
12/31/2020 12/31/2019
Cash 317,600 160,000
Accounts Receivable 300,000 180,000
Merchandise Inventory 320,000 400,000
Property, Plant and Equipment 510,000 800,000
Accumulated Depreciation (270,000) (250,000)
Total 1,177,600 1,290,000
Accounts Payable 150,000 80,000
Income Taxes Payable 290,000 330,000
Bonds Payable 300,000 500,000
Ordinary Share Capital 180,000 180,000
Retained Earnings 257,600 200,000
Total 1,177,600 1,290,000
Income Statement
December 31, 2020
Sales 7,000,000
Cost of Sales 5,960,000
Gross Profit 1,040,000
Selling Expense 500,000
Administrative Expenses 160,000 660,000
Income from Operations 380,000
Interest Expense 60,000
Income before Taxes 320,000
Income taxes 102,400
Net Income 217,600
The following additional data were provided:
Dividends for the year 2020 were P160,000.
During the year, equipment was sold for P200,000. The equipment originally cost for P290,000 and had a book value of
P240,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
All depreciation expenses were in the selling expenses category.
In the December 31, 2020 statement of cash flows of Bato Company, how much should be reported as operating
activities as: Net cash used in financing activities?
Answer: 360,000
Question 2
Balance Sheet
12/31/2020 12/31/2019
Cash 317,600 160,000
Total 1,177,600 1,290,000
Total 1,177,600 1,290,000
Income Statement
December 31, 2020
Sales 7,000,000
Net Income 217,600
activities as: Net cash provided by operating activities?
Answer: 317,600
Question 3
Balance Sheet
12/31/2020 12/31/2019
Cash 317,600 160,000
Total 1,177,600 1,290,000
Total 1,177,600 1,290,000
Income Statement
December 31, 2020
Sales 7,000,000
Net Income 217,600
In the December 31, 2020 statement of cash flows of Bato Company, how much should be reported as payment of
income taxes?
Answer: 142,400
Question 4
Balance Sheet
12/31/2020 12/31/2019
Cash 317,600 160,000
Total 1,177,600 1,290,000
Total 1,177,600 1,290,000
Income Statement
December 31, 2020
Sales 7,000,000
Net Income 217,600
activities as: Net cash provided by investing activities?
Answer: 200,000
Question 5
Balance Sheet
12/31/2020 12/31/2019
Cash 317,600 160,000
Total 1,177,600 1,290,000
Total 1,177,600 1,290,000
Income Statement
December 31, 2020
Sales 7,000,000
Net Income 217,600
In the December 31, 2020 statement of cash flows of Bato Company, how much should be corrected cost of sales?
Answer: 5,920,000
Question 6
Balance Sheet
12/31/2020 12/31/2019
Cash 317,600 160,000
Total 1,177,600 1,290,000
Total 1,177,600 1,290,000
Income Statement
December 31, 2020
Sales 7,000,000
Net Income 217,600
In the December 31, 2020 statement of cash flows of Bato Company, how much should be payment for selling expenses?
Answer: 430,000
Question 7
Balance Sheet
12/31/2020 12/31/2019
Cash 317,600 160,000
Total 1,177,600 1,290,000
Total 1,177,600 1,290,000
Income Statement
December 31, 2020
Sales 7,000,000
Net Income 217,600
In the December 31, 2020 statement of cash flows of Bato Company, how much should be payments of accounts
payable?
Answer: 5,770,000
Question 8
Balance Sheet
12/31/2020 12/31/2019
Cash 317,600 160,000
Total 1,177,600 1,290,000
Total 1,177,600 1,290,000
Income Statement
December 31, 2020
Sales 7,000,000
Net Income 217,600
In the December 31, 2020 statement of cash flows of Bato Company, how much collections from customers?
Answer: 6,880,000
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ACCTG 105
MIDTERM - QUIZ 1 - CASH FLOW STATEMENT
Question 1
Using the indirect method, an increase in accounts receivable during a period is deducted from net income in calculating
cash provided by operations.
True
False
Question 2
Each of the following is added to net income in computing net cash provided by operating activities except
a decrease in inventory.
an increase in accrued expenses payable.
amortization expense
a gain on sale of equipment.
Question 3
On December 31, 2020, Skidmore Company had the following cash flow data:
Cash paid for dividends P20,000

Cash collected from sale of building 90,000
Cash paid for wages 50,000
Cash received from issuing new shares of stock 600,000
Cash collected from customers 1,000,000
Cash paid to purchase inventory500,000
Cash paid for income taxes 100,000
Cash paid for advertising 30,000
Cash paid for purchase of equipment 200,000
Cash paid on principal of loan 300,000
Cash paid for rent 60,000
Skidmore Company had a cash balance of P750,000 on January 1, 2020.

Given the above information, compute the net change in cash in December 31, 2020.
Answer: 430,000
Question 4
In preparing a statement of cash flows, cash equivalents are subtracted from cash in order to compute the net change in
cash during a period.
True
False
Question 5
Joy Elle’s Vegetable Market had the following transactions during 2020:
1. Issued P25,000 of par value common stock for cash.
2. Repaid a 6 year note payable in the amount of P11,000.
3. Acquired land by issuing common stock of par value P50,000.
4. Declared and paid a cash dividend of P1,000.
5. Sold a long-term investment (cost P3,000) for cash of P3,000.
6. Acquired an investment in IBM stock for cash of P6,000.
What is the net cash used in investing activities?
Answer: 3,000
Question 6
Joy Elle’s Vegetable Market had the following transactions during 2020:
1. Issued P25,000 of par value common stock for cash.
2. Repaid a 6 year note payable in the amount of P11,000.
3. Acquired land by issuing common stock of par value P50,000.
4. Declared and paid a cash dividend of P1,000.
5. Sold a long-term investment (cost P3,000) for cash of P3,000.
6. Acquired an investment in IBM stock for cash of P6,000.
What is the net cash provided by financing activities?
Answer: 13,000
Question 7
The statement of cash flows is a required statement that must be prepared along with an income statement, balance
sheet, and retained earnings statement.
True
False
Question 8
On December 31, 2020, Halloway Company had the following financial information on its books:
Total assets P365,000

Net increase in operating activities 425,000
Total liabilities 185,000
Net decrease in financing activities 250,000
Sales revenue 680,000
Net decrease in investing activities 135,000
Additional information for Halloway's 2020 operations revealed that the company had beginning retained earnings of
P120,000 for the year, a beginning cash balance of P35,000, and dividends paid of P45,000.
Based on this information, compute the cash balance at December 31, 2020.
Answer: 75,000
Question 9
Using the indirect method, if equipment is sold at a gain, the
sale proceeds received are deducted in the operating activities section.
sale proceeds received are added in the operating activities section.
amount of the gain is added in the operating activities section.
amount of the gain is deducted in the operating activities section.
Question 10
Bainbridge Company uses the direct method in determining net cash provided by operating activities. The income
statement shows income tax expense P60,000. Income taxes payable were P25,000 at the beginning of the year and
P18,000 at the end of the year. Cash payments for income taxes are
Answer: 67,000
Question 11
Which of the following would be subtracted from net income using the indirect method?
A decrease in prepaid expenses
An increase in accounts receivable
An increase in accounts payable
Depreciation expense
Question 12


Given the above information, compute the net cash flow provided by operating activities.
Answer: 260,000
Question 13
Carsen Corporation shows income tax expense of P90,000. There has been a P5,000 decrease in income taxes payable
and a P7,000 increase in income taxes payable during the year. What was Carsen's cash payment for income taxes?
Answer: 88,000
Question 14
The acquisition of land by issuing common stock is
a noncash transaction which is not reported in the body of a statement of cash flows.
a noncash transaction and would be reported in the body of a statement of cash flows.
a cash transaction and would be reported in the body of a statement of cash flows.
only reported if the statement of cash flows is prepared using the direct method.
Question 15
Cash flow from investing activities is considered the most important category on the statement of cash flows because it is
considered the best measure of expected income.
True
False
Question 16
Cribbets Company uses the direct method in determining net cash provided by operating activities, During the year,
operating expenses were P260,000, prepaid expenses increased P20,000, and accrued expenses payable increased
P30,000. Cash payments for operating expenses were
Answer: 250,000
Question 17


Given the above information, compute the net cash balance at December 31, 2020.
Answer: 1,180,000
Question 18
A statement of cash flows indicates the sources and uses of cash during a period.
True
False
Question 19
A company had net income of P180,000. Depreciation expense is P26,000. During the year, Accounts Receivable and
Inventory increased P15,000 and P40,000, respectively. Prepaid Expenses and Accounts Payable decreased P2,000 and
P4,000, respectively. There was also a loss on the sale of equipment of P3,000. How much cash was provided by
operating activities?
Answer: 152,000
Question 20
Generally, the most important category on the statement of cash flows is cash flows from
Financing Activities
Investing activities
Operating activities
Significant non-cash activities
Question 21
Logan Company has other operating expenses of P260,000. There has been an increase in prepaid expenses of P16,000
during the year, and accrued liabilities are P24,000 lower than in the prior period. Using the direct method of reporting
cash flows from operating activities, what were Logan's cash payments for operating expenses?
Answer: 300,000
Question 22
The cost of goods sold during the year was P165,000. Merchandise inventory decreased by P6,000 during the year and
accounts payable decreased by P3,000 during the year. Using the direct method of reporting cash flows from operating
activities, cash payments for merchandise total
Answer: 162,000
Question 23


Given the above information, compute the net cash flow used in investing activities.
Answer: 110,000
Question 24


Given the above information, compute the net cash flow provided by financing activities.
Answer: 280,000
Question 25
In the Freyfogle Company, land decreased P60,000 because of a cash sale for P60,000, the equipment account
increased P20,000 as a result of a cash purchase, and Bonds Payable increased P70,000 from an issuance for cash at
face value. The net cash provided by investing activities is -
Answer: 40,000
Question 26
Cline Company issued common stock for proceeds of P186,000 during 2020. The company paid dividends of P33,000
and issued a long-term note payable for P45,000 in exchange for equipment during the year. The company also
purchased treasury stock that had a cost of P7,000. The financing section of the statement of cash flows will report net
cash inflows of
Answer: 146,000
Question 27
The use of cash to purchase highly liquid short-term investments (cash equivalents) would be reported on the statement
of cash flows as an investing activity.
True
False
Question 28
In Gentry Company, land decreased P120,000 because of a cash sale for P120,000, the equipment account increased
P40,000 as a result of a cash purchase, and Bonds Payable increased P130,000 from issuance for cash at face value.
The net cash provided by investing activities is
Answer: 80,000
Question 29
If a company has both an inflow and outflow of cash related to property, plant, and equipment, the
cash inflow and cash outflow should be reported separately in the financing activities section.
two cash effects can be netted and presented as one item in the financing activities section.
two cash effects can be netted and presented as one item in the investing activities section.
cash inflow and cash outflow should be reported separately in the investing activities section
Question 30
The statement of cash flows should help investors and creditors assess each of the following except the
entity's ability to generate future income.
reasons for the difference between net income and net cash provided by operating activities.
entity's ability to pay dividends.
cash investing and financing transactions during the period.
Question 31
In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.
True
False
Question 32
During 2020, Unruh Company had P160,000 in cash sales and P1,400,000 in credit sales. The accounts receivable
balances were P180,000 and P212,000 at December 31, 2019 and 2020, respectively. Using the direct method of
reporting cash flows from operating activities, what was the total cash collected from all customers during 2020?
Answer: 1,528,000
Question 33
A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions.
True
False
Question 34
Which one of the following items is not necessary in preparing a statement of cash flows?
Determine the cash in all bank accounts
Determine the cash provided by operations
Determine the change in cash
Determine cash from financing and investing activities
Question 35

Based on this information, compute the net income at December 31, 2020.
Answer: 75,000
Question 36

Based on this information, compute the net increase in CASH at December 31, 2020.
Answer: 40,000
Question 37

Based on this information, compute the Retained Earnings at December 31, 2020.
Answer: 150,000
Question 38
Bent Company reports a P20,000 increase in inventory and a P5,000 decrease in accounts payable during the year. Cost
of Goods Sold for the year was P150,000. Using the direct method of reporting cash flows from operating activities, cash
payments made to suppliers were
Answer: 175,000
Question 39

Based on this information, compute the total owner's equity at December 31, 2020.
Answer: 180,000
Question 40
Purchased land and building with a mortgage.
Investing activities section
Financing activities section
Does not represent a cash flow
Operating activities section
Question 41
During the year, Salaries Payable decreased by P6,000. If Salary Expense amounted to P190,000 for the year, the cash
paid to employees (including deductions from gross pay) is -
Answer: 196,000
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ACCTG 105
CLASS ACTIVITY 2 - CASH VS ACCRUAL
Question 1
The statement below and other information pertain to Venus Trading:
Venus Trading
Statement of Financial Position
December 31, 2019
Assets Liabilities & Owners Equity

Cash P 7,020 Accounts Payable P 14,100
Notes Receivable 18,000 Salaries Payable 1,650
Accounts Receivable 6,000 Unearned Rent 900
Interest Receivable 480 Total Liabilities P 16,650
Inventories 27,000
Prepaid Insurance 750
Land 75,000
Building & Equipment 210,000
Accum. Depreciation (93,750) Venus Reyes, Capital 233,850
Total Assets P 250,500 Total Liabilities & Equity P 250,500
The cash book shows the receipts and payments during 2020 as follows:
Cash Receipts
Collections on accounts receivable P 52,500

Cash sales 63,000
Interest revenue 810
Rent revenue 5,400
Cash Payments
Accounts payable for merchandise P 80,100

Insurance premiums 1,410
Salaries 16,050
Other operating expenses 4,500
Venus, Drawing 9,000
Supplementary Information:
Sales returns and allowances P 2,700

Cash discounts taken by customers 900
Accounts receivable written off 450
Cash discounts taken on purchases 1,650
Purchase returns and allowances 1,455
Balances taken on December 31, 2020 from supplementary analysis:
Cash (verified through cash count bank reconciliation) P 17,670

Notes receivable (no change during 2020) 18,000
Accounts receivable 11,400
Interest receivable 795
Inventories 37,500
Prepaid insurance 1,050
Building and equipment (net of accu. Depreciation) 97,050
Salaries payable 2,850
Unearned rent 675
Additional information:
1.No acquisitions or disposals of plant assets were made in 2019

2.Payroll taxes and withholding taxes are ignored
3.The direct write-off method is used to record bad debts expense.
Compute the Rent Revenue/Income
Answer: 5,625
Question 2
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts

Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050


Inventories 37,500
Unearned rent 675

Compute the Insurance Expense
Answer: 1,110
Question 3
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts

Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050


Inventories 37,500
Unearned rent 675

Compute the Gross Profit from Sales
Answer: 53,100
Question 4
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts

Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050


Inventories 37,500
Unearned rent 675

Compute the gross purchases (purchases on account)
Answer: 81,855
Question 5
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts

Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050


Inventories 37,500
Unearned rent 675

Compute the Depreciation Expense
Answer: 19,200
Question 6
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts

Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050

Inventories 37,500
Unearned rent 675

Compute the gross sales (sales on account)
Answer: 124,950
Question 7
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts

Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050


Inventories 37,500
Unearned rent 675

Compute the Interest Revenue/Income
Answer: 1,125
Question 8
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts

Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050


Inventories 37,500
Unearned rent 675

Compute the Other Operating Expenses
Answer: 4,500
Question 9
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts
Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050


Inventories 37,500
Unearned rent 675

Compute the Salaries Expense
Answer: 17,250
Question 10
Venus Trading
December 31, 2019

Inventories 27,000
Land 75,000
Cash Receipts

Cash sales 63,000
Rent revenue 5,400
Cash Payments

Salaries 16,050


Inventories 37,500
Unearned rent 675

Compute the Net Profit
Answer: 17,340
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ACCTG 105
CLASS ACTIVITY 2 - ASSIGNMENT (CASH VS ACCRUAL)
Jacqueline Company began the current year with accounts receivable of P1,000,000
and allowance for doubtful accounts of P80,000. During the current year, the following
events occurred:
Accounts written off 120,000
Cash sales 500,000
Sales on account 3,000,000
Doubtful accounts expense recognized 200,000
At the end of the current year, the entity showed a balance in accounts receivable of
P1,680,000.
Under cash basis, what amount should be reported as sales?

(2,700,000)
Mall Company reported the following balances at the end of each year:
2019 2018
Inventory 2,600,000 2,900,000
Accounts payable 750,000 500,000
The entity paid suppliers P4,900,000 during the year ended December 31, 2019.
What amount should be reported for cost of goods sold in 2019?

(5,450,000)
Easter Company reported that all insurance premiums paid are debited to prepaid
insurance. For interim reporting, the entity made monthly charges to insurance expense
with an offset to prepaid insurance. The entity provided the following information for the
current year:
Prepaid insurance on January 1 150,000
Charges to insurance expense during the year
Including year-end adjustment of P25,000 625,000
Prepaid insurance on December 31 175,000
What was the amount of insurance premium paid in the current year?
(625,000)
During 2019, Kew Company, a service organizations, had P200,000 in cash sales and
P3,000,000 in credit sales.
The accounts receivable balances were P400,000 and P485,000 on December 31,
2018 and 2019 respectively.
If the entity desires to prepare a cash basis income statement, what amount should be
reported as sales for the current year?
(3,115,000)
Yates Company's records provide the following information concerning certain account balances and changes in these account
balances during the current year. Transaction information is missing from each item below.
Accounts Receivable: Jan. 1, balance 41,000, Dec. 31, balance 65,000, un-collectible
accounts written off during the year, 6,000; accounts receivable collected during the year,139,000.
Compute the sales on account.

(169,000)
Grier & Associates maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the
accrual basis. The cash basis income statement, along with additional information, follows:
Grier & Associates

Income Statement (Cash Basis)
For the Year Ended December 31, 2020
Cash receipts from customers 450,000
Cash payments:
Salaries and wages 150,000
Income taxes 65,000
Insurance 40,000
Interest 25,000 280,000
Net income 170,000
Additional information: Balances at 12/31
2020 2019
Accounts receivable 60,000 30,000
Salaries and wages payable 10,000 20,000
Income taxes payable 24,000 19,000
Prepaid insurance 8,000 4,000
Accumulated depreciation 95,000 75,000
Interest payable 3,000 9,000
No plant assets were sold during 2020.
Net income under accrual basis.

(195,000)
Otis Company acquired rights to a patent under a licensing agreement that required an
advance royalty payment when the agreement was signed. The entity remitted royalties
earned and due under the agreement on October 31 each year.
Additionally, on the same date, the entity paid, in advance, estimated royalties for the
next year. The entity adjusted prepaid royalties at year end. The entity provided the
following information for the current year:
Jan. 1 Prepaid royalties 650,000
Oct. 31 Royalty payment charged to royalty expense 1,100,000
Dec.31 Year-end credit adjustment to expense 250,000
What amount should be reported as prepaid royalties at year-end?

(850,000)
The following information is available for Renn Corporation's first year of operations:
Payment for merchandise purchases 315,000
Ending merchandise inventory 135,000
Accounts payable (balance at end of year) 60,000
Collections from customers 280,000
The balance in accounts payable relates only to merchandise purchases. All merchandise items were marked to sell at 40% above
cost.
What should be the ending balance in accounts receivable, assuming all accounts are deemed collectible?
(56,000)
Calapan Company provided the following data at year-end:
2018 2019
Accounts receivable 1,200,000 1,350,000
Accounts payable 1,500,000 1,850,000
In 2019, accounts written off amounted to P100,000. Sales returns amounted to P250,000, of which an amount of P50,000 was paid
to customers.
Cash receipts from customers after P500,000 discounts totaled P8,000,000.
Purchases returns amounted to P400,000, of which an amount of P100,000 was

received from suppliers.
Cash payments to trade creditors amounted to P5,000,000 after discounts of P200,000.
Under accrual, what is the amount of gross sales?

(8,950,000)
Seaside Company provided the following data for the current year:
Operating expenses:
Depreciation 1,000,000
Insurance 700,000
Salaries 1,500,000
Total operating expenses 3,200,000
December 31 January 1
Accrued salaries payable 100,000 120,000
What amount was paid for operating expenses?

(2,270,000)
Hard Company maintained accounting records on the cash basis but restated the
financial statements to the accrual basis of accounting. The entity had P6,000,000 in
cash basis income for 2019.
The entity provided the following information at year-end:

2019 2018
Under accrual basis, what amount of income should be reported in the 2019 income
statement?
(9,500,000)
On February 1, 2019, Tory began a service proprietorship with an initial cash
investment of P200,000. The proprietorship provided P500,000 of services on February
and received full payment in March.
The proprietorship incurred expenses of P300,000 in February which were paid in April.
During March, Tory drew P100,000 against the capital account
In the proprietorship’s statement of financial position on March 31, 2019 prepared under cash basis, what amount should be
reported as capital?
(600,000)
2018 2019
to customers.

Under accrual, what is the amount of net sales sales?

(8,150,000)
Reid Company, which began operations on January 1, 2018, has elected to use cash
basis accounting for the financial statements.
The entity reported sales of P1,750,000 and P800,000 in the tax returns for the years
ended December 31, 2019 and 2018, respectively.
The entity reported accounts receivable of P300,000 and P500,000 in the statement of
financial position on December 31, 2019 and 2018 respectively.
What amount should be reported as sales in the income statement for the year ended
December 31, 2019?
(1,550,000)
Zeta Company reported sales revenue of P4,600,000 in the income statement for the
year ended December 31, 2019
The entity wrote off uncollectible accounts totaling P50,000 during the current year.
2018 2019
Allowance for uncollectible accounts 60,000 110,000
Advances from customers 200,000 300,000
Under cash basis, what amount should be reported as sales for the current year?
(4,400,000)
On December 31, 2019, Ashe Company had a P990,000 balance in the advertising
expense account before any year-end adjustments relating to the following:
Radio advertising spots broadcast during December 2019 were billed to the entity on
January 4, 2020. The invoice cost of P50,000 was paid on January 15, 2020.
Included in the P990,000 is P60,000 for newspaper advertising for a January 2020
sales promotional campaign.
What amount should be reported as advertising expense for the year December 31,
2019?
(980,000)
Rara Company paid P72,000 to renew an insurance policy for three years on March 1,
2018.
On March 31, 2019, the unadjusted trial balance showed P3,000 for prepaid insurance
and P72,000 for insurance expense.
What amount should be reported for insurance expense for the three months ended
March 31, 2019?
(5,000)
Spee Company provided the following information for the current year:
Cash sales
Gross 2,000,000
Returns and allowances 100,000
Credit sales
Gross 3,000,000
Discounts 150,000
On January 1, customers owed P1,000,000. On December 31, customers owed
P750,000. The entity used the direct write off method for bad debts. No bad debts were recorded in the current year.
Under cash basis, what amount of revenue should be reported for the current year?
(5,000,000)
2018 2019
to customers.

Under accrual, what is the amount of net purchases?

(5,450,000)
Emmyrelle Company provided the following selected accounts, cash receipts and
disbursements for the current year:
Notes receivable 150,000 100,000
Cash receipts for current year

Cash sales 500,000
Collections of accounts receivable, net of discounts
Of P40,000 1,800,000
Collections of notes receivable 80,000
Bank loan – one year, dated December 31 100,000
Cash disbursements for current year

Cash purchases 130,000
Payments on accounts payable, net of discounts
Of P20,000 1,500,000
Payments on notes payable 400,000
Insurance 220,000
Other expenses 650,000
Sales returns and allowances 50,000
Under accrual basis, what is the amount of gross sales for the current year?
(2,420,000)
Allowance for Doubtful Accounts: Jan. 1, balance 4,000, Dec. 31, balance 7,500,
un-collectible accounts written off during the year, 20,000.
Compute the bad debt expense for the year.
(23,500)
Question 22 1 / 1 point
Interest Receivable: Jan. 1 accrued, 3,000, Dec. 31 accrued, 2,100, earned for the year,
35,000.
Compute the collections of interest.

(35,900)
Rara Company paid P72,000 to renew an insurance policy for three years on March 1,
2018.
On March 31, 2019, the unadjusted trial balance showed P3,000 for prepaid insurance
and P72,000 for insurance expense.
What amount should be reported for prepaid insurance on March 31, 2019?
(70,000)
On July 1, 2019, Roxy Company obtained fire insurance at an annual premium of

P72,000 payable on July 1 of each year. The first premium payment was made July 1,
2019.
On October 1, 2019, the entity paid P24,000 for real estate taxes to cover the period
ending September 30, 2020.
On December 31, 2019, what amount should be reported as prepaid expenses?

(54,000)
Tara Company owns an office building and leases the offices under a variety of rental
agreements involving rent paid in advance monthly or annually.
Not all tenants make timely payments of their rent. During 2019, the entity received
P8,000,000 cash from tenants.
The statement of financial position contained the following data at year-end:

2018 2019
Rental receivable 960,000 1,240,000
Unearned rental income 3,200,000 2,400,000
Uncollectible rent written off 500,000
What amount of rental revenue should be reported for the current year?
(9,080,000)
Emmyrelle Company provided the following selected accounts, cash receipts and
disbursements for the current year:
Cash receipts for current year

Cash sales 500,000
Collections of accounts receivable, net of discounts
Of P40,000 1,800,000
Bank loan – one year, dated December 31 100,000
Cash disbursements for current year

Payments on accounts payable, net of discounts
Of P20,000 1,500,000
Payments on notes payable 400,000
Insurance 220,000
Under accrual basis, what is the amount of gross purchases for the current year?
(1,960,000)
Clay Company borrowed money under various loan agreements involving notes
discounted and notes requiring interest payments at maturity. During the year ended
December 31, 2019. The entity paid interest totaling P100,000.
The December 31 statement financial position included the following information:

2018 2019
Prepaid interest 23,500 18,000
Interest payable 45,000 53,500
What amount of interest expense should be reported in the income statement for the
current year?
(114,000)
Park Company reported that the professional fees expense account had a balance of
P820,000 on December 31, 2019, before considering year-end adjustments relating to
the following:
Consultants were hired for a special project at a total fee not to exceed P650,000.
The entity has recorded P550,000 of this fee based on billings for work performed in
2019.
The attorney’s letter requested by the auditors dated January 31, 2020 indicated that
legal fees of P60,000 were billed on January 15, 2020 for work performed in
November 2019, and unbilled fees for December 2019 were P70,000.
What amount should be reported for professional fees expense for the year ended
December 31, 2019?
(950,000)
2018 2019
to customers.

Under accrual, what is the amount of gross purchases?

(5,850,000)
Thrift Company reported that the unadjusted prepaid expense account on December
31, 2019 comprised the following:
An opening balance of P15,000 for a comprehensive insurance policy. The entity

had paid an annual premium of P30,000 on July 1, 2018.
A P32,000 annual insurance premium payment made July 1, 2019.
A P20,000 advance rental payment for a warehouse that was leased for one year
beginning January 1, 2019.
On December 31, 2019 what amount should be reported as prepaid expenses?

(36,000)
Doren Company reported that the compensation expense account had a balance of
P490,000 on December 31, 2019 before any appropriate year-end adjustment relating
to the following:
No salary accrual was made for the week of December 25-31, 2019. Salaries for this
period totaled P18,000 and were paid on January 5, 2020.
Bonus for 2019 was paid on January 31, 2020 in the total amount of P175,000.
What amount should be reported for compensation expense for 2019?

(683,000)
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ACCTG 105
MIDTERM - QUIZ 2 - CASH VS ACCRUAL
Tarzana Company reported total purchases of P3,200,000 in its accrual basis financial statement on December 31, 2019. Additional
information revealed the following;
Accounts Payable – 1/1/2019 P 900,000
Accounts Payable – 1/31/2019 1,250,000
Under cash basis of measuring revenues and expenses, how much is the total purchases for the year ended December 31, 2019?
Answer: 2,850,000
At September 1, 2019, the following existed in the records of Lauren Company:
Plant and Equipment P 8,600,000
Accumulated Depreciation 3,970,000
During the year ended September 30, 2019, plant with a written down value of P370,000 was sold P490,000. The plant had originally
cost P800,000. Plant purchased during the year cost P 1,800,000. It is the company’s policy to charge a full year’s depreciation in the
year of acquisition of an asset and none in the year of sale, using a rate of 10% on the straight-line basis.
What is the carrying value should appear in Lauren’s statement of financial position at September 30, 2019 for plant and equipment?
Answer: 5,100,000
The following information was obtained from the incomplete records of Tanker related to its operating expenses:
2018 2019
Total payments made 670,000
Total Operating Expenses 690,000
Prepaid Operating Expenses 120,000 ?
Accrued Operating Expenses 230,000 190,000
What is the balance of the Prepaid Operating Expenses accounts on December 31, 2019?
Answer: 60,000
Gasoline Company reported revenue of P3, 100,000 in its accrual basis income statement for the year ended December 31, 2019.
Additional information were as follows;
Accounts Receivable – 12/31/2018 P 700,000
Accounts Receivable – 12/31/ 2019 1,100,000
Under cash basis, how much should Gasoline report as revenue for 2019?
Answer: 2,700,000
At September 1, 2019, the following existed in the records of Lauren Company:
Plant and Equipment P 8,600,000
Accumulated Depreciation 3,970,000

During the year ended September 30, 2019, plant with a written down value of P370,000 was sold P490,000. The plant had originally
cost P800,000. Plant purchased during the year cost P 1,800,000. It is the company’s policy to charge a full year’s depreciation in the
year of acquisition of an asset and none in the year of sale, using a rate of 10% on the straight-line basis.
What is the accumulated depreciation should appear in Lauren’s statement of financial position at September 30, 2019 for plant
and equipment?
Answer: 4,500,000
Palace started operating a service proprietorship on April 1, 2019 with an initial cash investments of P120,000. The business
provided P38,400 of services in April and received full payment in May. The business incurred expenses of P18,000 in April which
paid in June. During May, Palace withdraw P6,000 against his capital account.
What was income for the two month ended May 31, 2019 under the accrual method?
Answer: 20,400
Palace started operating a service proprietorship on April 1, 2020 with an initial cash investment of P120,000. The business provided
P38,400 of services in April and received full payment in May. The business incurred expenses of P18,000 in April which were paid in
June. During May, Palace withdraw P6,000 against his capital account.
What was the income for the two months ended May 31, 2020 under Cash Basis?
Answer: 38,400
Percy Company is engaged in a small export business. The company maintain limited records. Most of the company's transactions
are summarized in a cash journal; non-cash transactions are recorded by making memo entries. The following are abstracted from
the company's records:
Accounts Receivable 370,000 increase
Notes Receivable 200,000 decrease
Accounts Payable 150,000 decrease
Notes Payable - Trade 200,000 increase
Notes Payable - Bank 300,000 increase
Sales Ret. (P50,000 was refunded) 80,000
Sales Discounts 20,000
Purchase Ret. (P30,000 was refunded) 80,000
Purchase Discounts 35,000
Accounts Written Off 60,000
Recovery of Accounts Written Off 18,000
Cash Sales 300,000
Cash Purchases 250,000

Collections from Customers 1,500,000
Cash Payments to Trade Creditors 1,200,000
What is the amount of Gross Purchases?
Answer: 1,585,000
Hardy Boys Corporation acquires copyright from authors, paying advance royalties in some cases and in others, paying royalties
within 30 days of year-end. Hardy Boys reported royalty expense of P 375,000 for the year ended December 31, 2019. The following
data are included in the corporation’s December 31, Balance Sheet:
2018 2019
Prepaid Royalties 60,000 50,000
Royalties Payable 75,000 90,000
Under the cash basis, what amount of royalty expense should be reported in 2019 profit or loss?
Answer: 350,000
Passion Corporation maintains its accounting records on the cash basis but restates its financial statements to the accrual method of
accounting. Passion had P600,000 in cash-basis pretax income for 2019. The following information pertains to Passion’s operations
for the year ended December 31, 2019 and 2018:
2019 2018
Accounts Receivable P 400,000 P 200,000
Under the accrual method, what amount of income before taxes should Passion reports in its December 31, 2019 profit or loss?
Answer: 950,000
Percy Company is engaged in a small export business. The company maintain limited records. Most of the company's transactions
are summarized in a cash journal; non-cash transactions are recorded by making memo entries. The following are abstracted from
the company's records:
Notes Receivable 200,000 decrease
Accounts Payable 150,000 decrease
Notes Payable - Trade 200,000 increase
Notes Payable - Bank 300,000 increase

Sales Ret. (P50,000 was refunded) 80,000
Purchase Ret. (P30,000 was refunded) 80,000
Recovery of Accounts Written Off 18,000
Cash Sales 300,000
Cash Purchases 250,000
Collections from Customers 1,500,000
Cash Payments to Trade Creditors 1,200,000
What is the amount of Gross Sales?
Answer: 2,062,000
Gasoline Company reported revenue of P3, 100,000 in its accrual basis income statement for the year ended December 31, 2019.
Additional information were as follows;
Accounts Receivable – 12/31/2018 P 700,000
Accounts Receivable – 12/31/ 2019 1,100,000
Under cash basis, how much should Gasoline report as revenue for 2019?
Answer: 2,700,000
Palace started operating a service proprietorship on April 1, 2019 with an initial cash investments of P120,000. The business
provided P38,400 of services in April and received full payment in May. The business incurred expenses of P18,000 in April which
paid in June. During May, Palace withdraw P6,000 against his capital account.
What was income for the two month ended May 31, 2019 under the cash method?
Answer: 38,400
Kerosene Company reported total purchases of P2,500,000 in its cash basis financial statement on December 31, 2019. Additional
information revealed the following;
Accounts Payable – 1/1/2019 P 600,000
Accounts Payable – 1/31/2019 800,000

Under accrual basis of measuring revenues and expenses, how much is the total purchases for the year ended December 31, 2019?
Answer: 2,700,000
Palace started operating a service proprietorship on April 1, 2020 with an initial cash investment of P120,000. The business provided
P38,400 of services in April and received full payment in May. The business incurred expenses of P18,000 in April which were paid in
June. During May, Palace withdraw P6,000 against his capital account.
What was the income for the two months ended May 31, 2020 under Accrual Basis?
Answer: 20,400
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ACCTG 105
MIDTERM EXAM
The balance sheet for December 31, 2020, December 31, 2019, and the income statement for the year ended December 31, 2020,
for Rocket Company follows;
Rocket Company
Balance Sheet
2020 2019
Assets
Cash 25,000 20,000
Accounts receivable, net 60,000 70,000
Inventory 80,000 100,000
Land 50,000 50,000
Building and equipment 130,000* 115,000
Accumulated depreciation (85,000) (70,000)
Total assets 260,000 285,000

Wages payable 5,000 3,000
Current notes payable 50,000** 60,000
Common stock 110,000*** 100,000
Retained earnings 61,000 84,000
Total liabilities and stockholders' equity 260,000 285,000
* During 2020 cash payments for building and equipment 15,000.

** During 2020 cash paid for retirement of notes payable 10,000.
*** During 2020 cash received from issuance of stock.
Rocket Company
Income Statement
Sales 500,000
Less expenses:
Cost of goods sold 330,000
Selling and administrative expenses 90,000
(includes depreciation of 15,000)
Interest expense 5,000
Income before taxes 75,000
Net income 45,000
Note: Cash dividends of 68,000 were paid during 2020.
Compute the net cash used in investing activities.

Answer: 15,000
Fixed costs that are traceable to a segment may become common if the segment is divided into smaller units.
Question options:
True
False
Compared to cash basis net income for the current year; an entities accrual basis net income increased when it
Question options:
Had lower accrued expenses at the end of the current year than at the beginning of year.
Sold used equipment for cash at a gain in the Current year.
Declared a cash dividend in the prior year that it paid in the current year.
Wrote off more accounts receivable than it reported as uncollectible accounts expense in the current year.
Jones Clothing Store presented the following statement of cash flows for the year ended December 31,2020.
Jones Clothing Store

Statement of Cash Flows
Cash received:
a. From sales to customers 200,000
b. Interest income 10,000
c. Loans from banks 50,000
d. From sale of property, plant, and equipment 100,000
e. From issuance of common stock 150,000
f. From issuance of bonds 100,000
Total cash received 610,000
Cash payments:
g. For dividends 20,000
h. For purchase of stock of another company 150,000
i. For purchase of equipment 200,000
j. For acquisition of inventory 80,000
k. To employees 60,000
Total cash payments 510,000
Net increase in cash 100,000
Compute the net cash used in investing activities.

Answer: 250,000
Francis Company had operating expenses of 20,000 and depreciation expenses of 4,000. Assuming no other transactions, what was
the cash paid for operating expenses?
Answer: 16,000
Contribution margin and segment margin mean the same same thing.
Question options:
True
False
Premium Company is engaged in a small export business; hence the company maintains limited records. Most of the company’s
transactions are summarized in a cash journal; non-cash transactions are recorded by making memo entries. The following balances
were taken from the company’s records:
December 1, 2019 December 31, 2019
Cash Received from Customers 2,100,000
Cash Paid to Creditors 1,400,000
Sales Returns & Allowances 10,000
Note Receivable – Trade 50,000 100,000
Purchase Returns 5,000
How much would be the gross purchases for the year?
Answer: 1,307,500
Which statement is correct concerning interim financial reporting?
I. PAS 34 mandates which entities are required to publish interim financial reports, how frequently, or how soon after the end of an
interim period.
II. Entities that provide interim financial reports in conformity with generally accepted accounting principles shall conform to the
recognition measurement and disclosure principles set out in the standard.
Question options:
II only
Neither I nor II
I only
Both I and II
Question 9 1.5 / 1.5 points

Olsen Company paid or collected during 2020 the following items:
Insurance premiums paid 10,400

Interest collected 33,900
Salaries paid 120,200
The following balances have been excerpted from Olsen's balance sheets:
Dec. 31, 2020 Dec. 31, 2019
Interest receivable 3,700 2,900
Salaries payable 12,300 10,600
The insurance expense on the income statement for 2020 was -

Answer: 10,700
Premium Company is engaged in a small export business; hence the company maintains limited records. Most of the company’s
transactions are summarized in a cash journal; non-cash transactions are recorded by making memo entries. The following balances
were taken from the company’s records:
Cash Received from Customers 2,100,000
Cash Paid to Creditors 1,400,000
Sales Returns & Allowances 10,000
Note Receivable – Trade 50,000 100,000
Purchase Returns 5,000
How much would be the gross sales for the year?

Answer: 2,119,000
Rocket Company
Balance Sheet
2020 2019
Assets
Cash 25,000 20,000
Inventory 80,000 100,000
Land 50,000 50,000
Total assets 260,000 285,000

Common stock 110,000*** 100,000

Rocket Company
Income Statement
Sales 500,000
Less expenses:
Net income 45,000
Compute the net cash used in financing activities.

Answer: 68,000
During 2019, Kew Company, a service organizations, had P200,000 in cash sales and
P3,000,000 in credit sales.
The accounts receivable balances were P400,000 and P485,000 on December 31,
2018 and 2019 respectively.
If the entity desires to prepare a cash basis income statement, what amount should be
reported as sales for the current year?
Answer: 3,115,000
Which is incorrect concerning presentation of comparative interim financial statements?
Question options:
Statement of changes in equity cumulatively for the current financial year to date with comparative statement for the immediately
preceding year.
Statement cash flows cumulatively for the current financial year to date with comparative statement for the comparable year to
date period of the immediately preceding year.
Income statements for the current interim period and cumulatively for the current financial year to date with comparative
income statement for the immediately preceding year.
Statement of financial position as of the end of the current interim period and comparative statement of the current interim period
and comparative statement of financial position as of the end of the immediately preceding fiscal year.
The salary paid to a store manager is a traceable fixed expense of the store.
Question options:
True
False
The statement of cash flows should be reviewed for several time periods in order to determine the major sources of cash and the
major uses of cash.
Question options:
True
False

Dec. 31, 2020 Dec. 31, 2019
The interest revenue on the income statement for 2020 was -

Answer: 34,700
Segment statements for internal use should be prepared in the contribution format.
Question options:
True
False
If ending balance of accounts receivable exceeds the -
Question options:
No cash was collected during the period.
Net income for the period under accrual basis is less than the amount of cash basis income.
Cash collections during the period exceed the amount of revenue earned.
Cash collections. during the year are less than the amount of revenue earned.
Which of the following is the focus for the statement of cash flows?
Question options:
cash
cash and cash equivalents
current assets
working capital
The following information is available concerning the accounts of Franz Company:
Accounts payable, January 1, 2020 18,000

Cash payments on account during 2020 58,000
Purchase discounts taken during 2020 on 2020 purchases 1,200
Accounts payable, December 31, 2020 10,000
Assuming the company records purchases at the gross amounts, the total purchases for 2020 would be -
Answer: 51,200
The operating cash flow/current maturities of long-term debt and current notes payable is a ratio that indicates long-term, debt-
paying ability.
Question options:
True
False
Cash flow per share is a better indication of a firm's ability to make capital expenditure decisions and pay dividends than is earnings
per share
Question options:
True
False
Which of the following is not a quantitative threshold for defining a segment’s materiality?
Question options:
Segment residual profit after the cost of equity is 10% or more of the combined residual profit of all operating segments.
The segment absolute value of its profit or loss is 10% or more of the greater of (1) the combined reported profit of all operating
segments that reported a profit or (2) the absolute value of the combined reported loss of all operating segments that reported a
loss.
Segment assets are 10% or more of the combined assets of all operating segments.
Segment reported revenue, including intersegment revenues, is 10% or more of the combined revenue of all operating segments.
With the indirect method of presenting cash from operations, the income statement is essentially presented on a cash receipts and
cash payments basis.
Question options:
True
False
Zeta Company reported sales revenue of P4,600,000 in the income statement for the
year ended December 31, 2019
The entity wrote off uncollectible accounts totaling P50,000 during the current year.
2018 2019
Allowance for uncollectible accounts 60,000 110,000
Advances from customers 200,000 300,000
Under cash basis, what amount should be reported as sales for the current year?
Answer: 4,400,000
Tim Company had sales of 30,000, increase in accounts payable of 5,000, decrease in accounts receivable of 1,000, increase in
inventories of 4,000, and depreciation expense of 4,000.
What was the cash collected from customers?

Answer: 31,000
Which statement regarding accrual versus cash basis of accounting is true?
Question options:
The cash basis requires a complete set of records.
The cash basis is appropriate for some smaller entities
Application of the cash basis results in an income statement reporting revenue and expenses.
The cash basis is less useful in predicting the timing and amounts of future cash flows.
Which of the following is not a typical cash flow under investing activities?
Question options:
cash inflow from receipt of loans

cash outflow for loans to other entities
cash inflow from sale of property, plant, and equipment
cash outflow for payment of amounts borrowed
Under the accrual basis of accounting, cash receipts and disbursements may
Question options:
Precede, coincide with, or follow the period in which revenue and expenses are recognized.
Only coincide with the period in which revenue and expenses are recognized.
Precede revenue or coincide and with expenses but never are recognized follow the period in which revenue and expenses are
recognized.
Coincide with or follow but never precede the period in which revenue and expense are recognized.

Cash received:
Cash payments:
Compute the net cash provided by financing activities.

Answer: 280,000

Dec. 31, 2020 Dec. 31, 2019
The salary expense on the income statement for 2020 was -

Answer: 121,900
When converting from cash basis to accrual basis of accounting, which of the following adjustments should be made to cash paid for
operating expenses to determine accrual basis operating expenses?
Question options:
Subtract ending prepaid expense
Add beginning accrued liabilities
Subtract interest expense
Subtract beginning prepaid expense
When converting from cash basis to accrual basis of accounting, which of the following adjustments should be made to cash
collections from customers to determine accrual basis service revenue?
Question options:
Add cash sales
Subtract ending accounts receivable
Subtract beginning unearned service revenue
Add ending accounts receivable

The following information is available for Carr Company:
Payment for goods during 2020 92,000

Accounts payable, January 1, 2020 9,000
Inventory, January 1, 2020 10,400
Accounts payable, December 31, 2020 7,200
Inventory, December 31, 2020 9,700
Cost of goods sold for 2020 is -

Answer: 90,900
Working capital is considered to be one of the prime indicators of liquidity.
Question options:
True
False
Assuming that a segment has both variable expenses and traceable fixed expenses, an increase in sales should increase profits by an
amount equal to the sales times the segment margin ration.
Question options:
True
False
The retirement of debt by the issuance of common stock should be presented in a statement of cash flows in which of the following
sections?
Question options:
supplemental schedule to reconcile net income to net cash provided by operations
cash flows from investing activities
cash flows from financing activities
supplemental schedule of noncash investing and financing activities

Cash received:
Cash payments:
Compute the net cash provided by operating activities.

Answer: 120,000
Rocket Company
Balance Sheet
2020 2019
Assets
Cash 25,000 20,000
Inventory 80,000 100,000
Land 50,000 50,000
Total assets 260,000 285,000

Common stock 110,000*** 100,000

Rocket Company
Income Statement
Sales 500,000
Less expenses:
Net income 45,000
Compute the net cash provided by operating activities.

Answer: 68,000
Conroy Company had sales of 50,000, increase in accounts payable of 4,000, decrease in accounts receivable of 3,000, tax expense
of 5,000, and an increase in taxes payable of 1,000.
What was the cash outflow for taxes?

Answer: 4,000
---------------------------------------------------------------------------------------------------------------------------------------
FINALS
ACCTG 105
FINALS - ACTIVITY 1 - SINGLE ENTRY
Question 1
Royal Company provided the following data for the current year:
Sales 10,000,000
Cost of goods sold 5,300,000
Operating Expenses 3,800,000
Additional data;
Increase in prepaid expenses 300,000
Increase in accounts payable 150,000
Increase in inventory 400,000
Increase in accounts receivable 25,000
Under cash basis, what amount should be reported as purchases for the current year?
Answer: 5,550,000
Question 2
Covid Company provided the following data for the current year:
Cash Sales 2,500,000
Sales on Account 850,000
Cash Purchases 1,700,000
Purchases on Account 400,000
Payment of Expenses 750,000
Increase in Accounts Receivable 50,000
Increase in accounts Payable 50,000
Inventory - January 1 500,000
Inventory - December 31 600,000
Accrued Expenses - December 31 20,000
Prepaid Expenses - December 31 30,000
Equipment - December 31 1,000,000
Collection of Interest 40,000
Increase in Interest Receivable 10,000
On July 1 of the current year, an equipment was acquired for P200,000. The terms are P50,000 down and the balance to
be paid after one year.
The useful life of the equipment is 10 years with no residual value.
What is the amount of sales under cash basis?
Answer: 3,300,000
Question 3
What is the amount of cost of goods sold under cash basis?
Answer: 1,950,000
Question 4
Marimar Company used the accrual basis of accounting. The expenses for 2020 included depreciation of P200,000 and
amortization of P100,000.
2020
Decrease in accounts receivable 500,000
Decrease in interest receivable 30,000
Decrease in inventories 1,000,000
Increase in prepaid insurance 50,000
Increase in accounts payable 500,000
Increase in accrued expenses 200,000
Net sales 25,000,000
Interest income 150,000
Cost of goods sold 15,000,000
Insurance expense 1,000,000
Other expenses 2,000,000
What total amount was paid for expenses during the current year?
Answer: 2,550,000
Question 5
Wee Company provided the following information for the current year:
Sales Returns and Allowances 100,000
Credit Sales 3,000,000
Sales discounts 150,000
Customers owed P1,000,000 on January 1 and P750,000 on December 31. The entity used direct write off method for
bad debts. No bad debts were recorded in the current year.
Under cash basis of accounting, what amount of sales revenue should be reported for the current year?
Answer: 5,000,000
Question 6
What is the amount of purchases under cash basis?
Answer: 2,050,000
Question 7
At the beginning of current year, San Jose purchased the net assets of UC Laundry, a sole proprietorship, for P3,500,000
and commenced operations of Salud Laundry, a sole proprietorship. The assets had a carrying amount of P3,750,000 and
a market value of P3,600,000.
In Salud Laundry's cash basis financial statements for the current year, the entity reported revenue in excess of expenses
of P600,000. San Jose's drawing during the current year totaled P200,000.
In Salud Laundry financial statements, what amount should be reported a Capital - San Jose on December 31?
Answer: 3,900,000
Question 8
What is the amount of depreciation under cash basis?
Answer: 90,000
Question 9
Lalaine Company experienced the following changes in selected accounts for the current year:
Accrual sales 5,000,000
Decrease in accounts receivable 300,000
Increase in advances from customers 100,000
What total amount of cash was received from customers during the year?
Answer: 5,400,000
Question 10
What is the amount of net income under cash basis?
Answer: 550,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------
ACCTG 105
FINALS - ASSIGNMENT 1 - CORRECTION OF ERRORS

One Two Three Company had determined the 2019 and 2020 net income to be P4,000,000 and P5,000,000 respectively.
In a first time audit of the financial statements, the following errors are discovered:
Merchandise inventory was incorrectly determined P 50,000 understated for 2019 and P150,000 understatement for 2020.
Revenue received in advance in 2019 of P300,000 was credited to a revenue account when received. Of the total, P50,000 was
earned in 2019, P200,000 and the remainder will be earned in 2021.
P400,000 loss on sale of plant assets in 2020 was erroneously debited to retained earnings.
What is the corrected net income in 2019?

Answer: 3,800,000
During 2020, Paul Company discovered that the ending inventories reported on its financial statements were incorrect by the
following amounts:
2018 60,000 understated
2019 75,000 overstated
Paul uses the periodic inventory system to ascertain year-end quantities that are converted to peso amounts using the FIFO cost
method.
Prior to any adjustments for these errors and ignoring income taxes, Paul’s retained earnings at January 1, 2020, would be
overstated by?
Answer: 75,000
Tack, Inc. reported a retained earnings balance of 150,000 at December 31, 2019. In June 2020, Tack discovered that merchandise
costing 40,000 had not been included in inventory in its 2019 financial statements. Tack has a 30% tax rate.
What amount should Tack report as adjusted beginning retained earnings in its statement of retained earnings at December 31,
2020?
Answer: 178,000
Barley Company is in the process of adjusting the books at the end of 2019. The accounting records revealed the following
information:
The entity failed to accrue sales commissions at the end of 2017 and 2018 as follows:
2017 220,000
2018 140,000
In each case, the sales commissions were paid and expensed in January of the following year.
Errors in ending inventory for the last three years were discovered to be as follows:
The unadjusted retained earnings balance on January 1, 2019 is P12,600,000 and the unadjusted net income for 2019 was
P3,000,000. Dividends of P2,750,000 were declared during 2019.
What is the adjusted bet income for 2019?
Answer: 3,550,000
IMAX Company provided the following information:
2020 2019
Revenue 1,350,000 1,000,000
Expenses 980,000 650,000
Net Income 370,000 350,000
Total Assets 1,570,000 1,050,000
Total Liabilities 500,000 350,000
Total Owner's Equity 1,070,000 700,000
The entity failed to record P150,000 of accrued wages at the end of 2019. The wages were recorded and paid in January 2020. The
accrual accruals were made on December 31, 2020.
Answer: 520,000
2020 2019
Revenue 1,350,000 1,000,000
Expenses 980,000 650,000
Net Income 370,000 350,000
Total Assets 1,570,000 1,050,000
Answer: 200,000
Barley Company is in the process of adjusting the books at the end of 2019. The accounting records revealed the following
information:
The entity failed to accrue sales commissions at the end of 2017 and 2018 as follows:
2017 220,000
2018 140,000
In each case, the sales commissions were paid and expensed in January of the following year.
Errors in ending inventory for the last three years were discovered to be as follows:

The unadjusted retained earnings balance on January 1, 2019 is P12,600,000 and the unadjusted net income for 2019 was
P3,000,000. Dividends of P2,750,000 were declared during 2019.
What is the adjusted balance of retained earnings on December 31, 2019?
Answer: 13,800,000
Nagmamagaling Company reported the following net income:
2019 5,000,000
2020 5,500,000
In determination of the net income, the following items are ignored;
2019 2020
Prepaid Insurance 100,000 50,000
Accrued Salaries 200,000 150,000
Unearned Rental Income 450,000 250,000
Accrued Interest Receivable 300,000 450,000
What is the corrected net income for 2019?
Answer: 4,750,000
2020 2019
Revenue 1,350,000 1,000,000
Expenses 980,000 650,000
Net Income 370,000 350,000
Total Assets 1,570,000 1,050,000
What is the amount of total liabilities on December 31, 2019?
Answer: 500,000
Conn Co. reported a retained earnings balance of 400,000 at December 31, 2019. In August 2020, Conn determined that insurance
premiums of 60,000 for the three-year period beginning January 1, 2019, had been paid and fully expensed in 2019. Conn has a 30%
income tax rate.
What amount should Conn report as adjusted beginning retained earnings in its 2010 statement of retained earnings?
Answer: 428,000
Flat One Company showed income before income tax of P6,500,000 on December 31, 2020. The year-end verification of the
transactions revealed the following errors:
P1,000,000 worth of merchandise was purchased in 2020 and included in the purchases. However, the inventory was recorded in
2016 upon receiving.
A merchandise shipment valued at P1,500,000 was properly recorded in year end inventory. However the purchases was omitted in
the record.
Advertising for 2020 amounting to P500,000 was recorded when payment was made in January 2021.
Rental of P300,000 applicable for six months was received on November 1, 2020. The entire amount was reported as unearned
income in 2020.
Insurance premium covering the period from July 1, 2020 to July 1, 2021 amounting to P200,000 was paid and recorded as prepaid
on July 1, 2020. The entity did not make any adjustments at the end of the year.
Assume tax rate is 30% in 2020.
What is the corrected income after taxes for 2020?
Answer: 3,850,000
One Two Three Company had determined the 2019 and 2020 net income to be P4,000,000 and P5,000,000 respectively.
In a first time audit of the financial statements, the following errors are discovered:
Merchandise inventory was incorrectly determined P 50,000 understated for 2019 and P150,000 understatement for 2020.
Revenue received in advance in 2019 of P300,000 was credited to a revenue account when received. Of the total, P50,000 was
earned in 2019, P200,000 and the remainder will be earned in 2021.
P400,000 loss on sale of plant assets in 2020 was erroneously debited to retained earnings.
Answer: 4,900,000
2020 2019
Revenue 1,350,000 1,000,000
Expenses 980,000 650,000
Net Income 370,000 350,000

Total Assets 1,570,000 1,050,000
What is the amount of owner's equity on December 31, 2020?
Answer: 1,070,000
Loeb Corp. frequently borrows from the bank in order to maintain sufficient operating cash. The following loans were at a 12%
interest rate, with interest payable at maturity. Loeb repaid each loan on its scheduled maturity date.
Date of loan Amount Maturity date Term of loan
11/1/2019 5,000 10/31/2020 1 year
2/1/2020 15,000 7/31/2020 6 months
5/1/2020 8,000 1/31/2021 9 months
Loeb records interest expense when the loans are repaid. As a result, interest expense of 1,500 was recorded in 2020.
If no correction is made, by what amount would 2020 interest expense be understated?
Answer: 540
Nagmamagaling Company reported the following net income:
2019 5,000,000
2020 5,500,000
In determination of the net income, the following items are ignored;
2019 2020
Prepaid Insurance 100,000 50,000
Accrued Salaries 200,000 150,000
Unearned Rental Income 450,000 250,000
Accrued Interest Receivable 300,000 450,000
What is the corrected net income for 2020?
Answer: 5,850,000
On January 2, 2020, Air, Inc. agreed to pay its former president 300,000 under a deferred compensation arrangement. Air should
have recorded this expense in 2019 but did not do so. Air’s reported income tax expense would have been 70,000 lower in 2019 had
it properly accrued this deferred compensation.
In its December 31, 2020 financial statements, Air should adjust the beginning balance of its retained earnings by a debit of ?
Answer: 230,000
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ACCTG 105
FINALS - QUIZ 1
For counterbalancing errors, restatement of comparative financial statements is not necessary even if a correcting entry is not
required.
False
The income statement of Dolan Corporation for 2017 included the following items:
Interest revenue 65,500

Salaries expense 85,000
Insurance expense 7,600
The following balances have been excerpted from Dolan Corporation's balance sheets:

Accrued interest receivable 9,100 7,500
The cash paid for salaries during 2017 was

(80,300)
The following information is available for Carr Company:
Payment for goods during 2017 92,000

Decrease in Accounts Payable 1,800
Decrease in Inventory 700
Cost of goods sold for 2017 is -

(90,900)
The December 31 year-end financial statements of S Company contained the following errors:
Dec. 31, 2019 Dec.31, 2020
Ending inventory P70,000 understated P40,000 overstated
Depreciation expense 11,500 understated ---------
An insurance premium of P750,000 was prepaid in 2019 covering the years 2019, 2020, and 2021. The entire amount was charged
to expense in 2019. In addition, On December 31, 2020, a fully depreciated machinery was sold for P100,000 cash, but the sale was
not recorded until 2021. There were no other errors during 2019 and 2020, and no corrections have been made for any errors.
Ignore income tax effects.
What is the total under-stament of the errors on S Company’s 2020 working capital?
(310,000)
Ron-Ron Storage underwent a restructuring in 2016. The company conducted a thorough internal audit, during which the following
facts were discovered. The audit occurred during 2016 before any adjusting entries or closing entries are prepared.
a. Additional printers were acquired at the beginning of 2014 and added to the company’s office network. The P9,000 cost of the
printers was inadvertently recorded as maintenance expense. The printers have five-year useful lives and no material salvage value.
This class of equipment is depreciated by the straight-line method.
b. Three weeks prior to the audit, the company paid P51,000 for storage boxes and
recorded the expenditure as office supplies on hand. The error was discovered a week
later.
c. On December 31, 2015, inventory was understated by P112,000 due to a mistake in the physical inventory count. The company
uses the periodic inventory system.
d. Three years earlier, the company recorded a 3% stock dividend (4,000 common shares,P1) as follows:
Retained earnings 4,000

Common stock 4,000
The shares had a market price at the time of P10 per share.
e. At the end of 2015, the company failed to accrue interest expense that accrued during the last four months of 2005 on bonds
payable. The bonds which were issued at face value mature in 2020. The following entry was recorded on March 1, 2016, when the
semi-annual interest was paid:

Cash 180,000
f. A three-year liability insurance policy was purchased at the beginning of 2015 for
P216,000. The full premium was debited to insurance expense at the time.
Net income of 2014 is understated by :

(7,200)

The interest revenue on the income statement for 2017 was

(34,700)
Friend Co. began operations on January 1, 2017. Financial statements for 2017 and 2018 contained the following errors:
Dec. 31, 2017 Dec. 31, 2018
Ending inventory 132,000 too high 156,000 too low
Depreciation expense 84,000 too high —
Insurance expense 60,000 too low 60,000 too high
Prepaid insurance 60,000 too high
In addition, on December 31, 2018 fully depreciated equipment was sold for 28,800, but the sale was not recorded until 2019. No
corrections have been made for any of the errors. Ignore income tax considerations.
The total effect of the errors on the amount of Friend's working capital at December 31,2018 is understated by -
(184,800)
Dec. 31, 2019 Dec.31, 2020
What is the total understatement of the errors on S Company’s 2020 net income?
(0)
later.

Common stock 4,000

Cash 180,000
Net income of 2015 is understated by :

(134,200)
later.

Common stock 4,000

Cash 180,000
Accrued interest on Bonds Payable is -

(120,000)
The accrued interest on a 12%, 60-day note of a customer dated December 1, 2016 with a face value of P100,000 was not taken up
as of December 31, 2014. The collection of the note, which matured on January 31, 2017, was recorded as
Cash 102,000
Notes receivable 100,000
Interest Income 2,000
The error was discovered after collection. The correcting entry would require a -
Correct Answer
P1,000 debit to interest income
P2,000 debit to accrued interest receivable
P2,000 credit to interest income
P2,000 debit to cash

The insurance expense on the income statement for 2017 was
(10,700)
Counterbalancing errors are those that will be offset and that take longer than two periods to correct themselves.
False
Dec. 31, 2017 Dec. 31, 2018
Prepaid insurance 60,000 too high —
The total effect of the errors on Friend's 2018 net income is understated by -
(376,800)
A return of merchandise amounting to P4,500 which was previously purchased on
account was recorded as

Purchases 5,400
If the error had been discovered when the nominal accounts were still open, the
correcting entry would require a -
P900 credit to purchases
Correct Answer
P900 credit to accounts payable
P900 debit to purchase return
P900 debit to accounts payable
later.

Common stock 4,000

Cash 180,000
Net income of 2016 is overstated by :

(185,800)
Companies must make correcting entries for non-counterbalancing errors, even if they have closed the prior year’s books.
True
Lane Corporation has an incentive commission plan for its salesmen, entitling them to an additional sales commission when actual
quarterly sales exceed budgeted estimates. An analysis of the account "incentive commission expense" for the year ended
December 31,2017, follows:
Amount For Quarter Ended Date Paid
40,000 December 31, 2016 January 23, 2017
36,000 March 31, 2017 April 24, 2017
39,000 June 30, 2017 July 19, 2017
43,000 September 30, 2017 October 22, 2017
The incentive commission for the quarter ended December 31, 2017, was 42,000. This
amount was recorded and paid in January 2018. What amount should Lane report as
incentive commission expense for 2017?
(160,000)
Under the periodic inventory system, the ending inventory of P65,000 was erroneously
recorded as P56,000. The error had been discovered when all nominal and temporary
accounts were already closed to the real account. The correcting entry would require a -
Correct Answer
Credit to cost of sale
Debit to income summary account
Credit to owner’s capital
Debit to capital account
Collection of notes receivable of P50,000 plus interest of P500 was recorded as debit to
cash of P50,500 and notes receivable of P50,500. This error will
Understate the liability by P500
Overstate the expenses by P500

Understate assets by P500 and understate revenue by P500
Correct Answer
Understate revenue by P500


The cash paid for insurance premiums during 2017 was
(7,200)
The following information is available concerning the accounts of Franz Company:
Cash payments on account during 2017 58,000

Purchase discounts taken during 2017 on 2017 purchases 1,200
Decrease in Accounts Payable 8,000
Assuming the company records purchases at the gross amounts, the total purchases for 2017 would be -
(51,200)
In the middle of the year, an entity paid for insurance premiums for the current year and debited the amount to prepaid insurance.
At the year-end, the bookkeeper forgot to record the amount expired. In the financial statements prepared at year-end, the
omission
Overstates liabilities
Understates assets
Correct Answer
Overstates owner’s equity
Understates net income
The beginning accumulated depreciation per record was P100,000. During the year, the
firm sold one of its machines recorded as follows:
Cash 270,000
Accumulated depreciation - machine 30,000
Machine 300,000
If the actual cash proceeds is P300,000, the correcting entry would be:
Cash 300,000
Machine 270,000
Gain on sale of machine 30,000
Correct Answer
Accumulated depreciation - machine 30,000
Cash 300,000
Machine 300,000
Cash 30,000
Accounting errors include changes in estimates that occur because a company acquires more experience, or as it obtains additional
information.
False
Dec. 31, 2017 Dec. 31, 2018
Prepaid insurance 60,000 too high
The total effect of the errors on the balance of Friend's retained earnings at December 31,2018 is understated by -
(268,800)
The ending inventory for an entity was overstated in 2019. The overstatement will cause the entity’s
Retained earnings to be understated in the 2019 statement of financial position
Cost of goods sold to be understated in the 2020 income statement
Correct Answer
Cost of goods sold to be understated in the 2019 income statement.
2020 statement of financial position not be misstated
Errors in financial statements result from mathematical mistakes or oversight or misuse of facts that existed when preparing the
financial statements.
True
A collection of P5,000 notes receivable, plus P500 interest income was recorded as debit
to cash P5,500 and credit to notes receivable P5,500. The error had been discovered
when nominal accounts were still open. The correcting entry would require a
P500 debit to accounts receivable
P500 credit to cash

P500 debit to cash.
Correct Answer
P500 credit to interest income

The salary expense on the income statement for 2017 was

(121,900)
Accounts payable of P32,000 was paid and erroneously recorded as debit to accounts
payable and credit to cash for P23,000. The working capital
Is understated by P23,000
Is understated by P 9,000
Correct Answer
Is overstated by P9,000
Has no effect
Balance sheet errors affect only the presentation of an asset or liability account.
True
Counterbalancing errors do not include
an overstatement of unearned revenue.
Correct Answer
errors that correct themselves in three years.
an understatement of purchases.
errors that correct themselves in two years.
An example of a correction of an error in previously issued financial statements is a change -
in the service life of plant assets, based on changes in the economic environment.
in the tax assessment related to a prior period.
Correct Answer
from the cash basis of accounting to the accrual basis of accounting.
from the FIFO method of inventory valuation to the LIFO method.
Dec. 31, 2019 Dec.31, 2020
What is the total under-statement of the errors on S Company’s December 31, 2020 financial position?
(298,500)
If at end of the period an entity erroneously excluded some goods from its ending inventory and also erroneously did not record the
purchase of these goods in its accounting records, these errors would cause
The ending inventory, cost of goods sold, and retained earnings to be understated
No effect on net income, working capital, and retained earnings.
The ending inventory, cost of goods available for sale and retained earnings to be understated
Correct Answer
Cost of goods available for sale, cost of goods sold and net income to be understated


The cash received for interest during 2017 was -
(63,900)
If, at the end of a period, a company erroneously excluded some goods from its ending inventory and also erroneously did not
record the purchase of these goods in its accounting records, these errors would cause
Correct Answer
no effect on net income, working capital, and retained earnings.
the ending inventory, cost of goods sold, and retained earnings to be understated.
cost of goods sold and net income to be understated.
the ending inventory and retained earnings to be understated.
Handy Company purchased equipment that cost 750,000 on January 1, 2016. The entire cost was recorded as an expense. The
equipment had a nine-year life and a 30,000 residual value.
Handy uses the straight-line method to account for depreciation expense. The error was
discovered on December 10, 2018. Handy is subject to a 40 % tax rate.
Handy’s net income for the year ended December 31, 2016, was understated by -
(402,000)
Companies record corrections of errors from prior periods as an adjustment to the beginning balance of retained earnings in the
current period.
Correct Answer
True
False
Handy Company purchased equipment that cost 750,000 on January 1, 2016. The entire cost was recorded as an expense. The
equipment had a nine-year life and a 30,000 residual value.
Handy uses the straight-line method to account for depreciation expense. The error was
discovered on December 10, 2018. Handy is subject to a 40 % tax rate.
Before the correction was made and before the books were closed on December 31,
2018, retained earnings was understated by -
(354,000)
Big-Mouth Frog Corporation had revenues of 200,000, expenses of 120,000, and
dividends of 30,000.
When Income Summary is closed to Retained Earnings, the amount

of the credit to Retained Earnings is a
(80,000)
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ACCTG 105
FINALS - ACTIVITY 2
Question 1 (1 point)
Saved
Other comprehensive income arises from all of the following, except
Question 1 options:
The ineffective portion of gains and losses on hedging instruments in a
cash flow hedge
Changes in revaluation surplus for PPE and intangibles under the revaluation
model
Remeasurements arising from defined benefit plans
Gains and losses arising from translating the financial statements of a foreign
operation
Saved
An increase in the Inventory account of a company from 10,000 at the
beginning of the year to 15,000 at the end of the year would be shown on
the company's statement of cash flows prepared under the indirect method
as:
Question 2 options:
a deduction from net income of $10,000 in order to arrive at cash flows from
operating activities.
an addition to net income of 5,000 in order to arrive at cash flows from operating
activities.
an addition to net income of $15,000 in order to arrive at cash flows from operating
activities
a deduction from net income of 5,000 in order to arrive at cash flows from operating
activities.
Saved
Which of the following is not a retrospective-type accounting change?
Question 3 options:
LIFO method to the FIFO method for inventory valuation

Sum-of-the-years'-digits method to the straight-line method
Completed-contract method to the percentage-of-completion method for long-term

contracts
"Full cost" method to another method in the extractive industry
Saved
XYZ Inc. decided to extend its reporting period from a year (12-month period) to
a 15-month period. Which of the following is not required under PAS 1 in case of
change in reporting period?
Question 4 options:
. XYZ Inc. should disclose that comparative amounts used in the financial
statements are not entirely comparable.
XYZ Inc. should change the reporting period only if other similar entities
in the geographical area in which it generally operates have done so in
he current year: its financial statements would not be comparable to
others.
. XYZ Inc. should disclose the reason for using a longer period than a period of
12 months
All of the above are required
Saved
In a single statement of comprehensive income, profit is equal to the total
comprehensive income
Question 5 options:
Only if an entity has no item of other comprehensive income
Only if there are no reclassification adjustments
Only if expenses are classified by nature
Always
Saved
Under PAS 1, assets in the statement of financial position are broadly classified
into -
Question 6 options:
Depreciable and non-depreciable
Tangible and intangible
Current and non-current
Monetary and non-monetary
Saved
Which of the following is incorrect regarding fair presentation of financial
statements?
Question 7 options:
The application of PFRSs, with additional disclosure when necessary, is
presumed to result in financial statements that achieve a fair presentation.
In virtually all circumstances, an entity achieves a fair presentation by
compliance with applicable PFRSs.
Fair presentation requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the definitions
and recognition criteria for assets, liabilities, income and expenses set out in
the Framework.
Management cannot depart from a PFRS requirement even if
compliance with the requirement in question would be so misleading
that it would conflict with the objective of financial statements.
Saved
Which of the following would be classified as a Financing Activity on the
statement of cash flows?
Question 8 options:
Dividends received on investments in another company's common stock
Interest paid on bonds issued by the reporting company
Interest received on investments in another company's bonds.
Dividends paid to shareholders of the company on the company's common stock.
Question 9 (1 point) WRONG
Saved
When an entity BREACHES an undertaking under a long-term loan agreement
with the effect that the liability becomes payable on demand, the liability is
classified as
Question 9 options:
Non- current liability, if the refinancing is not at the discretion of the entity
owing the debt
Non- current liability, if the refinancing is at the discretion of the entity
owing the debt
Current, only if the lender demands immediate payment as a consequence of
the breach
Current, even if the lender has agreed not to demand payment as a
consequence of the breach
Saved
A statement of financial position as at the beginning of earliest comparative
period should be prepared by an entity in any following circumstances except
Question 10 options:
When an entity changes any of its estimates used in accounting
When an entity reclassifies items in the financial position
When an entity applies an accounting policy retrospectively
When an entity makes a retrospective restatement of items in the financial
statements
Saved
Which of the basic financial statements is not prepared using the accrual basis of
accounting?
None
Statement of Comprehensive Income
Saved
Under the indirect method of determining net cash provided by operating
activities, which of the following would be recorded as a deduction from net
income?
A decrease in accounts payable
An increase in salaries payable.
An increase in deferred tax liability.
A decrease in accounts receivable.
Saved
What is the purpose of information presented in notes to the financial
statements?
To correct improper presentation in the financial statements

To provide recognition to the financial statements
To provide disclosures required by generally accepted accounting

principles
To present management’s responses to auditor comments
Saved
Which of the following describes a change in reporting entity?
Changing the companies included in combined financial statements.
A company acquires a subsidiary that is to be accounted for as a purchase.
A manufacturing company expands its market from regional to nationwide.
A company divests itself of a European branch sales office.
Saved
The REFINANCING (rolling over) of a currently maturing long-term debt of an
entity completed after the balance sheet date but before the FS are authorized
for issue requires that such debt be classifies as a
Non- current liability, if the refinancing is not at the discretion of the entity
owing the debt
Current liability, the discretion of the entity to refinance the debt
notwithstanding
Current liability, if the refinancing is at the discretion of the entity owing the
debt
Non- current liability, if the refinancing is at the discretion of the entity
owing the debt
Saved
The presence of “cost of sales” account in the income statement signifies that an
entity classifies expenses according to
Nature
Amounts
Function
Maturity
Saved
All of the following is required to be disclosed by the entity in the notes to the
financial statements. Which is the exception?
The analysis of expenses either by the nature or by function
A description of the nature of the entity’s operation and its principal activities
The name of the parent and the ultimate parent of the group
If it is a limited life entity, information regarding the length of its life
Saved
Which of the following is accounted for as a change in accounting principle?
A change in inventory valuation from average cost to FIFO.
A change in the estimated useful life of plant assets.
A change from expensing immaterial expenditures to deferring and amortizing them as

they become material.
A change from the cash basis of accounting to the accrual basis of accounting.
Saved
Accounting changes are often made and the monetary impact is reflected in
the financial
statements of a company even though, in theory, this may be a violation of

the accounting
concept of
materiality.
consistency.
objectivity.
conservatism.
Saved
Which item is not a current liability?
Trade accounts payable
Stock dividend distributable
The currently maturing portion of long term debt
Unearned revenue
Saved
An entity presents an analysis of expenses using a classification based on:
The function of expenses
. Either the nature of expenses or the function of expenses within the entity,
whichever the entity would prefer to present.
Either the nature of expenses or the function of expenses within the
entity, whichever provides information that is reliable and more
relevant
The nature of expenses
Saved
Which statements is correct concerning presentation of information of the face of
the statement of Financial Position?
I. Additional line items, headings and subtotals shall be presented on the
face of the Statement of Financial Position when such presentation is
relevant to an understanding of the entity’s financial position
II. The standard does not prescribe the order or format in which items are not
to be presented
Both I and II
I only
Neither I and II
II only
Saved
Which of the following terms cannot be used to describe a line item in the
statement of comprehensive income?
Profit before tax
Gross profit
Revenue
Extraordinary item
Saved
A characteristic of the notes to the financial statements is that:
They describe accounting policies
They are not important

They present information that can be expressed in money terms.
They are separate from the financial statements.
Saved
The statement of financial position is useful for all of the following, except
Evaluating liquidity
Determining free cash flows
Assessing risk
Evaluating financial flexibility
Saved
The net worth method , otherwise known as the capital maintenance

approach, is a concept in which
Profit = Amount that an enterprise could distribute to its owners and be as well off
at the end of the period as it was at the beginning of the period
Profit = Change in fair value of net assets during a period
The financial statements effects of business events classified as revenues, gains,

expenses and losses, which are used to measure and define profit
Fair value adjusted for the effects of inflation or deflation are used to measure profit
Saved
A company changes from straight-line to an accelerated method of
calculating
depreciation, which will be similar to the method used for tax purposes.
The entry to
record this change should include a
debit to Deferred Tax Asset.
debit to Retained Earnings in the amount of the difference on prior years.
credit to Accumulated Depreciation.
credit to Deferred Tax Liability.

Saved
All of the following are correct, except:
Double-entry system is a system of recording transactions in a way that maintains the
equality of the accounting equation
Cash basis does not recognize accruals and deferrals
Incomplete records is another term for double entry system
Single-entry system does not provide for a debit-credit analysis of transactions
Saved
These provide narrative description or disaggregation of items disclosed on the
face of the financial statements and information about items that do not qualify
for recognition.
Value-added statements
Notes to the financial statements
Financial reports
Summary of significant accounting policies
Saved
Which of the following is true?
All of the above
The double –entry bookkeeping system requires analysis of transactions in terms of

debits and credits
The minimum record kept under the single entry system is the daybook which records
transactions in chronological order in narrative form
The single entry system is adopted by organizations whose activities are few and
simple, so that they do not employ the services of a bookkeeper
Saved
If a material amount of inventory has been ordered through a formal purchase
contract at the statement of financial position date for future delivery at firm prices
Disclosure is required only if prices have declined since the date of the order
Disclosure is required only if prices have since risen substantially
This fact must be disclosed
An appropriation of retained earnings is necessary
Saved
When converting from cash basis to accrual basis of accounting, which of
the following adjustments should be made to cash paid for operating
expenses to determine accrual basis operating expenses?
Add beginning accrued liabilities
Subtract interest expense
Subtract beginning prepaid expense

Subtract ending prepaid expense
Saved
The estimated life of a building that has been depreciated 30 years of an
originally
estimated life of 50 years has been revised to a remaining life of 10 years.

Based on this
information, the accountant should
depreciate the remaining book value over the remaining life of the asset.
continue to depreciate the building over the original 50-year life.
adjust accumulated depreciation to its appropriate balance through retained earnings,

based on a 40-year life, and then depreciate the adjusted book value as though the
estimated life had always been 40 years.
adjust accumulated depreciation to its appropriate balance, through net income, based
on a 40-year life, and then depreciate the adjusted book value as though the
estimated life had always been 40 years.
Saved
Which of the following items will not appear in the statement of changes in
equity?
Change in depreciation method
Total comprehensive Income
Dividends
Correction of prior error

Saved
Under PAS 1, which of the following does not describe a current liability?
The entity has an unconditional right to defer settlement of the liability
for at least twelve months after the balance sheet date
It is expected to be settled within the entity’s normal operating cycle
It is due to be settled within twelve months after the balance sheet date
It is held primarily for the purpose of being traded
Saved
The valuation of a promise to receive cash in the future at present value is valid
because of the accounting concept of
Going concern
Entity
Time period
Monetary unit
Saved
Which of the following definitions is correct?
I. General purpose financial statements are those intended to meet the needs
of users who are in a position require an entity to prepare reports tailored to
their particular information needs.

II. Individual financial statements are those presented by a parent, an investor in
an associate or a venturer in joint arrangement, in which the investments are
accounted for on the basis of the direct equity interest rather than on the
basis of the reported results and net assets of the investees.
I only
II only
Both I and II
Neither I nor II
Saved
A company changes from percentage-of-completion to completed-contract,
which is the
method used for tax purposes. The entry to record this change should
include a
debit to Retained Earnings in the amount of the difference on prior years, net of tax.
debit to Construction in Process.
debit to Loss on Long-term Contracts in the amount of the difference on prior

years,net of tax.
credit to Deferred Tax Liability.
Saved
It is defined as increase in economic benefits during the accounting period in the
form of inflows or enhancements of assets or decreases in liabilities that result in
increases in equity, other than those relating to contributions from equity participants?
Revenue
Profit
Gain
Income
Saved
Compared to the accrual basis of accounting, the cash basis overstates
income by the net decrease during the accounting period of:
Accrued expenses but not of accounts receivable
Accounts receivable but not of accrued expenses
Neither accounts receivable nor of accrued expenses
Both accounts receivable and accrued expenses
Saved
Which of the following statements is correct?
A change from expensing certain costs to capitalizing these costs due to a change in
the period benefited, should be handled as a change in accounting estimate.
Prior statements should be restated for changes in accounting estimates.
Changes in accounting principle are always handled in the current or prospective

period.
Correction of an error related to a prior period should be considered as an
adjustment to current year net income.
Saved
Which is not an objective of the notes to the financial statements as

envisaged
under PAS 1?
Notes present information about the basis of preparation of financial statements and the specific accounting
policies used
Notes provide additional information that is not presented on the face of the
primary statements, but is relevant to an understanding of any of them
Notes allow external auditors in assessing whether amounts in the
financial statements are fairly presented/stated so as to form an opinion
Notes disclose information required by PFRS that is not presented on the face of the primary statements
Saved
Which one of the following is not required to be presented as a minimum
information on the face of the Statement of Financial Position, according to
PAS 1?
Contingent Liability
Investments accounted under the equity method
Cash and cash equivalents
Property, Plant and equipment
Saved
Which of the following is an entity-specific aspect of the fundamental qualitative
characteristic relevance?
Predictive value
Materiality
Timeliness
Confirmatory value
Saved
What statements are intended to meet the needs of users who are not in a
position to require an entity to prepare reports tailored to their particular
information needs?
Separate financial statements
Consolidated financial statements
Business entity financial statements
General purpose financial statements
Saved
An entity that purchases goods from suppliers for resale to customers should
recognize which inventory?
All of the choices are correct
Work in process inventory
Merchandise inventory
Finished goods inventory
Saved
When converting from cash basis to accrual basis of accounting, which of
the following adjustments should be made to cash collections from
customers to determine accrual basis service revenue?
Add cash sales
Add ending accounts receivable
Subtract ending accounts receivable
Subtract beginning unearned service revenue
Saved
Presenting consolidated financial statements this year when statements of
individual
companies were presented last year is
an accounting change that should be reported by restating the financial statements
of
all prior periods presented.
a correction of an error.
not an accounting change.
an accounting change that should be reported prospectively.
Saved
The major financial statements include all of the following, except -
Statement of changes in financial position
Statement of changes in equity
Statement of comprehensive income
Statement of financial position
Saved
The process of reporting an item in the financial statements is
Recognition
Matching
Realization
Allocation
Saved
Which method of income measurement is used in the preparation of the income
statement?
Income components approach

Cash-flow approach
Transaction approach
Capital maintenance approach
Saved
Which of the following statements is true regarding single-entry accounting

system?
It is adopted by organizations with complex and numerous transactions
It is also called incomplete records because only minimal accounting records are
kept without the benefit of a complete accounting system
The single entry method of determining profit is the transaction approach
Transactions are analyzed in terms of debits and credits

Saved
PAS 1 requires the allocation of profit or loss for the period between or among:
I. Profit or loss attributable to owners of the parent
II. Profit or loss attributable to subsidiaries of the parent
III. Profit or loss attributable to non-controlling interests
II and III
I and III
I and II
I, II and III
Saved
Which of the following is included in comprehensive income?
Investments by owners
Distributions to owners
Unrealized gains on available for sale securities
Changes in accounting policy
Saved
Which of the following reports is within the scope of PAS 1?
A statement of financial condition prepared by a banking institution
A report of the entity’s resources not recognized in the statement of financial
position in accordance with PFRSs
A report containing a review of the main factors and influences determining
financial performance, including changes in the environment in which the
entity operates, the entity’s response to those changes and their effect, and
the entity’s policy for investment to maintain and enhance financial
performance, including its dividend policy
A review of the entity’s sources of funding and its targeted ratio of liabilities to
equity
Saved
If, at the end of a period, a company erroneously excluded some goods
from its ending
inventory and also erroneously did not record the purchase of these goods
in its
accounting records, these errors would cause
the ending inventory, cost of goods sold, and retained earnings to be understated.
the ending inventory and retained earnings to be understated.
cost of goods sold and net income to be understated.
no effect on net income, working capital, and retained earnings.
Saved
The statement of financial position
Uses fair value for most assets and liabilities
Makes very limited use of judgment and estimate
Omits many items that are of financial value
All of the choices are correct regarding the statement of financial position
Saved
The REFINANCING (rolling over) of a currently maturing long-term debt
completed on or before the balance sheet date requires that such debt be
classified as a
Non-adjusting event and be disclosed in the notes to the financial statements

Non-current liability
Current liability
Current liability or non- current liability, at the option of the debtor
Saved
Which of the following is not an acceptable presentation of the statement of
financial position?
Deferred tax liabilities presented as part of current liabilities
Assets presented in the order of liquidity
Non-controlling interests presented within equity
Provisions presented as part of the liability section
Saved
PAS 1 precludes an entity to present or classify this account as current in the
statement of financial position.
Provisions
Deferred tax assets
Prepayments
Available-for-sale investments
Saved
Which of the following is not treated as a change in accounting principle?
A change from LIFO to FIFO for inventory valuation
A change from completed-contract to percentage-of-completion
A change to a different method of depreciation for plant assets
A change from full-cost to successful efforts in the extractive industry
Saved
Offsetting of assets and liabilities is
Not allowed in all cases
Allowed in all cases
Allowed unless not permitted by PFRS

Not allowed unless permitted by PFRS
Saved
Which of the following is not an application of “going concern”?
The current and noncurrent classification of assets and liabilities is justifiable
and significant
Depreciation and amortization policies are justifiable and appropriate
The historical cost principle is credible

Amortizing research and development costs over several periods is
justifiable and appropriate
Saved
Which of the following is not required to be presented in the statement of
changes in equity?
For each component of equity, a reconciliation between the carrying amount
at the beginning and the end of the period
Total comprehensive income for the period, showing separately the total
amounts attributable to the owners of the parent and to non-controlling
interests
For each component of equity, the effects of retrospective application or

retrospective restatement
The amount of dividends recognized as distributions to owners during
the period, and the related amount per share
Saved
In preparing a statement of comprehensive income in two statements, the
second statement shall start with what line item?
Revaluation surplus
Income from continuing operations
Gain presented as other comprehensive income
Profit or loss
Saved
An entity shall present a complete set of financial statements (including the
comparative information) at least
Every two years
Every quarter
Annually
Every three to five years
Saved
Counterbalancing errors do not include
errors that correct themselves in two years.
an understatement of purchases.
errors that correct themselves in three years.
an overstatement of unearned revenue.
Saved
Which of the following is an essential characteristic of an asset?
An asset is obtained at a cost
An asset provides future economic benefits
The claims to an asset’s benefits are legally enforceable
An asset is tangible
Saved
Which of the following is correct concerning PAS 1 Presentation of Financial
Statements?
It prescribes the basis for presentation of general and special purpose
financial statements.
It sets out the recognition, measurement and disclosure requirements for
specific transactions and other events.
It uses terminology that is suitable for profit-oriented entities, and if not-for-
profit entities apply this Standard, they need not amend the descriptions used
for particular line items in the financial statements because it also applies to
them.
It applies equally to all entities, separate financial statements, individual

financial statements and consolidated financial statements.
Saved
Under PAS 1, which of the following does not refer to a current asset?
It is held primarily for the purpose of being traded
It is expected to be realized within twelve months after the balance sheet (BS)
date
It is a cash or cash equivalent restricted for more than 12 months from
BS date
It is expected to be realized, sold or consumed within the entity’s normal

operating cycle
Saved
Which is incorrect regarding an income statement?
An entity may present the components of profit or loss as part of a single
statement of comprehensive income
When a separate income statement is prepared, it is not considered a

part of a complete set of financial statements
When prepared, an income statement must be immediately presented before
the statement of comprehensive income
An entity may present the components of profit or loss in a separate income
statement
Saved
It involves the depiction of the items in words and by a monetary amount and the
inclusion of that amount in the financial statements.
Recognition
Presentation
Realization
Disclosure
Saved
Which of the following is not considered a characteristic of a liability?
Liquidation is reasonably expected to require use of existing resources
classifies as current assets
Present obligation
Arises from past events
Results in an outflow of resources
Saved
Which of the following is not a generally practiced method of presenting the
income statement?
Including gains and losses from discontinued operations of a component of a
business in determining net income
Including prior period adjustments in determining net income
The single-step income statement
The consolidated statement of income
Saved
Which of the following is (are) the proper time period(s) to record the
effects of a change
in accounting estimate?
Retrospectively only
Current period and prospectively
Current period and retrospectively
Current period only
Saved
They are structured representation of the financial position and financial
performance of an entity.
Statement of changes in equity
Notes to the financial statements
Statement of financial position
Financial statements
Saved
Items of dissimilar nature or function
Must not be presented separately in financial statements (i.e. must be
aggregated in the financial statements)
Must always be presented separately in financial statements
Must be disclosed only in the notes
Must be presented separately in financial statements if those items are

material
Saved
The statement of financial position information is useful for all of the following, except
To evaluate capital structure
To compute rate of return
To assess future cash flows
To analyze cash inflows and outflows for the period
Saved
Which type of accounting change should always be accounted for in current
and future
periods?
Change in accounting estimate
Change in reporting entity
Correction of an error
Change in accounting principle
Saved
When a company decides to switch from the double-declining balance
method to the
straight-line method, this change should be handled as a
correction of an error.
change in accounting estimate.
change in accounting principle.
prior period adjustment.
Saved
The fundamental qualitative characteristic of faithful representation has the
components of
Completeness, neutrality and freedom from error
Understandability, predictive value and reliability
Predictive value and confirmatory value
Comparability, consistency and confirmatory value
Saved
The occurrence that most likely would have no effect on net income is the
Collection in the current year of a dividend from an investment
Sale in the current year of an office building contributed by a shareholder in a

prior year
Correction of an error in the financial statements of a prior period
discovered subsequent to their issuance
Inventory purchased deemed worthless in the current year
Saved
What is the objective of financial statements according to PAS 1?
To provide information about the financial position, performance, and
cash flows of an entity that is useful to a wide range of users in making
economic decisions
To prepare financial statements in accordance with all applicable Standards

and Interpretations.
To prepare and present balance sheet, an income statement, a cash flow
statement, and a statement of changes in equity.
To prepare and present comparable, relevant, reliable, and understandable
information to investors and creditors.
Saved
Which of the following are the acceptable methods for reporting comprehensive
income for the period
I. One statement of comprehensive income
II. Two statements; an income statement and a statement of
comprehensive income
III. In the statement of owner’s equity
I only
I and II only
I, II and III
I and III only
Saved
An entity must disclose comparative information for
The previous two comparable period for all amounts reported
The previous comparable period for all amounts reported

The previous comparable period for all amounts reported and for all narrative
and descriptive information
The previous comparable period for all amounts reported, and for all
narrative and descriptive information when it is relevant to an
understanding of the current period’s financial statement
Saved
Which one of the following transactions should be classified as a financing
activity on the
statement of cash flows?
Purchase of equipment.
Payment of interest on a note.
Sale of a patent
Purchase of the company's own stock.
Saved
Which of the following disclosures is required for a change from sum-of-
the-years-digits to straight-line?
The cumulative effect on prior years, net of tax, in the current retained earnings
statement
Recomputation of current and future years’ depreciation
All of these are required.
Restatement of prior years’ income statements
Saved
An example of a correction of an error in previously issued financial
statements is a
change
in the tax assessment related to a prior period.
in the service life of plant assets, based on changes in the economic environment.
from the FIFO method of inventory valuation to the LIFO method.
from the cash basis of accounting to the accrual basis of accounting.
Saved
The income statement information would help in which of the following tasks?
Estimate future financial flexibility
Evaluate the liquidity of an entity
Estimate future cash flows
Evaluate the solvency of an entity
Saved
When an enterprise chooses not to present properly classified statements of
Financial position, how should asset and liabilities presented?
Assets and liabilities should be presented alphabetically
An enterprise is always required to present properly classified Statement of
Financial Position
Assets and liabilities should be presented according to liquidity
Assets and liabilities should be presented according to magnitude
Saved
PAS 1 refers to it as all changes in equity other than introduction and return of
capital to owners.
Profit
Total comprehensive income

Net income
Other comprehensive income
Saved
Which of the following statements is true when accounts receivable are factored
without recourse?
The factor assumes the risk of collectibility and absorbs any credit losses
in collecting the receivables
The receivables are used as collateral for a promissory note issued to the factor
by the owner of the receivables
The financing cost should be recognized ratably over the collection period of the
receivables
The transaction may be accounted for either as a secured borrowing or as a sale
depending upon the substance of the transaction
Saved
Current tax assets and current tax liabilities can only be offset in the statement of
financial position
If the entity does not have the legal right but the intention to settle on a net
basis
If the entity has the legal right and the intention to settle on a net basis
If the entity does not have the legal right and the intention to settle on a net
basis
If the entity has the legal right but not the intention to settle on a net basis
Saved
Travel advances should be reported as -
Cash because they represent the equivalent of money
Supplies
Investments
Receivables
Saved
The account deferred grant revenue is classified as
Revenue
A separate component of shareholder’s equity
Other income and expense
A noncurrent liability
---------------------------------------------------------------------------------------------------------------------------------------
ACCTG 105
FINALS - QUIZ 2
You have been assigned to examine the financial statements of Macelle Company for the year ended December 31, 2016.
Below is the Balance Sheet of the company.
Current assets 700,000 Current liabilities 250,000
Non-current assets 2,000,000 Non-current liabilities 900,000

_________ Stockholders’ Equity 1,550,000
Total Assets 2,700,000 Total liabilities/SHE 2,700,000
You discover the following situations:
1. Depreciation of P16,000 for 2016 on delivery vehicles was not recorded.
2. The physical inventory count on December 31, 2015, improperly excluded merchandise
costing P95,000 that had been temporarily stored in a public warehouse. Macelle uses
periodic inventory system.
3. The physical inventory count on December 31, 2016, improperly included merchandise
with a cost of P42,500 that had been recorded as a sale on December 27, 2016.
4. A collection of P28,000 on account from a customer received on December 31, 2016 was not recorded until January 2,
2017.
5. In 2016, the company sold for P18,500 fully depreciated equipment that originally cost
P110,000. The company credited the proceeds from the sale to the Equipment account.
6. During November 2016, a competitor company filed a patent-infringement suit against
Macelle claiming damages of P1,100,000. The company’s legal counsel has indicated
that an unfavorable verdict is probable and a reasonable estimate of the court’s award
to the competitor is P625,000. The company has not reflected or disclosed this situation
in the financial statements.
7. Macelle has a portfolio of trading securities. No entry has been made to adjust to
market. Information on cost and market value is as follows:
COST MARKET
December 31, 2015 P 190,000 P 190,000
December 31, 2016 168,000 164,000
8. At December 31, 2016, an analysis of payroll information shows accrued salaries of
P36,600. The Accrued Salaries payable account had a balance of P48,000 at December
31, 2016, which was unchanged from its balance at December 31, 2015.
9. A large piece of equipment was purchased on January 3, 2016, for P1,600,000 and was
charged to Repairs Expense. The equipment is estimated to have a service life of 8 years
and no residual value. Macelle normally uses the straight – line depreciation method for
this type of equipment.
10. A P75,000 insurance premium paid on July 1, 2015, for a policy that expires on June 30,
2019, was charged to insurance expense.
11. A trademark was acquired at the beginning of 2015 for P250,000. No amortization has
been recorded since its acquisition. Trademark has an economic life of 5 years.
Non-Current liabilities at year-end is:
(900,000)
Wizard Company, a calendar-year sole proprietorship, maintained its books on the cash
basis during the year
Wizard is in the process of negotiating a bank loan to finance the planned expansion of its
business. The bank is requesting 2016 financial statements prepared on the accrual basis of
accounting from Wizard. As Wizard’s accountant, you were called upon to assist in
preparing the financial statements. The following information were obtained during the
course of your examinations:

Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Accounts receivable, 12/31/15 283,500
Inventory, 12/31/15 1,085,000
Furniture & Fixtures 2,068,500
Leasehold improvements 787,500
Accumulated depreciation, 12/31/15 P 567,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Salaries expense 3,045,000
Taxes and licenses 217,000
Rent expense 598,500
Utilities expense 220,500
Living expenses 227,500
Total P 14,472,500 P 14,472,500
1. At December 31, 2016, amounts due from customers totaled P415,000.

2. Based on the analysis of the above receivables, P20,750 may prove uncollectible.
3. Unpaid invoices for the plant purchases totaled P533,750 and P297,500 at December 31,
2016 and December 31, 2015 respectively.
4. The inventory totaled P1,274,000 based on a physical count of the goods at December
31, 2016. The inventory was priced at cost, which approximates market value.
5. On May 1. 2016, Wizard paid P152,250 to renew its comprehensive insurance coverage
for one year. The premium on the previous policy, which expired on April 30, 2016, was
P136,500.
6. On January 2, 2016, Wizard entered into a twenty-year operating lease for the vacant
lot adjacent Wizard’s retail store used as a parking lot. As agreed in the lease, Wizard
paved and fenced in the lot at a cost of P787,500. The improvements were completed on
April 1, 2016, and estimated to have a useful life of fifteen years. No provision for
depreciation has been recorded. Depreciation on furniture and fixtures was P210,000 for
2016.
7. Accrued expenses at December 31, 2016 and 2015 were as follows:
2016 2015
Taxes and licenses P33,750 P20,250
Utilities 36,000 24,750
Total P69,750 P45,000
8. Wizard is being sued for P4,000,000. The coverage under the comprehensive insurance
policy is limited to P2,500,000. Wizard’s attorney believes that an unfavorable outcome
is probable and that a reasonable estimate of the settlement is P3,000,000.

9. The salaries account includes P40,000 per month paid to the proprietor. Wizard also
receives P4,375 per week for living expenses.
Determine the balances of the following under the accrual basis of accounting.
Estimated Loss from lawsuit - Dec. 31, 2016 -
(500,000)
At the beginning of current year, Complex Company started business and issued share capital, 60,000 shares with P100 par value, for
the following considerations:
Cash 500,000
Building with useful life of 15 years 4,500,000
Land 1,500,000
Total 6,500,000
An analysis of the bank statement showed total deposits, including the original cash investment, ofP3, 500,000. The balance in the
bank statement on December 31 was P250, 000 but there were checksamounting to P50, 000 dated in December but not paid by the
bank until January of next year. Cashon hand on December 31 was P125, 000 including customers’ deposit of P75, 000. During the
year,the entity borrowed P500, 000 from the bank and repaid P125, 000 and P25, 000 interest. Theproceeds of the loan were
credited to the bank account of the entity.
Disbursements paid in cash during the year were:
Utilities 100,000
Salaries 100,000
Supplies 175,000
Taxes 25,000
Dividends 150,000
Total 550,000
An inventory of merchandise taken on December 31 showed P755, 000 of merchandise. Tickets foraccounts receivable totaled P900,
000 but P50, 000 of that amount may prove uncollectible. Unpaidsuppliers invoices for merchandise amounted to P350, 000.
Equipment with a cash price of P400, 000was purchased in early January on a one-year installment basis. During the year, checks for
the downpayment and all maturing installments totaled P445, 000. The equipment has a useful life of 5 years.
What is the amount of shareholders equity at December 31?
(7,150,000)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250

Total P 14,472,500 P 14,472,500
P136,500.
2016.

2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Prepaid Insurance - Dec. 31, 2016 -
(50,750)

2017.
COST MARKET
December 31, 2015 P 190,000 P 190,000
December 31, 2016 168,000 164,000
Net Income of 2016 is understated by is:
(603,900)
he following balance sheet was prepared by the bookkeeper for Kraus Company as of
December 31, 2020.
Kraus Company
Balance Sheet
as of December 31, 2020
Cash 85,000 Accounts payable 90,000

Accounts receivable (net) 52,200 Long-term liabilities 100,000
Inventory 57,000 Stockholders' equity 218,500
Investments 76,300
Equipment (net) 106,000
Patents 32,000
Total 408,500 408,500
The following additional information is provided:

1. Cash includes the cash surrender value of a life insurance policy 9,400, and a bank
overdraft of 2,500 has been deducted.
2. The net accounts receivable balance includes:
(a) accounts receivable—debit balances 60,000;
(b) accounts receivable—credit balances 4,000;
(c) allowance for doubtful accounts 3,800.
3. Inventory does not include goods costing 3,000 shipped out on consignment. Receivables of 3,000 were recorded on these goods.
4. Investments include investments in common stock, trading 19,000 and available-for-sale 48,300, and franchises 9,000.
5. Equipment costing 5,000 with accumulated depreciation 4,000 is no longer used and is held for sale. Accumulated depreciation on
the other equipment is 40,000.
Total liabilities -
(196,500)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250

Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Wizards, Capital - Dec. 31, 2015 -
(2,181,000)
Data: January 1, 2019 December 31, 2019
Trade accounts receivable P 1,000,000.00 P 3,895,000.00
Allowance for doubtful accounts 200,000.00 237,000.00
Trade notes receivable 1,000,000.00 2,100,000.00
Customer advances 400,000.00 650,000.00
Additional information for CY 2019:
Sales return and allowances P 40,000.00
Accounts written off 65,000.00
Cash receipts from customers 3,600,000.00
Notes receivable discounted without recourse 400,000.00
Compute the net sales under accrual basis -
(7,810,000)
During 2020 the DLD Company had a net income of 55,000. In addition, selected
accounts showed the following changes:

Accounts Payable 1,000 increase
Building 4,000 decrease
Depreciation Expense 1,500 increase
Bonds Payable 8,000 increase
What was the amount of cash provided by operating activities?

(54,500)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500

Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Accrued Expenses - Dec. 31, 2016 -
(69,750)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000

Doubtful Account Expense - Dec. 31, 2016 -
(20,750)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000

Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Accounts Receivable - Dec. 31, 2016 -
(415,000)
Selected financial statement information and additional data for Stanislaus Co. is presented below. Prepare a statement of cash
flows for the year ending December 31, 2020
December 31
2019 2020
Cash ....................................................... 42,000 75,000
Accounts receivable (net) ...................... . 84,000 144,200
Inventory................................................. 168,000 201,600
Land........................................................ 58,800 16,000
Equipment .............................................. 504,000 789,600
TOTAL ........................................ 856,800 1,226,400
Accumulated depreciation ...................... 84,000 115,600

Accounts payable ................................... 50,400 86,000
Notes payable - Short-term .................... 67,200 29,400
Notes payable - Long-term ..................... 168,000 302,400
Common stock........................................ 420,000 487,200
Retained earnings .................................. 67,200 205,800
TOTAL ........................................ 856,800 1,226,400
Additional data for 2020:

1. Net income was 240,200.
2. Depreciation was 31,600.
3. Land was sold at its original cost.
4. Dividends of 101,600 were paid.
5. Equipment was purchased for 84,000 cash.
6. A long-term note for 201,600 was used to pay for an equipment purchase.
7. Common stock was issued to pay a 67,200 long-term note payable
Net cash provided by operating activities-

(175,800)
Matias Corporation requires audited financial statements for credit purposes. After making
normal adjusting entries, but before closing the accounting records for the year ended
December 31, 2016. Matias’s controller prepared the following financial statements for
2006:
Matias Corporation
STATEMENT OF FINANCIAL POSITION
December 31, 2016
Assets
Cash 1,225,000
Marketable equity securities 125,000
Allowance for doubtful accounts ( 55,000)
Inventories 530,000
Property and equipment 620,000
Accumulated Depreciation ( 280,000)
Total Assets 2,625,000
Liabilities and Stockholders’ Equity

Accounts payable and accrued liabilities 1,685,000
Income tax payable 110,000
Common stock, P20 par 300,000
Additional paid-in capital 75,000
Total liabilities and stockholders’ equity 2,625,000
Matias Corporation
STATEMENT OF INCOME
Net Sales 1,700,000
Cost of sales 570,000
Operating Expenses
Selling and administrative 448,000
Depreciation 42,000
Income before income tax 640,000
Net Income 448,000
Matias’s tax rate for all items was 30% for all affected years, and it made estimated tax
payments when due. Matias has been profitable in the past and expects results in the future
to be similar to 2016. During the course of your examination, the following additional information
(not considered when the above statements were prepared) was obtained:
1. The investment portfolio consists of short-term investment, classified as available-for-
sale, for which total market value equaled cost at December 31, 2015. On February 2,
2016, Matias sold one investment with a carrying value of P100,000 for P130,000. The
total of the sale proceeds was credited to the investment account.
2. At December 31, 2016, the market value of the remaining securities in the portfolio was
P142,000.
3. The P530,000 inventory total, which was based on a physical count at December 31,
2016, was priced at cost. Subsequently, it was determined that the inventory cost was
overstated by P66,000. At December 31, 2016, the inventory’s market value
approximated the adjusted cost.
4. Pollution control devices costing P48,000, which is high in relation to the cost of the
original equipment, were installed on December 29, 2015, and were charged to repairs in
2015.
5. The original equipment referred to in Item 4, which had a remaining useful life of six
years on December 20, 2015, is being depreciated by the straight-line method for both
financial and tax reporting.
6. A lawsuit was filed against Matias Corporation in October 2016 claiming damages of
P250,000. Company’s legal counsel believes that an unfavorable outcome is probable,
and a reasonable estimate of the court’s award to the plaintiff is P60,000, which will be
paid in 2017 if the case is settled.
Cost of Sales at year end is -
(636,000)
Cash 500,000

Land 1,500,000
Total 6,500,000
Utilities 100,000
Salaries 100,000
Supplies 175,000
Taxes 25,000
Dividends 150,000
Total 550,000
What is the total assets on December 31?
(7,950,000)
Emmyrelle Company provided the following selected accounts, cash receipts and disbursements forthe current year:
Cash receipts for current year:
Cash sales 500,000
Collections of accounts, net of cash discounts of P40, 000 1,800,000

Bank loan- one year, dated December 31, 2018 100,000
Cash disbursements for current year:
Payment of accounts payable, net of cash discounts of P20, 000 1,500,000
Payments of notes payable 400,000
Insurance 220,000
Under accrual basis, what amount should be reported as gross sales?
(2,420,000)
VILLA LYDIA CO. The records of the Company have not been examined for the three-year
period ended December 31, 2016. As a result of your examination of the records for the year
ended December 31, 2016 and your review of the records of the two prior years, it is
necessary to revise the net income and the retained income based upon the audited data, which follows:
The company’s retained income at December 31, 2016 follows:
Balance, 12/31/14 P 90,000
Net income, 2015 100,000
Net income, 2016 110,000
Balance, 12/31/16 P300,000
From your examination, you obtained the following information which must be taken into
consideration at the close of the year involved:

December 31, 2014
1. Goods consigned out to consignees are included in the inventory at P120,000, which is
20 percent in excess of cost.
2. Equipment with a 10-year-life was purchased for P30,000 and charged to expense on
December 31.
3. The following liabilities are omitted from the records:
Materials included in inventory P 3,000
Accrued taxes 4,100
December 31, 2015
4. Uncollectible accounts receivable of P9,000 are to be written off.
5. Marketable Securities costing P15,000 were at a market value of only P9,000.
6. Gain of P3,000 on sale of fully depreciated equipment was credited to the allowance for
depreciation.
7. Land cost of P9,000 had been erroneously charged to expense.
8. The inventory is overstated by P14,300 because of an error in footing an inventory
price sheet.
9. Depreciation was omitted; P5,000 should be provided.
December 31, 2016
For purchases of new machinery on December 31, 2016 P12,000
Accrued taxes 5,900

. Adjusted net income of 2016 is:
(115,400)
Vela Company reported the following increases in account balances during the current year:
Assets 10,000,000
Liabilities 2,700,000
Share Capital 6,000,000
Share Premium 600,000
Except for a P1, 300,000 dividend payment and the year’s earnings, there were no changes in retained earnings for the year.
What is the net income for the current year?
(2,000,000)
Balance, 12/31/14 P 90,000
Net income, 2015 100,000
Net income, 2016 110,000
Balance, 12/31/16 P300,000
December 31, 2014

December 31.
Accrued taxes 4,100
December 31, 2015
depreciation.
price sheet.
December 31, 2016
Accrued taxes 5,900
. Adjusted net income of 2015 is:
(110,800)
Emmyrelle Company provided the following selected accounts, cash receipts and disbursements for the current year:
Cash receipts for current year:
Cash sales 500,000
Collections of accounts, net of cash discounts of P40, 000 1,800,000
Bank loan- one year, dated December 31, 2018 100,000
Cash disbursements for current year:
Payment of accounts payable, net of cash discounts of P20, 000 1,500,000
Payments of notes payable 400,000
Insurance 220,000
Under accrual basis, what amount should be reported as gross purchases?
(1,960,000)
Given the following account information for Leong Corporation, prepare a balance sheet in report form for the company as of
December 31, 2020. All accounts have normal balances.
Equipment 50,000
Interest Payable 600
Dividends 50,400
Land 137,320
Inventory 102,000
Bonds Payable 78,000
Notes Payable (due in 6 months) 19,400
Common Stock 60,000
Accumulated Depreciation - Equip. 10,000
Prepaid Advertising 5,000
Revenue 341,400
Buildings 80,400
Supplies 1,860
Taxes Payable 3,000
Utilities Expense 1,320
Advertising Expense 1,560
Salaries and Wages Expense 53,040
Salaries and Wages Payable 900
Accumulated Depr. - Bld. 15,000
Cash 35,000
Depreciation Expense 8,000
Compute the retained earnings at the end of year-

(224,680)
Pedigo Corporation reports the following information:
Net cash provided by operating activities 275,000

Average current liabilities 150,000
Average long-term liabilities 100,000
Dividends paid 60,000
Capital expenditures 110,000
Payments of debt 35,000
Pedigo free cash flow is

(105,000)
2006:
Matias Corporation
December 31, 2016
Assets
Cash 1,225,000
Inventories 530,000

Matias Corporation
STATEMENT OF INCOME
Net Sales 1,700,000
Operating Expenses
Depreciation 42,000
Net Income 448,000
P142,000.
2015.
Marketable Equity Securities at year-end is-
(155,000)
Cash 500,000
Land 1,500,000
Total 6,500,000
Utilities 100,000
Salaries 100,000
Supplies 175,000
Taxes 25,000
Dividends 150,000
Total 550,000
What is the amount of purchases for the year?
(3,055,000)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000

Purchases - Dec. 31, 2016 -
(5,575,500)
December 31, 2020.
Kraus Company
Balance Sheet

Investments 76,300
Patents 32,000
Total 408,500 408,500

Total current assets -

(211,300)

Balance, 12/31/14 P 90,000
Net income, 2015 100,000
Net income, 2016 110,000
Balance, 12/31/16 P300,000
December 31, 2014
December 31.
Accrued taxes 4,100
December 31, 2015
depreciation.

price sheet.
December 31, 2016
Accrued taxes 5,900
. Adjusted retained earnings in 2016 is:
(319,100)
2017.
COST MARKET
December 31, 2015 P 190,000 P 190,000
December 31, 2016 168,000 164,000

Non - Current assets at year-end is:
(3,402,500)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000

Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Sales - Dec. 31, 2016 -
(11,559,000)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500

P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000

Taxes and Licenses - Dec. 31, 2016 -
(230,500)
2017.
COST MARKET
December 31, 2015 P 190,000 P 190,000
December 31, 2016 168,000 164,000

Current assets at year-end is:
(691,000)
Account Increase (Decrease)
Accounts Receivable (P 95,000.00)
Customers Advances 100,000.00
Allowance for doubtful accounts 52,000.00
Compute the gross sales under accrual basis
(4,850,000)
Balance, 12/31/14 P 90,000
Net income, 2015 100,000

Net income, 2016 110,000
Balance, 12/31/16 P300,000
December 31, 2014
December 31.
Accrued taxes 4,100
December 31, 2015
depreciation.
price sheet.

December 31, 2016
Accrued taxes 5,900
(92,900)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000

Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Salaries Expense - Dec. 31, 2016 -
(2,565,000)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500

P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000

Utilities Expense - Dec. 31, 2016 -
(231,750)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000

Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Merchandise Inventory - Dec. 31, 2016 -
(1,274,000)

Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250

Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015

Utilities 36,000 24,750
Total P69,750 P45,000
Wizards, Drawing - Dec. 31, 2016 -
(707,500)
2017.
COST MARKET
December 31, 2015 P 190,000 P 190,000
December 31, 2016 168,000 164,000
Total Shareholder's Equity at year-end is:
(2,329,900)
2017.
COST MARKET
December 31, 2015 P 190,000 P 190,000
December 31, 2016 168,000 164,000

Current liabilities at year-end is:
(863,600)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000

Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Depreciation Expense - Dec. 31, 2016 -
(249,375)
Camadillo Company reported the following changes in all the account balances for the current year, except for retained earnings:
Increase (Decrease)
Cash 700,000
Accounts receivable, net 550,000
Inventory 500,000
Investments (500,000)
Accounts payable (400,000)
Bonds payable 800,000
Share capital 1,500,000
Share premium 100,000
There were no entries in the retained earnings account except for net income (loss) and a dividend declaration of P300, 000 which
was paid in the current year.
What is the net income for the current year?
(0)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000

Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Property and Equipment, Net - Dec. 31, 2016 -
(2,039,625)
December 31
2019 2020
Cash ....................................................... 42,000 75,000
Inventory................................................. 168,000 201,600
Land........................................................ 58,800 16,000
Equipment .............................................. 504,000 789,600
TOTAL ........................................ 856,800 1,226,400

Common stock........................................ 420,000 487,200
TOTAL ........................................ 856,800 1,226,400

Net cash used by financing activities-

(101,600)
Under the cash basis, rent income and rent expense of Diesel Company for the calendar year 2019 is P615, 000.00 and P500, 000,
respectively. Additional information are presented below:
Rent collected in advance , beginning of the year 50,000
Rent collected in advance , end of the year 75,000
Rent earned , but not yet collected, beginning of the year 30,000
Rent earned , but not yet collected, end of the year 40,000
Rent paid in advance , beginning of the year 80,000
Rent paid in advance, end of the year 90,000
Rent incurred, but not yet paid, beginning of the year 45,000
Rent incurred, but not yet paid, end of the year 40,000
Requirements: Under accrual basis, compute the following:
Rent Expense -
(485,000)

Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500

P136,500.
2016.
2016 2015
Utilities 36,000 24,750

Total P69,750 P45,000
Accounts Payable - Dec. 31, 2016 -
(533,750)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000

Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Insurance Expense - Dec. 31, 2016 -
(147,000)
Cash 500,000
Land 1,500,000
Total 6,500,000
Utilities 100,000
Salaries 100,000
Supplies 175,000
Taxes 25,000
Dividends 150,000
Total 550,000
What is the amount of net income for the year?
(800,000)
Eros Company kept the records on a cash basis. The entity reported the following cash basis income statement for 2019:
Revenue 1,910,000
Expenses 809,000
Net Income 1,101,000
The following amounts of accrued, prepaid, and unearned items were ignored at the end of 2018 and 2019:
2018 2019
Accrued revenue 91,000 73,000

Unearned revenue 66,000 108,000
Accrued expenses 49,000 65,000
Prepaid expenses 46,000 56,000
What is the net income under accrual basis for 2019?
(1,035,000)
December 31
2019 2020
Cash ....................................................... 42,000 75,000
Inventory................................................. 168,000 201,600
Land........................................................ 58,800 16,000
Equipment .............................................. 504,000 789,600
TOTAL ........................................ 856,800 1,226,400

Common stock........................................ 420,000 487,200
TOTAL ........................................ 856,800 1,226,400

Net cash used by investing activities-

(41,200)
Data: January 1, 2019 December 31, 2019
Trade accounts receivable P 1,000,000.00 P 3,895,000.00
Allowance for doubtful accounts 200,000.00 237,000.00
Trade notes receivable 1,000,000.00 2,100,000.00
Customer advances 400,000.00 650,000.00

Notes receivable discounted without recourse 400,000.00
Compute the gross sales under accrual basis -
(7,850,000)
Question 51 0 / 1.5 points
2006:
Matias Corporation
December 31, 2016
Assets
Cash 1,225,000
Inventories 530,000

Matias Corporation
STATEMENT OF INCOME
Net Sales 1,700,000
Operating Expenses
Depreciation 42,000
Net Income 448,000
P142,000.
2015.
Net income in year end is -
(366,100)
2006:
Matias Corporation
December 31, 2016
Assets
Cash 1,225,000
Inventories 530,000
Matias Corporation
STATEMENT OF INCOME
Net Sales 1,700,000
Operating Expenses
Depreciation 42,000
Net Income 448,000

P142,000.
2015.

Inventory at year end is -
(464,000)
2006:
Matias Corporation
December 31, 2016
Assets
Cash 1,225,000
Inventories 530,000

Matias Corporation
STATEMENT OF INCOME
Net Sales 1,700,000
Operating Expenses
Depreciation 42,000
Net Income 448,000
P142,000.
2015.
Allowance for market decline in value of marketable equity security at year-end is:
(13,000)
Under the cash basis, rent income and rent expense of Diesel Company for the calendar year 2019 is P615, 000.00 and P500, 000,
respectively. Additional information are presented below:
Rent collected in advance , beginning of the year 50,000
Rent collected in advance , end of the year 75,000
Rent earned , but not yet collected, beginning of the year 30,000
Rent earned , but not yet collected, end of the year 40,000
Rent paid in advance , beginning of the year 80,000
Rent paid in advance, end of the year 90,000
Rent incurred, but not yet paid, beginning of the year 45,000
Rent incurred, but not yet paid, end of the year 40,000
Requirements: Under accrual basis, compute the following:
Rent Income -
(600,000)
Cash 500,000
Land 1,500,000
Total 6,500,000
Utilities 100,000
Salaries 100,000
Supplies 175,000
Taxes 25,000
Dividends 150,000
Total 550,000
What is the amount of sales for the year?
(4,000,000)
Balance, 12/31/14 P 90,000
Net income, 2015 100,000
Net income, 2016 110,000
Balance, 12/31/16 P300,000
December 31, 2014
December 31.
Accrued taxes 4,100
December 31, 2015
depreciation.
price sheet.
December 31, 2016
Accrued taxes 5,900
. Adjusted net income of 2014 (assuming P85,000 is recorded as net income of 2014) is:
(87,900)
The following information is relevant to the calculation of the sales figure for Paulo, a sole trader who does not keep proper
accounting records:
Accounts receivable , January 2, 2019 balance 291,000
Cash received from credit customers and paid into the bank 3,861,000
Expenses paid out of cash received from customers before banking 68,000
Bad debts written off 72,000
Refund to credit customers 21,000
Discounts allowed to credit customers 94,000
Cash sales 1,120,000
Accounts receivable, December 31, 2019 386,000
What amount of sales revenue should appear in Paulo’s profit or loss for the year ended December 31, 2019?
(5,289,000)
December 31, 2020.
Kraus Company
Balance Sheet
Investments 76,300
Patents 32,000
Total 408,500 408,500

Total assets -
(415,000)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000

Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250
Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Accounts Receivable, Net - Dec. 31, 2016 -
(394,250)
Wizard Company
TRIAL BALANCE
December 31, 2016
Debits Credits
Cash P448,000
Inventory, 12/31/15 1,085,000
Wizard, Drawings
Wizard, Capital, 12/31/15 2,180,500
Sales 11,427,500
Purchases 5,339,250

Total P 14,472,500 P 14,472,500
P136,500.
2016.
2016 2015
Utilities 36,000 24,750
Total P69,750 P45,000
Cost of Sales - Dec. 31, 2016 -
(5,386,500)
Stine Corp.'s trial balance reflected the following account balances at December 31, 2020:
Accounts receivable (net) 24,000

Trading securities 6,000
Accumulated depreciation on equipment and furniture 15,000
Cash 16,000
Inventory 30,000
Equipment 25,000
Patent 4,000
Prepaid expenses 2,000
Land held for future business site 18,000
In Stine's December 31, 2020 balance sheet, the current assets total is
(78,000)

Balance, 12/31/14 P 90,000
Net income, 2015 100,000
Net income, 2016 110,000
Balance, 12/31/16 P300,000
December 31, 2014
December 31.
Accrued taxes 4,100
December 31, 2015
depreciation.
price sheet.
December 31, 2016
Accrued taxes 5,900
(203,700)
Question 63 0 / 1.5 points
On December 31, 2019 and 2018 comparative financial statements of World Gallery Company showed equipment
with an original cost of P379, 000.00 and P344, 000.00 with accumulated depreciation of P153, 000.00 and P 128,000.00,
respectively.
During 2019, the company purchased equipment costing P50, 000, and sold equipment with a carrying value of P9, 000.00.
What amount should the company report as depreciation expense for the year ended December 31, 2019?
(31,000)
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PRELIM

Accounts Receivable 590,000

Treasury Shares (at cost) 330,000

Long Term Investments

Financial Assets at fair value through P/L 320,000

Financial Assets at fair value through OCI 1,030,000

Property and Equipment

Office Supplies 80,000

Building and Equipment 3,560,000

Patents (net) 470,000

Prepaid Insurance 50,000

Deferred tax Assets 70,000

Discounts on Bonds Payable 100,000

Total Assets P 8,240,000

Accounts Payable 990,000

Allowance for Uncollectible Accounts 80,000

Salaries Payable 150,000

Taxes Payable 250,000

Long Term Liabilities

Bonds Payable (due 2022) 1,100,000

Retained Earnings 2,300,000

Acc. Depreciation Building & Equipment 920,000

Shares Premium 1,040,000

Ordinary Share Capital 1,200,000

Accumulated holding gains through OCI 120,000

Total Credits P8,240,000

Accounts Receivable 590,000

Treasury Shares (at cost) 330,000

Long Term Investments

Financial Assets at fair value through P/L 320,000

Financial Assets at fair value through OCI 1,030,000

Property and Equipment

Office Supplies 80,000

Building and Equipment 3,560,000

Patents (net) 470,000

Prepaid Insurance 50,000

Deferred tax Assets 70,000

Discounts on Bonds Payable 100,000

Total Assets P 8,240,000

Allowance for Uncollectible Accounts 80,000

Salaries Payable 150,000

Taxes Payable 250,000

Long Term Liabilities

Bonds Payable (due 2022) 1,100,000

Unearned Rent Revenue (3months) 90,000

Retained Earnings 2,300,000

Acc. Depreciation Building & Equipment 920,000

Shares Premium 1,040,000

Ordinary Share Capital 1,200,000

Accumulated holding gains through OCI 120,000

Total Credits P8,240,000

Accounts Receivable 530,000

Investment in Associate 110,000

Property, plant and equipment 3,250,000

Accumulated depreciation and impairment 700,000

Software - net of amortization and impairment 10,000

Deferred Tax Asset 5,000

Bank Overdraft 80,000

Bank Loan, payable in 2023 50,000

Trade Payable 430,000

Interest Payable 2,000

Provision for Warranty 4,000

Employee Benefit Obligation (P4,000 current) 10,000