FEU Alabang BFM11 Midterm Exam 1 of 3

True or False: Basic Concepts (10 points)

1.The three steps in the accounting process are identification,

recording, and communication.
2. Bookkeeping encompasses all steps in the accounting process.
3. Accountants prepare, but do not interpret, financial reports.
4. The two most common types of external users are investors and
company officers.
5. Managerial accounting activities focus on reports for internal
users.
6. Congress passed the Sarbanes-Oxley Act to reduce unethical behavior
and decrease the likelihood of future corporate scandals.
7. The primary accounting standard-setting body in the Philippines is
the Financial Reporting Standard Council (FRSC).
8. The historical cost principle dictates that companies record assets
at their cost. In later periods, however, the fair value of the
asset must be used if fair value is higher than its cost.
9. Relevance means that financial information matches what really
happened; the information is factual.
10.A business owner’s personal expenses must be separated from expenses
of the business to comply with accounting’s economic entity
assumption.

##

Problem 1: Expanded Accounting Equation (10 points)

Transactions made by Kaya Mo Yan & Co., a public accounting

firm, for the month of August are shown below. Prepare the (1)
journal entry, (2)T-account, and tabular analysis which shows
the effects of these transactions on the (3)expanded accounting
equation.

• August 1- The owner invested P25,000 cash in the business.

• August 5- The company purchased P7,000 of office equipment on credit.
• August 10- The company received P8,000 cash in exchange for services
performed.
• August 16- The company paid P850 for this month’s rent.
• August 28- The owner withdrew P1,000 cash for personal use.

Problem 2: Analysis of Accounting Equation (6 points)

Using the facts in Problem 1, compute for the following:

1. How much is the total asset?

2. What is the result in the Statement of Comprehensive Income? How
much?

##

Prepared by: BMQ,

FEU Alabang BFM11 Midterm Exam 2 of 3

Problem 3: Analysis of Transaction (8 points)

Tiwala Lang’s Payroll Services Company entered into the

following transactions during May 2022.

1. Purchased computers for P15,000 from Bytes of Data on account.

2. Paid P3,000 cash for May rent on storage space.
3. Received P12,000 cash from customers for contracts billed in April.
4. Performed payroll services for Magic Construction Company for
P2,500 cash.
5. Paid Northern Ohio Power Co. P7,000 cash for energy usage in May.
6. Tiwala Lang invested an additional P25,000 in the business.
7. Paid Bytes of Data for the computers purchased in (1) above.
8. Incurred advertising expense for May of P900 on account.

Match the following transaction using the choices below:

(a) an increase in assets and a decrease in assets.

(b) an increase in assets and an increase in owner’s equity.
(c) an increase in assets and an increase in liabilities.
(d) a decrease in assets and a decrease in owner’s equity.
(e) a decrease in assets and a decrease in liabilities.
(f) an increase in liabilities and a decrease in owner’s equity.
(g) an increase in owner’s equity and a decrease in liabilities.

Problem 4: Analysis of Transaction (6 points)

Using the facts in Problem 3, compute for the following:

1. How much is the total asset?

2. How much is the total equity?

##

Problem 5: Multiple choice (Basic Concepts)

1. Performing services on account will have the following
effects on the components of the basic accounting equation:
(a) increase assets and decrease owner’s equity.
(b) increase assets and increase owner’s equity.
(c) increase assets and increase liabilities.
(d) increase liabilities and increase owner’s equity.

2. Which of the following statements is false?

a) A statement of cash flows summarizes information about the
cash inflows (receipts) and out flows (payments) for a specific
period of time.
b) A balance sheet reports the assets, liabilities, and owner’s
equity at a specific date.

Prepared by: BMQ,

FEU Alabang BFM11 Midterm Exam 3 of 3

c) An income statement presents the revenues, expenses, changes

in owner’s equity, and resulting net income or net loss for a
specific period of time.
d) An owner’s equity statement summarizes the changes in owner’s
equity for a specific period of time.

3. Services performed by a public accountant include:

(a)auditing, taxation, and management consulting.
(b)auditing, budgeting, and management consulting.
(c)auditing, budgeting, and cost accounting.
(d) auditing, budgeting, and management consulting.

4. Payment of an account payable affects the components of the

accounting equation in the following way.
(a) Decreases owner’s equity and decreases liabilities.
(b) Increases assets and decreases liabilities.
(c) Decreases assets and increases owner’s equity.
(d) Decreases assets and decreases liabilities.

5. The historical cost principle states that:

(a) assets should be initially recorded at cost and adjusted when
the fair value changes.
(b) activities of an entity are to be kept separate and distinct
from its owner.
(c) assets should be recorded at their cost.
(d) only transaction data capable of being expressed in terms of
money be included in the accounting records.

**End of the Examination**

"Whatever you do, work at it with all your heart, as working for the
Lord, not for human masters, since you know that you will receive
an inheritance from the Lord as a reward. It is the Lord Christ you
are serving." - Colossians 3:23-24 NIV

Prepared by: BMQ,