L-NU AA-23-02-01-18

LYCEUM-NORTHWESTERN UNIVERSITY
Tapuac District, Dagupan City

COLLEGE OF BUSINESS EDUCATION

SEMI-FINALS EXAMINATION – FABM 210 Fundamentals of Accounting Part 2

2nd Semester, AY 2020– 20212

Prepared by: Amie Jane R. Miranda, CPA

Name:_____________________________________ Score:____________________

Student No.: _______________ Year/Section:___________ Date of Exam: ____________

I. MULTIPLE CHOICES. Choose the best answer from the choices and encircle your answer. Strictly “NO
ERASURES”.

1. A complete set of financial statements does not include which of the following?
a. Statement of comprehensive income
b. Statement of cost of goods sold and gross profit
c. Balance sheet
d. Statement of cash flows

2. A financial statement that shows the inflows and outflows of cash during a particular period of time
is known as:
a. income statement
b. statement of retained earnings
c. balance sheet
d. statement of cash flows

3. Which of the following terms is not used to refer to the income statement?
a. statement of profit or loss
b. statement of financial performance
c. statement of operations
d. statement of financial position

4. Entity A has total current assets of ₱100,000 and total current liabilities of ₱60,000. What is Entity
A’s current ratio?
a. 1.67
b. 0.67
c. 0.60
d. ₱40,000

5. Financial statements generally include all but which of the following:

a. Statement of profit or loss and other comprehensive income
b. Income Tax Return
c. Statement of changes in equity
d. Notes

6. Which of the following statements is correct?

a. The sole proprietor’s Drawings account is reported in the statement of profit or loss (income
statement).
b. Transactions are initially classified and recorded in the ledgers.
c. An example of an accountable event is a transaction that involves the transfer or exchange of
goods or services between two or more entities.
d. Summarizing means transferring information initially recorded in the journals to the ledger.

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7. Which of the following statements is incorrect?
a. The original source materials evidencing business transactions are called source documents.
b. Under the double-entry system of recording, for every peso of a debit, there must be a peso of a
credit.
c. The general ledger includes all accounts appearing in the trial balance while the subsidiary
ledgers provide additional detail in support of certain general ledger balances.
d. Assets, expenses, and drawings are decreased by debits and increased by credits.
e. The accounting process consists of the phases of recording, classifying and summarizing.

8. Another name for the balance sheet is

a. Statement of operations
b. Statement of financial position
c. Statement of financial balance
d. Sheet of balance

9. The statement of financial position heading will specify a

a. period of time.
b. point in time.
c. time after time.
d. happy time.

10. Which of the following is an element of the statement of financial position?

a. Expenses
b. Gains
c. Equity
d. Losses

11. Which of the following is an asset account?

a. Accumulated Depreciation
b. Accounts Payable
c. Prepaid Insurance
d. Unearned Revenue

12. Which of the following is a contra account?

a. Purchases
b. Allowance for bad debts
c. Owner’s capital
d. Cost of goods sold

13. What is the normal balance for an asset account?

a. Debit
b. Credit
c. Large
d. Zero

14. What is the normal balance for contra asset accounts?

a. Debit
b. Credit
c. Small
d. None of these

Use the following information for the next three questions:

The comparative balance sheet and statement of comprehensive income of ABC Co. on December 31,
20x1 are shown below:

ABC Co.
Statement of Financial Position
As of December 31, 20x1

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 ASSETS 20x1 20x0
Cash and cash equivalents ₱220,000 ₱100,000
Trade and other receivables 65,000 60,000
Inventory 60,000 240,000
Prepaid assets 20,000 80,000
365,00
Total current assets 0 480,000

Property, plant &

equipment 380,000 220,000
380,00
Total noncurrent assets 0 220,000

₱700,00
TOTAL ASSETS ₱745,000 0

LIABILITIES
Trade and other payables ₱310,000 ₱280,000

EQUITY
Owner’s capital 435,000 420,000

₱700,00
TOTAL LIABILITIES & EQUITY ₱745,000 0
   

ABC Company
Statement of Comprehensive Income
For the year ended December 31, 20x1

Sales ₱500,000
Cost of sales (300,000)
GROSS PROFIT 200,000
Rent income 75,000
Depreciation expense (120,000)
Insurance expense (60,000)
Bad debts expense (15,000)
Loss on sale of equipment (20,000)
PROFIT FOR THE YEAR 60,000
Other comprehensive income -
COMPREHENSIVE INCOME FOR THE
₱60,000
YR.

Additional information:
 Equipment with carrying amount of ₱120,000 was sold for ₱100,000 resulting to a loss on sale of
₱20,000.
 Acquisition of equipment for cash amounted to ₱400,000.
 Owner drawings totalled ₱45,000.

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15. How much is the net cash flows from (used in) operating activities?
a. 465,000
b. 426,000
c. 388,000
d. (42,000)

16. How much is the net cash flows from (used in) investing activities?
a. 300,000
b. 320,000
c. (300,000)
d. (220,000)

17. How much is the net cash flows from (used in) financing activities?
a. (42,000)
b. (45,000)
c. 120,000
d. 100,000

Use the following information for the next three questions:

The adjusted trial balance of Entity A on December 31, 20x1 is shown below:

ACCOUNTS Dr. Cr.

Cash 650,000
Accounts receivable 34,000
Prepaid insurance 5,000
Computer equipment 1,550,000
Accumulated depreciation 366,250
Loans payable (due after 2 yrs.) 1,000,000
Owner’s equity 1,254,000
Owner’s drawings 3,300,000
Service fees 5,689,000
Salaries expense 1,155,000
Rent expense 1,200,000
Utilities expense 187,500
Office supplies expense 95,000
Insurance expense 5,000
Prepaid office supplies 9,000
Depreciation expense 126,250
Interest expense 10,000
Interest payable 10,000
Utilities payable 7,500
Totals 8,326,750 8,326,750

18. What is the current ratio?

a. 39.87
b. 39.89
c. 39.98
d. 40.09

19. What is the return on total assets?

a. 1.38
b. 1.47
c. 1.55
d. 1.60

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20. What is the return on net assets?
a. 3.37
b. 3.48
c. 3.50
d. 3.52

21. Client Jay pays ABC Co. ₱1,000 in December for ABC to perform services for Jay in 45 days. ABC uses
the accrual basis of accounting. In December ABC will debit Cash for ₱1,000. What will be the other
account involved in the December accounting entry prepared by ABC (and what type of account is
it)?
a. Accounts Receivable (asset)
b. Prepaid Services (asset)
c. Service Revenues (revenue)
d. Unearned Revenues (liability)

22. ABC Co. performed services for Client Kay in December and billed Kay ₱4,000 with terms of net 30
days. ABC follows the accrual basis of accounting. In January ABC received the ₱4,000 from Kay. In
January, ABC will debit Cash since cash was received. What account should ABC credit in the January
entry?
a. Accounts Receivable
b. Service Revenue
c. Owner's Equity
d. Owner’s Drawings

23. ABC Co. follows the accrual basis of accounting and performs a service on account (on credit) in
December. The service was billed at the agreed upon amount of ₱3,500. ABC Co. debited Accounts
Receivable for ₱3,500 and credited Service Revenue for ₱3,500. The effect of this entry on the
balance sheet of ABC is to increase assets by ₱3,500 and to
a. Decrease Assets By ₱3,500
b. Increase Owner's Equity By ₱3,500
c. Decrease Owner’s Equity By ₱3,500
d. Increase Liabilities By ₱3,500

24. Which of the following would not be a current asset?

a. Accounts Receivable
b. Land
c. Prepaid Insurance
d. Supplies

25. Which of the following would normally be a current liability?

a. Note Payable Due In Two Years
b. Unearned Revenue (Unearned Income)
c. Prepaid insurance
d. Accounts receivable

26. When an owner draws ₱5,000 from the business, the asset Cash decreases by ₱5,000. What is the
other effect on the balance sheet?
a. Total Assets Increases
b. Owner's Equity Decreases
c. Owner's Equity Increases
d. No effect on equity

27. Notes Payable could not appear as a line on the balance sheet in which classification?
a. Current Assets
b. Current Liabilities
c. Noncurrent Liabilities
d. All of these

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28. ABC Co. has current assets of ₱50,000 and total assets of ₱150,000. ABC has current liabilities of
₱30,000 and total liabilities of ₱80,000. What is the amount of ABC's owner's equity?
a. 20,000
b. 30,000
c. 70,000
d. 120,000

29. The heading of the statement of profit or loss and other comprehensive income will specify which of
the following?
a. apoint in time
b. aperiod of time
c. from this moment in time
d. time is gold

30. Income earned by a company from its main operating activities are normally referred to as
a. Revenues
b. Gains
c. Expenses
d. Losses

31. A company disposes of equipment that it no longer uses in its business. The amount received by the
company is more than the amount the asset is carried at in the accounting records. The company
will report a(n)
a. Expense
b. Gain
c. Loss
d. Revenue

32. Liabilities are classified as current

a. when they are expected to be settled within 12 months from the end of the reporting period.
b. when they are expected to be settled beyond 1 year from the end of the reporting period.
c. whenever management wants to classify them as current.
d. any of these.

33. The accounts of Entity A on December 31, 20x1 show the following balances:

Cost of goods sold ₱250,000

Insurance expense 120,000
Advertising expense 18,000
Freight-out 36,000
Loss on sale of equipment 4,000
Rent expense (one-half pertains sales department) 120,000
Salaries expense (1/4 pertains to non-sales
personnel) 200,000
Sales commission expense 20,000
Bad debts expense 6,000
Interest expense 1,000

How much is the general and administrative expenses?

a. 446,000
b. 296,000
c. 286,000
d. 236,000

34. Imagine you are a business manager. Your company has an opportunity to venture out into a new
market with a new product. However, your current resources are limited. In order to take the
opportunity, you need to discontinue the production of one of your existing products. Your

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 company’s accountant provided you with the following information to help you decide which
product to discontinue.

  Product A Product B Product C

Net sales (income) 5,000,000 3,500,000 2,100,000
Attributable costs (expenses) (4,800,000) (2,275,000) (630,000)

Which product will you most likely consider to stop producing?

a. Product A
b. Product B
c. Product C
d. All them

35. Imagine you are a business manager of a manufacturing company. Your company’s manufacturing
process involves four (4) stages. The first stage takes most of the manufacturing time and costs and
is the bottleneck (i.e., obstacle, hindrance or handicap) in the manufacturing process. The demand
for your product is high and your company can sell all that it can produce. Your predicament now is
your productive capacity.

You want to streamline the first stage and came up with two proposals. Each of those proposals
decreases the manufacturing time but entails additional costs, such as additional investment in new
machines and employment of additional personnel. Your accountant prepared the following cost
analysis to help you decide which of those proposals to implement:

  Existing set-up Proposal #1 Proposal #2

Units of production 4,000 4,400 5,300
Manufacturing time (in days) 30 30 30
Attributable costs 1,000,000 1,249,600 1,346,200
Sale price per unit 450 450 450

So what is your decision? (Hint: Prepare pro-forma statements of profit for each of the proposals,
including the existing set-up.)
a. Implement Proposal #1
b. Implement Proposal #2
c. Retain the existing set-up
d. This is too difficult for me. I’m quitting my job.

36. It is the principle of a sound tax system which requires that taxes should be imposed in manner that
is proportionate to the taxpayer’s ability to pay.
a. Fiscal adequacy
b. Theoretical justice
c. Administrative feasibility
d. Eminent domain

TAX TABLE
If taxable income is: Tax due is:
 Not over ₱250,000  0%
 Over ₱250,000 but not over ₱400,000  20% of the excess over ₱250,000
 Over ₱400,000 but not over ₱800,000  ₱30,000 + 25% of the excess over ₱400,000
 Over ₱800,000 but not over ₱2,000,000  ₱130,000 + 30% of the excess over ₱800,000
 Over ₱2,000,000 but not over  ₱490,000 + 32% of the excess over
₱8,000,000 ₱2,000,000
 Over ₱8,000,000  ₱2,410,000 + 35% of the excess over
₱8,000,000

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37. Ms. Z, single with no qualified dependent, earns taxable compensation income of ₱3,230,000 during
a taxable year. How much is the tax due of Ms. Z?
a. 338,600
b. 683,800
c. 838,600
d. 883,600

38. Information on Mr. Y’s compensation is as follows:

Regular:
Basic monthly salary 22,000
Cost of living allowance (COLA) per
month 1,000
Laundry allowance per month 300
SSS contribution 581.30
PhilHealth contribution 275
Pag-IBIG contribution 100
Union dues 100

For the year:

Overtime pay (total for the year) 11,000
13th month pay 22,000

Note: Laundry allowance is not taxable up to ₱300 per month.

How much is the tax due for the year?

a. 4,864
b. 4,684
c. 4,865
d. 0

39. The accounting records of a taxpayer’s business show the following information for the taxable year:

Accounts Dr. Cr.

Sales ₱1,280,000
Sales returns and discounts ₱60,000
Inventory, beg. 40,000
Purchases 180,000
Commissions expense 30,000
Communication, Light & Water 16,000
Depreciation expense 25,000
Office Supplies expense 10,000
Rent expense 30,000
Salaries expense 340,000
Transportation expense 19,000
₱750,00 ₱1,280,00
Totals
0 0

Additional information:
 The ending inventory per physical count is ₱70,000.

How much is the tax due assuming the taxpayer elects to deduct itemized deductions?
a. 30,000

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 b. 80,000
c. 50,000
d. d. 0

40. Mr. B’s gross salary for the month of March 20x1is ₱64,000 before deductions for the following: SSS
contribution of ₱581.30, PhilHealth contribution of ₱437.50,Pag-IBIG contribution of ₱100 and
withholding tax. Mr. B’s employer withholds income taxes on a monthly basis. How much is the net
pay of Mr. B?
a. 49,895.20
b. 51,094.20
c. 52,994.20
d. 55,694.20

41. Mr. C, a resident citizen, earns the following passive incomes, gross of final taxes:

Interest income from a peso bank deposit ₱3,000

Winnings from Lotto 60,000

How much is the total final tax on Mr. C’s passive incomes?
a. 7,800
b. 8,600
c. 9,800
d. 12,600

42. A business is required to pay VAT if

a. it is VAT-registered.
b. it has annual total sales or receipts that exceed ₱3,000,000.
c. there are reasonable grounds to believe that its annual total sales or receipts will exceed
₱3,000,000.
d. Any of these

43. The VAT included in the sale price of a seller is called

a. input VAT.
b. selling VAT.
c. output VAT.
d. VAT man.

44. The VAT included in the purchase price paid by a buyer is called
a. input VAT.

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 b. selling VAT.
c. output VAT.
d. VAT mobile.

45. You own a VAT-registered business. During the period, your business collected ₱2,576,000 from
sales and paid ₱1,008,000 for purchases. Your business neither extends credit to customers nor
makes purchases on credit.The amount of VAT that you are required to pay to the BIR is
a. 309,120.
b. 188,160.
c. 168,000.
d. 276,000.
ajmiranda
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Goodluck and Godbless

Reviewed and Checked by:

Dr. Genoveva Y. Reyes, CPA, FRIAcc

Dean, College of Business Education

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