NATIONAL FEDERATION OF JUNIOR PHILIPPINE

INSTITUTE OF ACCOUNTANTS REGION IV

R4 Accounting Varsity Basic Acctg – Level 2
Batch 2019-2020

Instructions: Identify the choice that best completes the statement

or answers the question.
You have (1) hour and (30) minutes to answer this 50-item exam. Good
luck!

1. An overpayment error was discovered in computing and paying the

wages of a Bartson Repair Shop employee. When Bartson receives cash
from the employee for the amount of the overpayment, which of the
following entries will Bartson make?

a) Cash, debit; Wages Payable, credit

b) Wages Payable, debit; Wages Expense, credit
c) Cash, debit; Wages Expense, credit
d) Wages Expense, debit, Cash, credit

2. Merchandise subject to terms 1/10, n/30, FOB shipping point, is

sold on account to a customer for P15,000. The seller paid
transportation costs of P1,000 and issued a credit memorandum for
P5,000 prior to payment. What is the amount of the cash discount
allowable?

a) 150
b) 140
c) 160
d) 100

3. Which of the items below would appear in the Income Statement

columns of the work sheet?

a) Net Loss
b) Unearned Fees
c) Equipment
d) Prepaid Expense

4. Which of the accounting steps in the accounting process below

would be completed last?

a) preparing the financial statements

b) preparing the adjusted trial balance
c) journalizing
d) posting

5. On November 1, 2017, Key Co. paid P3,600 to renew its insurance

policy for 3 years and used an income statement account to record
this transaction. At December 31, 2017, Keys unadjusted trial balance
showed a balance of P90 for prepaid insurance and P4,410 for
insurance expense. What amounts should be reported for insurance
expense in Keys December 31, 2017 financial statements?

a) 1,200
b) 1,100
c) 1,010
d) 1,250

6. Which one of the fixed asset accounts listed below will not have a
related contra asset account?

a) Land
b) Delivery Equipment
c) Building
d) Office Equipment

7. An accrued expense is an expense

a) Not reasonably estimable.

b) Incurred and paid.
c) Paid but not incurred.
d) Incurred but not paid.

8.
June Cash 6,00
23 0
Capital stock 6,000
Invest cash in Able, Co.

The journal entry will:

a) Increase Cash and decrease Capital stock

b) Increase Capital stock and decrease Cash
c) Increase Cash and increase Capital stock
d) Decrease Cash and decrease Capital stock

9. An indication that the work sheet columns are in balance and the
work sheet is completed is

a) the word "Total" is written at the bottom of each pair of columns

b) each pair of columns is double underlined
c) each pair of columns has the totals circled
d) the final figures are written in ink
10. On January 1, 2017, Brecon Co. installed cabinets to display its
merchandise in customers stores. Brecon expects to use these cabinets
for 5 years. Brecons 2017 multi-step income statement should include

a) One-fifth of the cabinet costs in cost of goods sold.

b) One-fifth of the cabinet costs in selling, general, and
administrative expenses.
c) All of the cabinet costs in cost of goods sold.
d) All of the cabinet costs in selling, general, and administrative
expenses.

11. Which of the following accounts has a normal credit balance?

a) Sales
b) Sales Returns and Allowances
c) Merchandise Inventory
d) Delivery Expense

12. After all of the account balances have been extended to the
Income Statement columns of the work sheet, the totals of the debit
and credit columns are P87,500 and P98,300, respectively. What is the
amount of the net income or net loss for the period?

a) P10,800 net income

b) P10,800 net loss
c) P98,300 net income
d) P87,500 net loss

13. Accrued revenues would appear on the balance sheet as

a) assets
b) liabilities
c) prepaid expenses
d) stockholder's equity

14. The accounting cycle requires three trial balances be done. In

what order should they be prepared?

a) Post-closing, unadjusted, adjusted

b) Unadjusted, adjusted, post-closing
c) Unadjusted, post-closing, adjusted
d) Post-closing, adjusted, unadjusted

15. If there is a balance in the unearned subscriptions account after

adjusting entries are made, it represents a(n)

a) revenue
b) deferral
c) accrual
d) expense

16. The column of the income statement show the debits are equal to
P56,899 and credits are P60,333. What do this information mean to the
accountant?

a) Net income of P3,434

b) None are correct.
c) the accounts are out of balance
d) Net loss of P3,434

17. Lane Company acquires copyrights from authors, paying advance

royalties in some cases, and in others, paying royalties within 30
days of year-end. Lane reported royalty expense of P375,000 for the
year ended December 31, 2017. The following data are included in
Lanes December 31 balance sheets:

2016 2017
Prepaid royalties P60,000 P50,000
Royalties payable 75,000 90,000

During 2017 Lane made royalty payments totaling

a) 400,000
b) 380,000
c) 350,000
d) 370,000

18. Which of the following is a deferred cost that should be

amortized over the periods estimated to be benefited?

a) Advance from customer to be returned when sale completed.

b) Security deposit representing 2-months rent on leased office
space.
c) Property tax for this year payable next year.
d) Prepayment of 3-year insurance premiums on machinery.

19. The adjusting entry for rent earned that is currently recorded in
the unearned rent account is

a) Rent Revenue, debit; Unearned Rent, credit

b) Rent Expense, debit; Unearned Rent, credit
c) Unearned Rent, debit; Prepaid Rent, credit
d) Unearned Rent, debit; Rent Revenue, credit

20. If merchandise sold on account is returned to the seller, the

seller may inform the customer of the details by issuing a
a) sales invoice
b) purchase invoice
c) debit memorandum
d) credit memorandum

21. Wright Company sells for cash major household appliance service
contracts agreeing to service customers appliances for a 1-year, 2-
year, or 3-year period. Cash receipts from contracts are credited to
unearned service contract revenues and this account had a balance of
P1,440,000 at December 31, 2017, before year-end adjustment. Service
contract costs are charged to service contract expense as incurred
and this account had a balance of P360,000 at December 31, 2017.
Outstanding service contracts at December 31, 2017, expire as
follows:

During 2018 P300,00

0
During 2019 450,000
During 2020 200,000

What amount should Wright report as unearned service contract

revenues at December 31, 2017?

a) 490,000
b) 712,500
c) 1,080,000
d) 950,000

22. On November 1, 2017, Key Co. paid P3,600 to renew its insurance
policy for 3 years and used an income statement account to record
this transaction. At December 31, 2017, Keys unadjusted trial balance
showed a balance of P90 for prepaid insurance and P4,410 for
insurance expense. What amounts should be reported for prepaid
insurance in Keys December 31, 2017 financial statements?

a) 3,300
b) 3,400
c) 3,490
d) 3,390

23. Which of the following errors, each considered individually,

would cause the trial balance totals to be unequal?

a) a payment of P311 to a creditor was posted as a debit of P3,111 to

Accounts Payable and a debit of P311 to Accounts Receivable
b) cash received from customers on account was posted as a debit of
P140 to Cash and a credit of P140 to Accounts Payable
c) a transaction was not posted
d) a payment of P96 for insurance was posted as a debit of P46 to
Prepaid Insurance and a credit of P46 to Cash

24. The difference between the totals of the debit and credit columns
of the Adjusted Trial Balance columns on a work sheet

a) is the net difference between revenue, expenses, and dividends

b) is not unusual when preparing the work sheet
c) indicates there is an error on the work sheet
d) is the amount of net income or loss

25. Closing entries are dated in the journal as of

a) the last day of the accounting period, although they are actually
journalized after the end of the accounting period
b) the first day of the subsequent accounting period
c) the first day of the accounting period, although they are actually
journalized after the end of the accounting period
d) the date they are actually journalized, although they are
generally prepared after the end of the accounting period

26. Accumulated Depreciation appears on the

a) balance sheet in the property, plant and equipment section

b) income statement as an operating expense
c) balance sheet in the current assets section
d) balance sheet in the long-term liabilities section

27. The chart of account for the Frias Company includes some of the
following accounts:

Account Name Account Number

Cash 11
Accounts Receivable 13
Prepaid Insurance 15
Accounts Payable 21
Unearned Revenue 24
Capital Stock 31
Dividends 32
Fees Earned 41
Salaries Expense 54
Rent Expense 56

On the journal page 3, the following transaction was found:

Cash 750
Fees Earned 750

What is the post reference that will be found on the journal entry?

a) 3
b) 41
c) 11, 41
d) 11

28. The process of recording a transaction in the journal is called

a) summarizing
b) journalizing
c) recording
d) posting

29. Supplies are recorded as assets when purchased. Therefore, the

credit to supplies in the adjusting entry is for the amount of
supplies

a) that are in the ending balance

b) purchased
c) either used or remaining
d) used

30. Decker Company assigns some of its patents to other enterprises

under a variety of licensing agreements. In some instances advance
royalties are received when the agreements are signed, and in others,
royalties are remitted within 60 days after each license year-end.
The following data are included in Deckers December 31 balance sheet:

2016 2017
Royalties receivable P90,000 P85,000
Unearned royalties 60,000 40,000

During 2017 Decker received royalty remittances of P200,000. In its

income statement for the year ended December 31, 2017, Decker should
report royalty revenue of
a) 225,000
b) 215,000
c) 195,000
d) 220,000

31. Which of the following is an accrued liability?

a) Portion of long-term debt payable in current year.

b) Wages payable.
c) Cash dividends payable.
d) Rent revenue collected 1 month in advance.

32. What is the major difference between the Unadjusted Trial Balance
and the Adjusted Trial Balance?

a) The Adjusted Trial Balance will show the net income (loss) as an
additional account.
b) The Adjusted Trial Balance includes the postings of the
adjustments for the period in the balance of the accounts.
c) The Unadjusted Trial Balance will be used to record the
adjustments for the period.
d) Both will need to be in balance in order to continue with the end-
of-period processing

33. On January 2, 2017, Smith purchased the net assets of Jones

Cleaning, a sole proprietorship, for P350,000, and commenced
operations of Spiffy Cleaning, a sole proprietorship. The assets had
a carrying amount of P375,000 and a market value of P360,000. In
Spiffys cash-basis financial statements for the year ended December
31, 2017, Spiffy reported revenues in excess of expenses of P60,000.
Smiths drawings during 2017 were P20,000. In Spiffys financial
statements, what amount should be reported as Capital-Smith?

a) 415,000
b) 390,000
c) 410,000
d) 400,000

35. Which of the following accounts will not be closed to Income

Summary at the end of the fiscal year?

a) Unearned Rent
b) Salaries Expense
c) Fees Earned
d) Depreciation Expense

36. Using a perpetual inventory system, the entry to record the

return from a customer of merchandise sold on account includes a
a) credit to Merchandise Inventory
b) credit to Sales Returns and Allowances
c) debit to Cost of Merchandise Sold
d) debit to Merchandise Inventory

37. Which of the following supports the accrual basis of accounting?

a) revenue recognition concept

b) cash concept
c) revenue recognition and matching concepts
d) matching concept

38. Which of the following is an example of accrued revenue?

a) An agreement has been signed for swimming pool cleaning for the
next three months.
b) Swimming pool cleaning that has been provided and paid on the same
day.
c) Swimming pool cleaning that has been for three months in advance.
d) Swimming pool cleaning that has been provided but has not been
billed or paid.

39. After net income is entered on the work sheet, the Balance Sheet
debit and credit columns must

a) be the same amount as the total amount of the Income Statement

debit and credit columns
b) equal each other
c) not be equal to each other and need not be the same total amounts
as any other pair of columns on the work sheet
d) be the same amount as the total amount in the Adjusted Trial
Balance debit and credit columns

40. The arrangements between buyer and seller as to when payments for
merchandise are to be made are called

a) net cash
b) cash on demand
c) credit terms
d) gross cash

41. Under Gerber Companys accounting system, all insurance premiums

paid are debited to prepaid insurance. For interim financial
statements, Gerber makes monthly estimated charges to insurance
expense with an offset to prepaid insurance. Additional information
for the year ended December 31, 2017, is as follows:

Prepaid insurance at December 31, P150,000

2016
Charges to insurance expense 625,000
during 2017
(including a year-end adjustment
of P25,000)
Unexpired insurance premiums at 175,000
December 31, 2017

What was the total amount of insurance premiums paid by Gerber during
2017?

a) 625,000
b) 600,000
c) 650,000
d) 475,000

42. The premium on a 3-year insurance policy expiring on December 31,

2017, was paid in total on January 1, 2015. Assuming that the
original payment was recorded as a prepaid asset, how would total
assets and stockholders equity be affected during 2017?

a) Both total assets and stockholders equity would decrease.

b) Total assets would decrease and stockholders equity would
increase.
c) Both total assets and stockholders equity would increase.
d) Neither total assets nor stockholders equity would change.

43. At December 31, 2016, Cobb Company had a P695,000 balance in its
advertising expense account before any year-end adjustments relating
to the following:

I. Included in the P695,000 is P80,000 for printing sales catalogs

for a January 2017 sales promotional campaign.
II. Television advertising spots telecast during December 2016 were
billed to Cobb on January 2, 2017. The invoice cost of P45,000 was
paid on January 11, 2017.

Cobbs advertising expense for the year ended December 31, 2016,
should be

a) 660,000
b) 570,000
c) 740,000
d) 615,000

44. Merchandise with a sales price of P500 is sold on account with

term 2/10, n/30. The journal entry to record the sale would include a
a) Debit to Sales Discounts for P10
b) Debit to Accounts Receivable for P490
c) Credit to Sales for P500
d) debit to Cash for P500

45. In credit terms of 1/10, n/30, the "1" represents the

a) number of days in the discount period

b) percent of the cash discount
c) number of days when the entire amount is due
d) full amount of the invoice

46. Rent revenue collected 1 month in advance should be accounted for

as

a) A current liability.
b) A separate item in stockholders equity.
c) Revenue in the month collected.
d) An accrued liability.

47. The premium on a 3-year insurance policy expiring on December 31,

2017, was paid in total on January 1, 2015. Assuming that the
original payment was initially debited to an expense account, and
that appropriate adjusting entries have been recorded on December 31,
2015 and 2016, the balance in the prepaid asset account on December
31, 2016, would be

a) The same as the original payment.

b) Zero.
c) The same as it would have been if the original payment had been
initially debited to a prepaid asset account.
d) Lower than the balance on December 31, 2017.

48. The income statement is prepared from the

a) income statement columns of the work sheet

b) both the adjusted trial balance and the income statement columns
of the work sheet
c) adjusted trial balance
d) either the adjusted trial balance or the income statement columns
of the work sheet

49. The post-closing trial balance differs from the adjusted trial
balance in that it

a) does not take into account adjusting entries

b) does not include income statement accounts
c) does not include balance sheet accounts
d) does not take into account closing entries
50. If the two totals of a trial balance are not equal, it could be
due to

a) recording the same transaction more than once

b) failure to record a transaction
c) recording the same erroneous amount for both the debit and the
credit parts of a transaction
d) an error in determining the account balances, such as a balance
being incorrectly computed

---- Thank you for taking the exam. We will be informing you about
the results. ----

Answer Key:

1. c AVERAGE 21. d AVERAGE 41. c AVERAGE

2. d DIFFICULT 22. b AVERAGE 42. a DIFFICULT
3. a AVERAGE 23. a AVERAGE 43. a AVERAGE
4. a EASY 24. c AVERAGE 44. c AVERAGE
5. b AVERAGE 25. a AVERAGE 45. b EASY
6. a EASY 26. a EASY 46. a EASY
7. d EASY 27. c DIFFICULT 47. c EASY
8. c AVERAGE 28. b EASY 48. d AVERAGE
9. b AVERAGE 29. d EASY 49. b EASY
10. b EASY 30. b AVERAGE 50. d AVERAGE
11. a EASY 31. b EASY
12. a AVERAGE 32. b AVERAGE
13. a EASY 33. b EASY
14. b EASY 34. b EASY
15. b EASY 35. a EASY
16. a AVERAGE 36. d EASY
17. c AVERAGE 37. c EASY
18. d EASY 38. d EASY
19. d AVERAGE 39. b AVERAGE
20. d EASY 40. c EASY