CUP 2

BASIC ACCOUNTING AND BASIC FINANCE

Easy Round 1 point each Theory – 10 seconds

Problem – 15 seconds

1. Which of the following is not one of the necessary processes performed in accounting in order to
provide information that is useful to interested users?
a. Identifying
b. Summarizing
c. Recording
d. Counting

ANSWER: d

2. Which of the following is not an accounting assumption?

a. Integrity
b. Periodicity
c. Economic entity
d. Going concern

ANSWER: a

3. Closing entries are necessary for

a. permanent accounts only.
b. temporary accounts only.
c. both permanent and temporary accounts.
d. permanent or real accounts only.

ANSWER: b

4. Which of the following is a short-term debt security?

a. Corporate bonds
b. Treasury Notes
c. Common stocks
d. Negotiable certificates of deposit

ANSWER: d

5. Which of the following is an asset?

a. Retained earnings
b. Mortgage payable
c. Investment property
d. Provision for income tax

ANSWER: c

6. As of December 31, 2014, Calexico Company has assets of P192,000 and owner's equity of
P117,000. How much are the liabilities for Calexico Company as of December 31, 2014?

ANSWER: P75,000
 7. Your accounts payable ledger shows the following amounts: P1,000 cr., P800 cr., P200 dr., and P100
dr. How much is the ending balance of your accounts payable?

ANSWER: P1,500

8. A T-Account is
a. A way of depicting the basic form of an account.
b. A special account used instead of a journal.
c. A special account used instead of a trial balance.
d. Used for accounts that have both a debit and credit balance.

ANSWER: a

9. A business incurs total expenses of ₱630,000 and reports loss of ₱270,000. How much is the total
revenue?
a. ₱900,000
b. ₱320,000
c. ₱380,000
d. ₱360,000

ANSWER: d

10. In the first month of operations, the total of the debit entries to the cash account amounted to
P1,200 and the total of the credit entries to the cash account amounted to P800. The balance of the
cash account is
a. P400 debit
b. P400 credit
c. P1,200 debit
d. P800 credit

ANSWER: a

EXTRA QUESTIONS:

11. When an item of expense is paid and recorded in advance, it is normally called a(n)

ANSWER: Prepaid expense

12. On March 1, a company received ₱3,000 cash from a client as an advance for 12 months’ worth of
delivery services. The company initially recorded this receipt as a debit to cash and a credit to
delivery service revenue. The adjusting entry on December 31 would include a:
a. debit to delivery service revenue, ₱2,500.
b. credit to unearned delivery service revenue, ₱500.
c. credit to delivery service revenue, ₱500.
d. No adjusting entry was required because the delivery service was for a one-year period
exactly.

ANSWER: a
Average Round 3 points each Theory – 15 seconds
Problem – 30 seconds

1. Druganaut Company buys a P2,100,000 van on credit. The transaction will affect the
a. income statement only.
b. balance sheet only.
c. income statement and owner's equity statement only.
d. income statement, owner's equity statement, and balance sheet.

ANSWER: b

2. If an adjustment is needed for unearned revenues, the

a. liability and related revenue are overstated before adjustment.
b. liability and related revenue are understated before adjustment.
c. liability is overstated and the related revenue is understated before adjustment.
d. liability is understated and the related revenue is overstated before adjustment.

ANSWER: c

3. Which of the following statements is correct?

a. The “cost of sales” or “cost of goods sold” account is an asset account.
b. A cash purchase of equipment increases the total assets of an entity.
c. Income decreases equity, while expenses increases equity.
d. The collection of accounts receivable does not affect the total assets of a business.

ANSWER: d

4. The term used to describe the process by which the money is brought into its present value is
__________________________.

ANSWER: Discounting

5. The balance in the supplies account on June 1 was P5,200, supplies purchased during June were
P3,500, and the supplies on hand at June 30 were P3,000. The amount to be used for the
appropriate adjusting entry is
a. P3,500.
b. P5,700.
c. P6,500.
d. P11,700.

ANSWER: b

6. The income statement and balance sheet columns of Iron and Wine Company's worksheet reflect
the following totals:
Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $72,000 $48,000 $60,000 $84,000

To enter the net income (or loss) for the period into the above worksheet requires an entry to the
a. income statement debit column and the balance sheet credit column for $28,000.
b. income statement credit column and the balance sheet debit column for $28,000.
c. income statement debit column and the income statement credit column for $48,000.
 d. balance sheet debit column and the balance sheet credit column for $48,000.

ANSWER: b

7. At year-end, Entity A’s total assets and total liabilities are ₱190 million and ₱70 million,
respectively. If Entity A had a beginning equity of ₱145 million and there were no contributions
from, or distributions to, the owner during the period, how much profit (loss) did Entity A earn
(incur) during the year?
a. ₱35 million
b. ₱25 million
c. (₱35 million)
d. (₱25 million)

ANSWER: d

8. Jake’s Market recorded the following events involving a recent purchase of merchandise:

Received goods for P60,000, terms 2/10, n/30.

Returned P1,200 of the shipment for credit.
Paid P300 freight on the shipment.
Paid the invoice within the discount period.

As a result of these events, the company’s inventory increased by how much?

ANSWER: P57,924

9. At December 1, Desdemona Enterprises reported owner’s equity of P120,000. During December,

the owner made additional investments of P12,000 and the company earned net income of P30,000.
If owner’s equity at December 31 totals P111,000, what amount of owner drawings were made
during the month?

ANSWER: P51,000

10. Dan plans to fund his individual retirement account (IRA) with the maximum contribution of
$2,000 at the end of each year for the next 10 years. If Dan can earn 10 percent on his contributions,
how much will he have at the end of the tenth year?
a. $12,290
b. $20,000
c. $31,874
d. $51,880

ANSWER: c

EXTRA QUESTIONS:

11. The following is selected information from Motley Corporation for the fiscal year ending October
31, 2014.
Cash received from customers P 300,000
Revenue recognized 375,000
Cash paid for expenses 180,000
Cash paid for computers on November 1, 2013 that will be used
for 3 years (annual depreciation is P16,000) 48,000
Expenses incurred, including interest, but excluding any depreciation 220,000
 Proceeds from a bank loan, part of which was used to pay for
the computers 100,000
Based on the accrual basis of accounting, what is Motley Corporation’s net income for the year
ending October 31, 2014?

ANSWER: P139,000

12. Theta prepares its financial statements for the year to 30 April each year. The company pays rent
for its premises quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The
annual rent was ₱84,000 per year until 30 June 2000. It was increased from that date to ₱96,000
per year. What rent expense and end of year prepayment should be included in the financial
statements for the year ended 30 April 2001?

ANSWER: Rent Expense, ₱94,000; Prepaid Rent, ₱16,000

Difficult Round 5 points each Theory – 20 seconds

Problem – 60 seconds

1. Accounting has been given various definitions. Which of the following is no one of those definitions?
a. Accounting is a service activity. Its function is to provide quantitative information, primarily
financial in nature, about economic entities that is intended to be useful in making economic
decisions.
b. Accounting is the art of recording, classifying, and summarizing in a significant manner and
in terms of money, transactions and events which are, in part of at least, of a financial
character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating the
results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.

ANSWER: c

2. Statement I: For a merchandising company, all accounts that affect the determination of income
are closed to the Income Summary account.
Statement II: A multiple-step income statement provides users with more information about a
company’s income performance.
Statement III: Inventory is classified as a current asset in a classified balance sheet.
a. None of the statements is true.
b. Only one statement is true.
c. Only one statement is false.
d. None of the statements is false.

ANSWER: d

3. Bi Den, Trump Co. records all disbursements using nominal accounts (i.e., expense method). On
December 31, 2019, Bi Den, Trump Co. has total expenses of ₱2,000,000 before considering the
following:
 a. Advertisement costs paid in January 2020 totaled ₱20,000. The advertisement was aired on
Fox News Network on December 28, 2019.
b. A three-year insurance on assets was obtained on August 1, 2019 for ₱108,000.
c. On July 15, 2019, Bi Den, Trump Co. entered into an operating lease requiring monthly
payments of ₱120,000 starting on the date of the lease contract and monthly thereafter.
d. Office supplies expense has a balance of ₱140,000. The physical count of office supplies
revealed a balance of ₱132,000.

How much is the 2019 adjusted total expenses?

ANSWER: ₱1,735,000

4. Your business acquired a building on May 1, 2010 for a total cost of P15,000,000. The building has
an estimated useful life of 20 years. Your business records depreciation only at year-end, and uses
calendar year as your business period. What is the balance of the related accumulated depreciation
account on May 1, 2020?

ANSWER: P7,250,000

5. A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal
interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT?
a. The periodic rate is less than 3%.
b. The present value would be greater if the lump sum were discounted back for more periods.
c. The present value of the $1,000 would be larger if interest were compounded monthly
rather than semiannually.
d. The PV of the $1,000 lump sum has a smaller present value than the PV of a 3-year, $333.33
ordinary annuity.

ANSWER: d

EXTRA QUESTIONS:

6. Winter Gloves Company had checks outstanding totaling $122,800 on its May bank reconciliation.
In June, Winter Gloves Company issued checks totaling $279,800. The July bank statement shows
that $321,400 in checks cleared the bank in July. A check from one of Winter Gloves Company's
customers in the amount of $2,000 was also returned marked "NSF." The amount of outstanding
checks on Winter Gloves Company's July bank reconciliation should be _____________________.

ANSWER: $81,200

7. The accounts of Entity A on December 31, 20x1 show the following balances:
Gross sales P 5,800,000
Sales returns 116,000
Sales discounts 1,160,000
Gross purchases 2,200,000
Freight-in 110,000
Purchase discounts 66,000
Purchase returns 22,000
Inventory, beg. 460,000
Inventory, end. 320,000

What is Entity A’s gross profit?

ANSWER: P2,162,000

8. The debit total of a trial balance exceeds the credit total by ₱600. In investigating the cause of the
difference, the following errors were determined:

a. A debit to accounts receivable of ₱2,100 was not posted;

b. A ₱10,500 credit to be made to the Purchases account was credited to Accounts payable
instead;
c. A ₱26,000 credit to be made to the Sales account was credited to the Accounts receivable
account instead;
d. The prepaid rent account balance of ₱15,800 was included in the trial balance as ₱18,500.

How much is the correct balance of the trial balance?

ANSWER: ₱15,500

9. The worksheet does not show

a. net income or loss for the period.
b. revenue and expense account balances.
c. the ending balance in the owner's capital account.
d. the trial balance before adjustments.

ANSWER: c

10. Identify which of the following statements is/are true?

I. Another name for balance sheet is statement of changes in financial position.
II. The balance sheet heading will specify a period of time.
III. An acceptable heading for a balance sheet is:
ABC Company
Statement of Financial Position
For the Year Ended December 31, 2017
IV. In a manual bookkeeping system, transactions are first recorded in a trial balance.
V. A journal entry includes the date, account titles, and amounts.

ANSWER: V only

Clincher Round Theory – 10 seconds

Problem – 20 seconds

1. If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the
a. seller will bear the freight cost.
b. carrier will bear the freight cost.
c. Inventory account will be increased.
d. Inventory account will not be affected.

ANSWER: c

2. Which of the following statements incorrectly describes an accounting concept or principle?

a. Under the accrual basis of accounting, revenues are recognized when earned and expenses
are recognized when incurred.
 b. Under the going concern concept, the business entity is assumed to carry on its operations
for a definite period of time.
c. Under the business entity concept, the business is recognized to have an identity separate
from its owner.
d. Under the time period concept, the life of the business is divided into series of reporting
periods.

ANSWER: b

3. Cost of goods sold is determined only at the end of the accounting period in which inventory
system?

ANSWER: Periodic inventory system