Wesleyan University-Philippines

College of Business and Accountancy

Preliminary Examination
Fundamentals of Accounting

NAME:

DATE:

SCORE: / 100

Part I: 1 point each (10 points)

Multiple Choice Questions. Choose the best answer for each question. Write the letter
of your answer. (ERASURES OR ANY ALTERATION WILL BE CONSIDERED WRONG)

1. Statement 1: The First step in analyzing a transaction is to

ascertain/identify if the transaction is an accountable event.
Statement 2: Capital represents the owner’s investment or equity in a business.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

2. Statement 1: Liabilities represent amounts owed to creditors.

Statement 2: When a business receives cash, it is always recorded as an increase
to Cash and a decrease to expense.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

3. Statement 1: In the fundamental accounting equation, assets are added to

liabilities.
Statement 2: Business transactions are expressed in terms of money.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

4. Statement 1: Accounts Receivable is considered an asset.

Statement 2: A business owner can invest cash or other assets of value in the
business.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

5. Statement 1: The Liability created when supplies are bought on account

is called an accounts payable.
Statement 2: Both sides of the fundamental accounting equation must always be
equal.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

6. If assets total P700,000 and liabilities total P400,000, how much are
the net assets and owner’s equity?
a. 300,000 & 300,000
b. 400,000
c. 700,000
d. 1,100,000

7. If assets increase by P100,000 and liabilities decrease by P30,000,the

owner’s equity must
a. Remain unchanged
b. Increase by P130,000
 c. Decrease by P70,000
d. Decrease by P130,000

8. Which of the following is true?

a. The debit is on the right side of an asset account.
b. The debit is on the left side of an asset account.
c. The credit is on the left side of a liability account.
d. The debit is on the right side of an expense account.

9. Which of the following is true?

a. A debit will increase the liability account.
b. A credit will increase an asset account.
c. A credit will increase a revenue account.
d. A debit will decrease an expense account.

10. Which of the following is not an example of non-current assets?

a. A second-hand computer used in the office
b. A van that is purchased through installments that the total amount of which
is not yet fully settled
c. Prepaid Rent
d. Building

11. What are the increases in resources that a firm earns by providing
goods or services to its customers?
a. Assets
b. Income
c. Expenses
d. Liabilities

12. Which of the following accounts is increased by a credit?

a. Sales
b. Delivery Equipment
c. Cash
d. Utilities Expense

13. Which of the following accounts has normal debit balance?

a. Mortgage Payable
b. Capital Account
c. Rent Expense
d. Interest Payable

14. Which of the following accounts has normal credit balance?

a. Unearned Revenue
b. Salaries Expense
c. Office Supplies
d. Cash
15. Which of the following statement’s is correct?
a. To record increase in any given asset account, the account must be debited.
b. TO record decrease in capital, the capital account must be credited.
c. To record an increase in any given liability account, the account must be
debited
d To record decrease in any given liability account, the account must be
credited.

Part II: Accounting Equation Analysis (1 point each) - 10 points

Compute the amount of the missing element of financial position.

16. Hindi na ako Mandadaya Company has assets of P800,000 and owner's equity
of P450,000.
17. Respect Company has liabilities of P430,000 and owner's equity of
P810,000.
18. Magalang Co. has assets of P423,000 and liabilities of P153,600.
19. Litong Lito na Company has liabilities of P142,500 and owner's equity of
P236,500.
20. Di na ako Mangongopya kay Frennie Company has assets of P950,000 and
liabilities of P450,000.
21. Park Saeroyi Studio has assets of P624,050 and liabilities of P237,000.
22. At the beginning of the year, the assets of Kersy’s Clothing Company
were P360,000 and its owner's equity was P200,000. During the year,
assets increased by P120,000 and liabilities increased by P20,000. What
was the owner's equity at the end of the year?
23. At the beginning of the year, Papasa Ako Company had liabilities of
P100,000 and owner's equity of P96,000. If assets increased by P40,000
 and liabilities decreased by P30,000, what was the owner's equity at
the end of the year?
24. The liabilities of Luca Luca Pacioli Stylist equal one-fourth of the
total assets, and the owner's equity is P600,000. What is the amount of
the liabilities?
25. At the beginning of the year, Mendez Vulcanizing Services had
liabilities of P500,000 and owner's equity of P400,000. If assets
increased by P50,000 and liabilities decreased by P30,000, what was the
owner's equity at the end of the year?

Part III. Comprehensive Problem

May Pag-asa Pa Ba Company has the following information at June 30, 2030:

May Pag-asa Pa Ba Company

Unadjusted Trial Balance
June 30, 2030
Account Title Debit Credit
Cash 431,000.00
Accounts Receivable 104,000.00
Supplies 5,000.00
Prepaid Rent 27,000.00
Land 45,000.00
Building 300,000.00
Accumulated Depreciation-Building 155,000.00
Accounts Payable 510,000.00
Unearned Service Revenue 40,000.00
May Pag-asa Pa Ba Co., Capital 102,000.00
May Pag-asa Pa Ba Co., Drawing 7,000.00
Service Revenue 450,000.00
Salary Expense 255,000.00
Rent Expense 25,000.00
Insurance Expense 50,000.00
Miscalleneous Expense 8,000.00
Total 1,257,000.00 1,257,000.00

May Pag-asa Pa Ba Company must make adjusting entries for the following items:

a. Supplies on hand at year-end, P500.

b. Nine months of rent P27,000 were paid in advance on April 1, 2030.
c. Depreciation expense on the building of P12,000 has not been recorded.
d. Employees work Monday through Friday. The weekly payroll is P5,000 and is
paid every Friday. June 30, 2030, falls on Monday.
e. Service revenue of P15,000 must be accrued.
f. May Pag-asa Pa Ba Company received P40,000 in advance for consulting services
to be provided evenly from January 1, 2030, through August 31, 2030. None of the
revenue from this client has been recorded.
g. Paid 50,000 for a 1-year fire insurance to commence on May 31, 2030. The amount
of premium was debited to Insurance Expense.

Requirements:

1. Journalize May Pag-asa Pa Ba’s adjusting entries at June 30, 2030. (7 points)
2. Post the entries to the T-accounts and compute the total for each account. (28
points)
3. Write the trial balance on a worksheet, enter the adjustments, and prepare an
adjusted trial balance. (25 points)
4. Prepare the income statement, the statement of owner’s equity, and the balance
sheet. (15 points)

Prepared by:

______________________
Prof. Marites A. Castaneda, CPA
Course Instructor