Basic Accounting Prequalifying SolMan

Junior Philippine Institute of Accountants
Revamped and Reimagined Project Ulikid

Basic Accounting
Pre-qualifying Exams
April 28, 2023
➷ True or False with Solutions
1. A balance sheet can be prepared by getting the figures from the balance sheet column of the
worksheet, except for the amount of capital which is taken from the final figure of the capital
statement. TRUE
2. Preferred shareholders receive higher dividends than common shareholders when the company
generates high profits. FALSE
3. Assuming an account with a debit balance has been erroneously listed in the credit column of the trial
balance, a discrepancy of two times of the amount is reflected in the trial balance totals. TRUE
4. Substance over form is the underlying concept that supports the recognition of impairment in the
value of non-monetary assets held by the enterprise. FALSE
5. The failure to record a purchase of merchandise on account even though the goods are property
included in the physical inventory results in an understatement of liabilities and an overstatement of
owner’s equity. TRUE
6. Declaration of dividends requires the approval of the Board of Directors and majority of the
shareholders. FALSE
7. When a payment is received for services not yet rendered, no entry is recorded until that service has
been rendered. FALSE
8. The dual aspect concept states that for every change in a financial transaction, there would always be
a two-sided effect to the extent of the same amount recorded in the books of accounts. TRUE
9. The total value of credits, in most cases, is higher than the total value of debits. FALSE
10. The check register is a simplified form of the cash receipts journal and serves as a record of all check
payments. FALSE
11. Conservatism is best described as selecting an accounting alternative that has the least favorable
impact on owners' equity. TRUE
12. The trial balance provides interim proof of accuracy and signifies the absence of errors in the
accounting records. FALSE
13. Transactions are first entered in the check register, and later, when payment is made, in the voucher
register. FALSE
14. Goods received from another entity on consignment should be included in the inventory at the end of
the reporting period. FALSE
15. After journalizing and posting the closing entries, the balance of the owner’s capital account
represents the cumulative net result of income, expense, and withdrawal transactions. TRUE
16. No journal entry is made when there are share splits. TRUE
17. Cost of goods sold is the primary difference between a merchandising and a service business income
statement. TRUE
18. Sales Discounts is a contra-revenue account with a normal credit balance. FALSE
19. It is legal to issue shares at par or at more than par but not at less than par. TRUE
20. A debit balance in the retained earnings account is called a deficit. TRUE
21. If the seller is to shoulder the cost of delivery, the term is stated as FOB Shipping Point. FALSE
22. The term freight prepaid or collect will dictate who shoulders the transportation cost. FALSE
23. Merchandise inventory could include goods that are in transit. TRUE
24. The periodic inventory system provides an up-to-date amount of inventory on hand. FALSE
25. A corporation can be a general partner in a partnership. FALSE
26. A partnership can be a corporator in a corporation. TRUE
This document is strictly private, confidential, and should not be shared to any third party.
Any violation of this clause gives JPIA - USLS the right to seek legal recourse.
1
Basic Accounting
April 28, 2023
27. Summarization reduces the effects of numerous transactions into useful groups or categories. FALSE
28. The first step in the accounting cycle is the journalizing of transactions and selected other events.
FALSE
29. Recording incurred but unpaid expenses is an example of an accrual. TRUE
30. Failure to record the adjusting entry for accrued salaries results in the current year’s profit being
overstated. TRUE
➷ Short Problems with Solutions
31. Jay P. Yuh decided to start up his business by loaning 15,000 from the bank and investing his savings
and his laptop. Upon start-up, his balance sheet shows a balance of 10,000 and 45,000 in the Cash
and Owner’s Equity accounts, respectively. What was the value of his laptop upon investment?
50,000
Solution:
Assets = Liabilities + Owner’s Equity
Cash + Laptop = Notes Payable + Owner’s Equity
10,000 + Laptop = 15,000 + 45,000
Laptop = 50,000
32. At the beginning of the accounting period, the assets and owner’s equity totaled 85,670 and 67,495,
respectively. If liabilities increased by 5%, and owner’s equity decreased by 7,000 during the year,
how did the assets change? Note: Indicate whether it is an increase or decrease and round your final
answer to the nearest whole number. 6,091 decrease
Solution:
Assets = Liabilities + Owner’s Equity
85,670 = Liabilities + 67,495
85,670 - 67,495 = Liabilities
18,175 = Liabilities (Beginning Balance)
18,175 x 105% = 19,083.75 Liabilities (Ending Balance)

67,495 - 7,000 = 60,495.00 Owner’s Equity (Ending Balance)
79,578.75 Assets (Ending Balance)
85,670.00 Assets (Beginning Balance)

(79,578.75) Assets (Ending Balance)
6,091.25 Decrease
2
Basic Accounting
April 28, 2023
33. The following are the account balances of Ulikid Corp.
Cash 204,525
Accounts Payable 51,000
Prepaid Rent 45,000
Accounts Receivable 122,700
Inventory 64,340
Equipment 43,000
Unearned Revenue 30,265
Accrued Salaries 28,000
Land 350,000
Owners Equity ?
How much is the owner's equity? 720,300
Solution:
Cash 204,525
Prepaid Rent 45,000
Inventory 64,340
Equipment 43,000
Land 350,000
Total Assets 829,565
Less Liabilities:
Accounts Payable 51,000
Unearned Revenue 30,265
Owner’s Equity 720,300
34. If current liabilities totalled 203,105, non-current liabilities at 490,100, and owner’s equity at 620,179,
how much is the total assets? 1,313,384
Solution:
Current Liabilities 203,105
Non-Current Liabilities 490,100
Owner’s Equity 620,179
Total Assets 1,313,384
Use the following information to answer items 35 to 37.
A review of the assets of Sir Use & Co. disclosed the following:
● A machine was purchased for P365,000 on April 30, 2021. It is estimated to last for 5 years, after
which it can be sold for P80,000.
● On January 1, 2022, the entity procured office equipment worth 185,000. The asset has an
estimated useful life of 8 years with no salvage value.
● Land was acquired for 695,000 on November 30, 2022. It was intended for the future expansion
of the company.
3
Basic Accounting
April 28, 2023
35. How much is the depreciation expense for the machine for the year ended December 31, 2021?
38,000
Solution:
Purchase price of the machine 365,000
Less: Residual value 80,000
Depreciable amount 285,000
Divide by: estimated useful life 5
Annual depreciation 57,000
Multiply by: 8/12
Depreciation 2021 38,000
36. How much is the total accumulated depreciation to be presented in the 2022 statement of financial
position? 118,125
Solution:
Procurement price of the office equipment 185,000
Divide by: estimated useful life 8
Annual depreciation 23,125
Depreciation 2021 (from item no. 37) 38,000
Annual depreciation of machine 57,000
Accumulated Depreciation 2022 118,125
37. How much is the value of the non-current assets to be carried in the books on January 1, 2023?
1,126,875
Solution:
Less: Accumulated depreciation 95,000
Carrying Amount 1/1/2023 270,000
Less: Accumulated depreciation 23,125
Carrying Amount 1/1/2023 161,875
Land 695,000
Non- Current Assets 1/1/2023 1,126,875
38. Kekli, an investor, decided to invest P3,600,000 excess cash in a certificate of deposit on April 30,
2022. The certificate carried a 7% interest rate per annum and a one-year term to maturity. What is
the amount of accrued interest as of December 31, 2022? 168,000
Solution:
Principal Amount 3,600,000
Interest Rate 7%
Annual Interest 252,000
Multiply by: 8/12
Accrued Interest Dec 2022 168,000
4
Basic Accounting
April 28, 2023
39. Supplies at the beginning of the period were valued at P24,000. Additional purchases of P61,000
were made during the year. At the end of the period, P12,000 worth of supplies were counted. How
much was the supplies used during the period? 73,000
Solution:
40. A company follows the fiscal period and closes on June 30. It pays a weekly salary of P105,000 every
Friday. If June 30 falls on a Wednesday, how much is the accrued expense to be recorded at the end
of the period? 63,000
Solution:
Weekly Salary 105,000
Divide by: 5
Daily Salary 21,000
Multiply by: 3
Use the following information to answer questions 41 - 44.
The following information pertains to Pacioli Corp.

● A two year insurance policy was purchased for P30,000 on September 31, 2022. On initial
recognition, the Insurance Expense account was debited.
● The company received a P48,000 advance payment during the year on services still to be
performed. By the end of the year, one-third of the services had been performed.
● The company’s supplies account showed a beginning debit balance of P5,000. Additional
supplies were purchased at an amount of P6,000. On December 31, 2022, the supplies on hand
were P2,000.
● A one year note payable was issued at an amount of P150,000 on July 1, 2022. The interest rate
is 6% per annum and will be paid at maturity date together with the principal amount.
41. How much will be credited to Prepaid Insurance on December 31, 2022. 0
Solution:
Sept. 31 Insurance Expense 30,000
Cash 30,000
Dec. 31 Prepaid Insurance 26,250

Prepaid Expense 26,250
The company is following the expense method. At year end, Prepaid Insurance should be DEBITED and not credited.
5
Basic Accounting
April 28, 2023
42. What is the carrying amount of the Unearned Revenue? 32,000
Solution:
Unearned Revenue beg. 48,000
Multiply by Outstanding Balance ⅔
Carrying Amount 32,000
43. How much supplies were used during the year? 9,000
Solution:
44. How much is the accrued interest to be recorded? 4,500
Solution:
Principal Amount 150,000
Interest Rate 6%
Annual Interest 9,000
Multiply by: 6/12
Accrued Interest Dec 2022 4,500
45. On December 16, 2021, a typhoon destroyed the warehouse of Kim Mhie Enterprises. The company
uses the perpetual method. The following information is available on the said date.
Cost of Goods Sold 4,139,685

Freight In 15,895
Freight Out 5,326
Inventory, beg 486,755
Purchases 5,624,892
Purchases Discounts 438,741
Purchases Returns 598,732
Compute the value of the destroyed merchandise. 950,384
Solution:
Inventory, beg 486,755

Freight In 15,895
Purchases 5,624,892
Less: Purchases Discounts 438,741
Purchases Returns 598,732
Total Goods Available for Sale 5,090,069
Less: Inventory, end (SQUEEZE) 950,384.00
Cost of Goods Sold 4,139,685
6
Basic Accounting
April 28, 2023
Use the following information for items 16 to 17.
The following information was taken from the 2022 financial statements of Bruno Company:
Inventory, 1/1/22 583,216
Inventory 12/31/22 279,324
Accounts Payable, 12/31/21 93,678
Sales 1,396,415
Cost of Sales 985,692
Assume all purchases are on credit.
46. How much was Bruno Company’s purchases? 681,800
Solution:
Inventory, 1/1/22 583,216
Purchases (SQUEEZE) 681,800
Less: Inventory 12/31/22 279,324
Cost of Sales 985,692
47. What amount of cash payments to suppliers should Bruno report in the books? 577,636
Solution:
Purchases (from item no. 46) 681,800
Total 775,478
Less:Accounts Payable, 12/31/22 197,842
Cash Payments to Suppliers 577,636
48. Kopi Co. took a physical inventory at the end of the year and determined that P635,248 of goods
were on hand. In addition, Kopi Co. determined that purchases amounting to P65,121 of goods were
in transit that were shipped F.O.B shipping point which the company received on January 1, 2022,
and the sale of P39,875 worth of inventory F.O.B shipping point which was shipped on December 29,
2021 and received by the customer on January 5, 2022 were not included in the physical count. What
is the correct inventory balance? 700,369
Solution:
Unadjusted Ending Inventory 635,248
Purchases F.O.B shipping point 65,121
Adjusted Inventory Balance 700,369
7
Basic Accounting
April 28, 2023
49. Cow Sing Trading sold 10 units of rechargeable lamp with a unit list price of P2,000 on June 1, 2022
to See Na Corporation. Given that the trade discount is 10% and the cash discount is 20%, and that
the cash discount period is 10 days and the credit period is 30 days. If See Na Corporation settles
their account on June 8, 2022, what is the actual amount they need to pay? 14,400
Solution:
Total List Price (2,000 x 10) 20,000
Multiplied by (1 - Trade Discount) 90%
Invoice PricE 18,000
Cash Discount (1 - Discount) 80%
Amount to be paid 14,400
50. The following is the summary of purchases and sales transactions that occurred during the month
end of Naevis Company.
Transaction VAT-inclusive Price

Purchased Equipment 362,418
Purchased Inventory 215,987
Sold Inventory 875,963
Returned Defective Equipment 81,624
Returned Defective Inventory 65,192
Compute for the VAT Payable at month end. Use the 12% VAT rate. 47,612
Solution:
Output VAT
Sold Inventory 875,963.00
Multiply: VAT Rate 0.12/1.12
93,853.18
LESS: Input VAT
Purchased Equipment 362,418.00
Purchased Inventory 215,987.00
Less: Returned Defective Equipment 81,624.00
Less: Returned Defective Inventory 65,192.00
Net Purchase Transactions 431,589.00
Multiply: VAT Rate 0.12/1.12
46,241.68
VAT Payable 47,612
8
Basic Accounting
April 28, 2023
51. On December 31, 2022, it was determined that Kwangya Merchandising’s inventory account has a
balance of P38,645. Throughout the year, the entity purchased P263,518 worth of inventory and was
able to sell 697 units costing P495 per unit. What amount of inventory was carried in the books of
Kwangya Merchandising at the year ended December 31, 2021? 120,142
Solution:
INVENTORY
Inventory 12/31/2021 120,142 345,015 Sales
Purchases 263,518 38,645 Inventory 12/31/2022
383,660 383,660
52. Mi Casa took a physical inventory on December 31, 2022 and determined that P873,645 of goods
were on hand. In addition, it was determined that P62,134 of goods were in transit, shipped FOB
destination, and were actually received two days after the inventory count. P39,871 of merchandise
were discovered to be in the possession of the carrier on the day of the count, whose purchase terms
were FOB shipping point. Office Supplies amounting to P20,000 were excluded from the count. On
December 31, 2021, the entity reported an inventory of P813,000, and net purchases of P561,897.
Purchases in 2022 were 15% higher than the previous year. After conducting an examination, it was
discovered that the 2021 ending inventory was actually understated by P50,000. How much is the
Cost of Goods Sold for 2022? 595,666
Solution:
Beginning Inventory 863,000*
Purchases 646,182**
Less: Ending Inventory (913,516)***
Cost of Goods Sold 595,666
*[813,000 + 50,000 (understatement)]

**(561,897 x 115%)
***(873,645 + 39,871)
9
Basic Accounting
April 28, 2023
Use the following information to answer items 23 and 24.
The following transactions transpired during November 2022.

● Nov 16 - purchased merchandise from FRNGL Supplier, P136,245 terms: 2/10, n/30; FOB
shipping point. The supplier paid a freight of 1,650.
● Nov 19 - purchased merchandise from ISTG Supplier, P164,350 terms: 3/10, 2/15, n/30; FOB
destination. The buyer paid a freight of 2,695.
● Nov 26 - paid the account with FRNGL Supplier in full.
● Nov 30 - paid the account with ISTG supplier in full.
53. Compute the amount paid to fully settle the account with FRNGL Supplier? 135,170
Solution:
Nov 16 Purchases 136,245
Freight-in 1,650
Accounts Payable - FRNGL 137,895
26 Accounts Payable - FRNGL 137,895

Purchase Discount (136,245 x 2%) 2,725
Cash 135,170
54. What total amount was paid to fully settle the account with ISTG Supplier? 158,368
Solution:
Nov 19 Purchases 164,350
Accounts Payable - ISTG 164,350
Cash 2,695
30 Accounts Payable - ISTG 164,350

Purchase Discount (164,350 x 2%) 3,287
Cash 158,368
The equity accounts of Valix Company have the following balances on December 31, 2022:
Ordinary share capital, P20 par, 500,000 shares authorized P3,000,000

Share premium - ordinary 1,800,000
Retained earnings 5,600,000
Treasury shares, at cost of P24 per share 240,000
55. Compute for the number of issued shares. 150,000
Solution:
Ordinary Share Capital 3,000,000
Divide by Par Value 20
Issued Shares 150,000
10
Basic Accounting
April 28, 2023
56. Compute for the number of outstanding shares. 140,000
Solution:
Issued Shares (item 55) 150,000
Less: Treasury Shares (240,000/24) 10,000
Outstanding Shares 140,000
57. Compute for the total shareholders’ equity. 10,160,000
Solution:
Ordinary Share Capital 3,000,000
Share premium - ordinary 1,800,000
Retained Earnings 5,600,000
Treasury Shares (240,000)
Shareholders’ Equity 10,160,000
Presented below is information related to Kieso Corporation

:
Share Capital - Ordinary, P10 par P4,300,000
Share Premium - Ordinary 700,000
Share Capital - Preference 8 ½%, P50 par 2,000,000
Share Premium - Preference 400,000
Retained Earnings 1,500,000
Treasury Shares - Ordinary (at cost) 150,000
58. The legal capital of Kieso Corporation is? 6,300,000
Solution:
Share Capital - Ordinary 4,300,000
Share Capital - Preference 2,000,000
Legal Capital 6,300,000
59. The total contributed capital related to ordinary shares is? 5,000,000
Solution:
Share Capital - Ordinary 4,300,000
Contributed Capital (Ordinary) 5,000,000
11
Basic Accounting
April 28, 2023
60. Brigham Corporation recorded the following journal entry on June 9, 2022:
Cash 42,250
Ordinary Shares 32,500
The explanation reads, “Issued ordinary shares for P130 per share.” The par value per ordinary
share is? 100
Solution:
Cash Received 42,250
Divide Price per Share 130
Number of Shares Issued 325
Ordinary Shares 32,500

Divide by Number of Shares 325
Par Value 100
12

Basic Accounting Prequalifying SolMan

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Basic Accounting Prequalifying SolMan

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Junior Philippine Institute of Accountants

Revamped and Reimagined Project Ulikid

➷ True or False with Solutions

➷ Short Problems with Solutions

18,175 x 105% = 19,083.75 Liabilities (Ending Balance)

85,670.00 Assets (Beginning Balance)

33. The following are the account balances of Ulikid Corp.

How much is the owner's equity? 720,300

Use the following information to answer items 35 to 37.

Use the following information to answer questions 41 - 44.

The following information pertains to Pacioli Corp.

Dec. 31 Prepaid Insurance 26,250

42. What is the carrying amount of the Unearned Revenue? 32,000

44. How much is the accrued interest to be recorded? 4,500

Cost of Goods Sold 4,139,685

Compute the value of the destroyed merchandise. 950,384

Inventory, beg 486,755

Use the following information for items 16 to 17.

46. How much was Bruno Company’s purchases? 681,800

Transaction VAT-inclusive Price

*[813,000 + 50,000 (understatement)]

Use the following information to answer items 23 and 24.

The following transactions transpired during November 2022.

26 Accounts Payable - FRNGL 137,895

30 Accounts Payable - ISTG 164,350

Use the following information to answer items 55 to 57.

Ordinary share capital, P20 par, 500,000 shares authorized P3,000,000

55. Compute for the number of issued shares. 150,000

56. Compute for the number of outstanding shares. 140,000

57. Compute for the total shareholders’ equity. 10,160,000

Use the following information to answer items 58 to 59.

Presented below is information related to Kieso Corporation

58. The legal capital of Kieso Corporation is? 6,300,000

Ordinary Shares 32,500

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