POA 01

Name: ……………………… Student ID: ……………………

DOB: ……………………. (X = month)

Part 1: Multiple Choice (15%): Choose the one alternative that best completes the statement
or answers the question
1. Information related to Kerber Co. is presented as the followings: On April 5, purchased
merchandise from Wilkes Company for $33,000, terms 2/10, n/30, FOB shipping point. On April
6, paid freight costs on account of $900 on merchandise purchased from Wilkes. The journal
entries to record freight cost transactions on the books of Kerber Co. under a perpetual
inventory system is:
A. Debit to Inventory 900 and Credit to Account Payble 900
B. Debit to Freight cost 900 and Credit to Account Payble 900
C. Debit to Inventory 900 and Credit to Cash 900
D. Debit to Freight cost 900 and Credit to Cash 900

2. Dee Preciated rented an office space to Core Poration for three months at $500 per month,
payable at the end of the third month, January 31. No year-end adjusting entry was recorded on
December 31. As a consequence of this oversight,
A. Expense were overstated and Equity was overstated
B. Expense were overstated and Equity was understated
C. Expense were understated and Equity was overstated
D. Expense were understated and Equity was understated

3. The trial balance of Luxury Company had accounts with the following normal balances: Cash
$10,000, Service Revenue $60,000, Salaries and Wages Payable $8,000, Salaries and Wages
Expense $40,000, Rent Expense $18,000, Owner’s Capital $45,000, Owner’s Drawings $19,000,
and Equipment $100,000, Accumulated Deprecication – Equipment $19,000, Account Payable
$45,000. In preparing a trial balance, the total in the credit column is:
A. $167,000.
B. $168,000.
C. $158,000.
D. $177,000.
4. In periods of rising prices, LIFO will produce:
A. higher net income than FIFO.
B. the same net income as FIFO.
C. lower net income than FIFO.
D. higher net income than average-cost.

5. Cash of $300 received at the time the service was performed was journalized and posted as a
debit to Cash $300 and a credit to Accounts Receivable $300. Assuming the incorrect entry is not
reversed, the correcting entry is:
A. debit Service Revenue $300 and credit Accounts Receivable $300.
B. debit Accounts Receivable $300 and credit Service Revenue $300.
C. debit Cash $300 and credit Service Revenue $300.
D. debit Accounts Receivable $300 and credit Cash $300.

Part 2: True/ False Question (15%): Write T if the statement is True and T if the statement
is False and explain?
1. After closing entries have been journalized and posted, all temporary accounts in the ledger
should have zero balances.
2. Under the revenue recognition principle, revenue is recognized only after services have been
provided and cash has been received.
3. A current liability is a debt that a company expects to pay within one year and the operating
cycle, whichever is longer.
4. The operating cycle of a merchandising company ordinarily is shorter than that of a service
company.
5. Deferrals are expenses or revenues that are recognized at a date later than the point when cash
was originally exchanged.

Part 3: Problems (70%)

Exercise 3.1 (40%): Lazy River Resort opened for business on June 1 with eight air-conditioned
units.
Its trial balance before adjustment on August 31 is as follows.
Lazy River Resort, Inc.
Trial Balance
August 31, 2021
Cash $19,600
Supplies 3,300
Prepaid insurance 6,000
Land 25,000
Buildings 125,000
Equipment 26,000
Account payable $6,500
Unearned revenue (Payment in advanced of customers) 7,400
Mortage 80,000
Share Capital—Ordinary 100,000
Dividends 5,000
Service Revenue 80,000
Maitenance and repairs expenses 3,600
Salaries and wages expenses 51,000
Utilities expenses 9,400
Total $273,900 $273,900
Other data:
1. Insurance contract is for 2 years.
2. A count on August 31 shows X00 of supplies on hand.
3. Annual depreciation is 4,500 on buildings and 2,400 on equipment.
4. Unearned rent revenue of 4,100 was recognized for services performed prior to August 31.
5. Salaries of 400 were unpaid at August 31.
6. Rentals of 3,700 were due from tenants at August 31. (Use Accounts Receivable.)
7. The mortgage interest rate is 12% per year. (The mortgage was taken out on August 1.)
 Instruction: Prepare
1. Appropriate entries (including Adjusting and Closing entries)
2. An income statement for the 3 months ending August 31
3. A statement of financial position as of August 31.
Exercise 3.2 (30%): Based on the following data, prepare the multiple income statement for Duc
An company for the 3rd quarter of 2021.
Items Amount Items Amount
Net Sale revenue 567.000 Salary & Wage expenses 35.300
Depreciation expense 54.800 Insurance prepaid 41.100
Sale allowance for customer 3.630 Utilities expense 3..450
Cost of inventory purchased
Interest expense 12.750 in the quarter 345.600
Gain on disposal of
Purchase discount from supplier 7.430 equipment 24.890
Inventory, 1 July 134.560 Prepaid from customer 75.000
Inventory, 30 September 87.300 Unearned revenue 102.500
Purchase return due to quality
Delivery cost (FOB destination) of goods (X is the month of
when purchase inventory 6.300 birth of student) X%