FINANCIAL ACCOUNTING AND REPORTING MIDTERM DEPARTMENTAL
EXAMINATION
2nd Term., A.Y. 2018 - 2019
BAFACR1X Midterm Exam
NAME: (surname first) ________________________________ SCORE: __________________
YR./ SEC.: _________________
DATE: ___________________
GENERAL DIRECTION: You are given two-part examination, Part I – Theories (1pt each) and Part II Problem
Solving – (1pt each). Read and analyze the following questions and choose the best answer by shading the
letter of your choice in your answer sheet. STRICTLY NO ERASURES ARE ALLOWED.
PART I – THEORIES (1PT EACH)
1. Which of the following steps in the accounting cycle are listed in logical order?
a. Post the closing entries, take a post-closing trial balance, and journalize the closing entries.
b. Post the journal entries to the general ledger account, prepare a worksheet, and then take a
trial balance.
c. Journalize transactions, post entries to general ledger, then prepare a trial balance.
d. Prepare the income statement, prepare the balance sheet and then prepare a trial balance.
2. A trial balance
a. Proves that debits and credits are equal in the ledger
b. Supplies a listing of open accounts and their balances that are used in preparing financial
statements.
c. Is normally prepared three times in the accounting cycle.
d. All of these
3. Failure to record the unexpired portion of insurance premium paid would
a. understate expense
b. understate profit
c. overstates owner’s equity
d. overstates liabilities
4. Statement 1: In general, debits refer to increases in account balances, and credits refer to
decreases.
Statement 2: All liability and equity accounts are increased on the credit side and decreased on
the debit side.
a. True, True
c. False, True
b. True, False
d. False, False
5. Statement 1: If purchased of supplies was recorded using the asset method and no adjusting
entry was made, the net income will be understated and the assets will be overstated.
Statement 2: If cash received for services to be rendered in the future was recorded by debiting
cash and crediting service revenue and no adjustment was made at the end of the period, the
net income and revenues for the period will be both understated.
a. True, True
c. False, True
b. True, False
d. False, False
6. Choose the correct statement
a. No adjusting entries should be necessary for the inventory account if the periodic inventory
system is used.
b. Example of accrued expenses include wages payable and depreciation expense.
c. Accrued items are those for which recognition of the related revenue or expense occurs in an
accounting period after the entity pays or receives cash, respectively.
d. Reversing entries are done at the beginning of the next accounting period and are optional.
7. Statement 1: In a merchandising operation, the sales account should include only credit sales
of merchandise.
Statement 2: If goods are sold at a mark-up of 75% on cost, the gross profit is 75 of cost.
a. True, True
b. True, False
c. False, True
d. False, False
8. Which of the following companies would be likely to use perpetual system?
a. Drugstore
c. Car dealer
b. Hardware store
d. School and supplies store
9. Which of the following statements is not correct?
a. Physical possession is not required for legal title to inventory.
b. A cash discount has no account of its own and requires no special accounting entry.
c. The periodic inventory system utilizes a purchases account.
d. The sales account is used only for the sales of inventories.
10. FOB shipping point means:
a. Title passes at shipping point; seller is responsible to pay for transportation cost
b. Title passes at shipping point; buyer is responsible to pay for transportation cost
c. Title does not pass at shipping point, however, buyer is responsible for the transportation cost
d. Title passes at place of the buyer; buyer is responsible to pay for the transportation cost
11. Which of the following statements is not a characteristic of a perpetual inventory system?
a. Sales are recorded with a corresponding entry to update the cost of goods sold.
b. The company maintains detailed records of the cost of each inventory and continuously show
the inventory that should be on hand.
c. All purchase transactions are recorded to the Merchandise Inventory account.
d. Shipping costs are recorded in a separated account called “Freight-in”.
12. Which of the following is not a characteristic of the periodic system?
a. Periodic system is generally used by enterprises maintaining numerous inventory
items with low unit costs.
b. The inventory quantity is determined by means of a physical count at year-end
and the quantity obtained is subtracted from the total units available for sale to
determine the units sold during the period.
c. The entry to record the sale of goods is accompanied by debiting Cost of goods
sold and crediting Inventory account.
d. Purchases of goods are recorded by debiting Purchases account.
13. Which of the following statements is false?
a. The difference between list price and invoice price is equal to the amount of trade
discount.
b. Trade discounts are a convenient means of reducing list price to invoice price.
c. Revenue from the sale of merchandise with a trade discount is entered in the
accounting records at list price.
d. Trade discounts are not identical to cash discounts.
14. ABC Co. sold P 22,400 of merchandise on account to a customer on January 16, 2018, terms:
FOB Destination, 2/10, n/30 and the customer paid the shipping costs of P 1,500. What would
be the journal entry by ABC Co. for the payment of shipping costs by the customer on January
16, 2018 if the company uses perpetual inventory system?
a. Freight in
1,500
Cash
1,500
b. Accounts receivable
1,500
Merchandise Inventory
1,500
c. Freight-out
1,500
Accounts receivable
1,500
d. Merchandise Inventory
1,500
Accounts receivable
1,500
15. Statement 1: Beginning inventory can be computed by adding ending inventory to cost of goods
sold less cost of goods purchased.
Statement 2: The excess of Output tax over the Input tax is known as VAT payable and is
considered a current liability until it is remitted to Bureau of Internal Revenue.
a. True, True
b. True, False
16.
c. False, True
d. False, False
The following are advantages in using special journals except:
a. The use of special journals often reduces recording time.
b. When special journals are used, the recording step in the accounting cycle can be divided
among several accounting personnel.
c. Personnel making entries in the special journals need not have a thorough knowledge of the
entire accounting system
d. None of the above
17. Which of the following items would be recorded in the purchase journal?
a.
b.
c.
d.
Supplies purchased on account
Equipment purchased on account
Merchandise purchased on account
All of the above.
18. The controlling account in the general ledger that summarizes the debits and credits to the
individual accounts in the customers’ ledger is called
a. Accounts payable ledger
b. Accounts receivable ledger
c. Purchases ledger
d. Sales ledger
19. Statement 1: The form of Balance sheet that lists assets on the left-hand side of the statement
with the liabilities and owner’s equity on the right-hand side is referred to as “Report form”.
Statement 2: Financial statements should be prepared at least annually.
a. True, True
b. True, False
c. False, True
d. False, False
20. Statement 1: Assets will be classified as current when it is expected to be realized within twelve
months after the reporting date.
Statement 2: Expenses in the income statement presented using the nature of expense method
are aggregated according to their nature and are not reallocated among various functions within
the entity.
a. True, True
c. False, False
b. False, True
d. True, False
PART II - PROBLEM SOLVING (1PT EACH)
21. Comparison of the balance sheet of ABC Co. at the end of 2018 with its balance sheet at the end
of 2017 showed a decrease in total assets of P 69,000 and owner’s equity by P 15,000. The
change in liabilities during the year was
a. Increase of P 84,000
c. Decrease of P 54,000
b. Decrease of P 84,000
d. Increase of P 54,000
22. DEF Co. had total assets of P 20,000,000 and total equity of P 15,000,000 on January 1. During
the year, assets increased by P 3,000,000 and liabilities decreased to P 4,000,000. DEF Co.
also had withdrawals of P 1,000,000 and additional investments of P 2,500,000.W hat amount of
net income/ net loss should be reported for the year?
a. P 7,500,000 net income
c. P 7,500,000 net loss
b. P 2,500,000 net income
d. P 2,500,000 net loss
Use the following information for no. 23-24.
The following transactions and events relate to GHI Co. for the current accounting period:
a.) Sold merchandise costing P 450,000 for P 100,000 cash and P 700,000 on account.
b.) Perpetual inventory system is used.
c.) Purchased land for P 1,000,000 cash with P 3,000,000 mortgage payable.
d.) Received payment on account, P 120,000
e.) Utilities expense incurred for the month, P 80,000
f.) Estimated uncollectible accounts is 2% of the outstanding accounts receivable. The balance
of accounts receivable and allowance for bad debts at the beginning of the month is P 500,000
and P 5, 000, respectively. During the month, there are recovery of accounts of P 4,000.
g.) Depreciation for the month is P 15,000.
23. The foregoing transactions and events increased the total assets by
a. P 3,080,000
b. P 246,000
c. P 3,326,000
d. P 3,623,000
24. The foregoing transactions and events increased the total equity by
a. P 3,080,000
b. P 246,000
c. P 3,326,000
d. P 3,623,000
Use the following information for nos. 25-28.
The trial balance of JKL Company is shown below.
JKL Company
Trial Balance
As of December 31, 2018
Cash
Accounts Receivable
Office Equipment
Accounts Payable
JKL, Capital
Fees income
Salaries Expense
Rent Expense
Utilities Expense
Total
Debit
P 70,000
25,000
90,000
Credit
P 65,000
107,500
62,500
25,000
5,000
P 216,600
1600
P 235,000
In the process of verifying the amount in the trial balance, the following errors were discovered:
(a) A debit to P 5,000 was not posted to accounts payable.
(b) A debit to utilities expense for P 1,000 was posted as P 100.
(c) A debit entry for accounts receivable was posted to the credit side P 5,000.
(d) Fees income of P 2,500 was posted twice.
25. The corrected trial balance of the JKL company should show total debits of
a. P 228,500
c. P 231,000
b. P 226,000
d. P 227,500
26. The corrected net income of JKL Company is
a. P 27,500
c. P 30,000
b. P 30,900
d. P 32,500
27. How much is the total assets of JKL Company?
a. P 185,000
b. P 195,000
28. How much is the total liabilities of JKL Company?
a. P 60,000
b. P 96, 600
c. P 180,000
d. P 190,000
c. P 65,000
d. P 60,900
Use the following information for no. 29.
Prepaid Insurance:
Balance beginning of year
Balance end of year
P 5,600
6,400
During the year, an additional business insurance policy was purchased. A 2-year premium of P
2,500 was paid and charged to Prepaid Insurance. Assume that the entity prepares statements
and adjusting entries only once each year.
29. What is the adjusting journal entry to arrive at ending the ending balance?
a. Debit Insurance Expense and credit Prepaid Insurance, P 1,700
b. Debit Prepaid Insurance and credit Insurance Expense, P 1,700
c. Debit Prepaid Insurance and credit Insurance Expense, P 800
d. Debit Prepaid Insurance and credit Insurance Expense, P 6,400
30. The accountant of MNO Co. made the following adjusting entry on December 31.
Prepaid Rent
Rent Expense
P 1,800
P 1,800
If annual rent is paid in advance every October 1. The original transactions entry made was
a. Debit Prepaid Rent and credit Cash, P 1,800
b. Debit Rent Expense and credit Cash, P 1,800
c. Debit Rent Expense and credit Cash, P 2,400
d. Debit Rent Expense and credit Cash, P 7,200
Use the following information for no. 31-32.
On June 1, 2018, Guzman Forest Products sold merchandise of P 2,500 for each Watunog
Discman, terms: 2/10,n/30. Afable Audio bought seven units, less trade discounts of 10% and
20%.
31. How much did Afable Audio pay on June 8, 2018? (Selling price is exclusive of VAT)
a. P 12,348
b. P 18,823.84
c. P 19,208
d. P 13,829.76
32. How much is the sales discount recorded on June 8, 2018?
a. P 282.24
b. P252
c. P 250
d. P 242
Use the following information for no. 33-37.
At the beginning of the current season on April 1, the ledger of Cho Cho Pro Shop showed cash
P 250,500, Merchandise Inventory P 300,500 and Cho Ramos, Capital P 551,000.The following
transactions are completed during April. ( Note : transactions pertaining to merchandise is VAT
inclusive.)
April
5
Purchased golf bags,clubs and balls on account from Balata Co.,P 179,200, FOB
Shipping point, terms: 2/10,n/60.
7
Paid freight on Balata purchase, P 8,000.
9
Received credit from Balata Co. for merchandise returned, P 22,400.
10
Sold merchandise on account to members P 12,096, terms n/30.
11
Purchased golf shoes, sweaters, and other accessories on account from Arrow
Sportswear, P 73,920, terms: 1/10,n/30.
14
Paid Balata Co. in full.
16
Received credit from Arrow Sportswear for merchandise returned, P 7,840.
18
Made sales on account to members for P 41,440, terms,n/30.
20
Paid Arrow Sportswear in full.
27
Granted credit to members for clothing that did not fit, P 3,360.
30
Made cash sales, P 67,200.
30
Received payments on account from members, P 19,100.
-
All sale transactions are sold at 125% of cost
The company uses perpetual inventory system
33. How much is the balance of Merchandise Inventory on April 30, 2018?
a. P 468,270
c. P 119,770
b. P 420,860
d. P 420,270
34. How much is the balance of Cash on April 30, 2018?
a. P 109,716.80
c. P 240,555.20
b. P 175,136.20
d. P 185,080.80
35. How much is the balance of (vat payable)/vat creditable on April 30, 2018?
a. ( P 10,897.20)
c. P 12,576
b. P 10,897.20
d. (P 12,576)
36. How much is the balance of Accounts Receivable on April 30, 2018?
a. P 50,176
c. P 34,436
b. P 31,076
37. How much is the gross profit for the month of April 2018?
a. P 20,960
b. P 23,960
d. P 53,536
c. P 20,096
d. P 29,630
Use the following information for nos. 38-40.
On February 1, 2018, a fire destroyed all the merchandise inventory on hand of CAMMEE
Company. The following information was available from the company’s accounting records,
which were saved from the fire by an employee;
Cost of goods sold
Transportation-in
Merchandise Inventory, 1/1/2018
Purchase discount
Purchase returns and allowances
Purchases
P 1,260,000
39,600
300,000
2% of Purchases
46,200
60,000 more of cost of goods sold
38. How much is the value of the destroyed merchandise?
a. P 372,000
b. P 1,287,000
c. P 1,260,000
d. P 327,000
39. How much is the cost of goods available for sale?
a. P 1,587,000
b. P 1,287,000
c. P 1,260,000
d. P 1,547,400
40. If goods are sold at a mark-up of170% on cost, how much is the sales for the period?
a. P 3,402,000
c. P 3,204,000
b. P 2,142,000
d. P 2,412,000
Use the following information for no. 41-44 .
At the end of December 31, 2018, the following sales invoices for selling of inventory were not
yet recorded by XYZ Co.
Invoice date
12/31/2018
1/2/2019
Selling price
P 400,000
P 750,000
Cost
P 320,000
P 600,000
Date Shipped
12/22/2018
12/28/2018
Date Received
12/25/2018
1/2/2019
12/27/2018
P 250,000
P 200,000
1/3/2019
1/5/2019
1/10/2019
12/30/2018
P 150,000
P 230,000
P 120,000
P 184,000
12/31/2018
12/30/2018
1/1/2019
1/2/2019
FOB terms
Destination
Shipping
point
Shipping
point
destination
Shipping
point
The following are the unadjusted balances of each accounts before recording the following
invoices:
Accounts Receivable
P 1,000,000
Merchandise Inventory
P 3,000,000
Sales
P 5,000,000
Cost of goods sold
P 2,500,000
41. How much is the adjusted balance of Accounts Receivable?
a. P 2,780,000
c. P 2,530,000
b. P 2,630,000
d. P 2,380,000
42. How much is the adjusted balance of Merchandise Inventory?
a. P 1,896,000
c. P 1,696,000
b. P 1,576,000
d. P 1,656,000
43. How much is the adjusted balance of Sales ?
a. P 6,380,000
b. P 6,780,000
c. P 6,630,000
d. P 6,530,000
44. How much is the adjusted balance of Cost of goods sold?
a. P 3,924,000
b. P 3,804,000
c. P 3,604,000
d. P 3,724,000
Use the following information for no. 45-47
MTC Company had the following cash transactions during September. Record only the
transactions relating to the cash receipts journal and total the columns using the Cash Receipts
Journal below.
Sept
1
Received payment from Alexis Food Corp for accounts receivable. The
check was P60,000. A 2% discount was taken
8
Cash sales for the week amounted to P1,000.00
10
Mark, the owner, invested an additional P5,000.00 in the Company
amount of the
20
Received payment from Allan for accounts receivable. Check was for P2, 000.00 and
discount of P100.00 was taken.
31
Cash paid for salaries P4, 000.00
31
Received payment on account from Glenn in the amount of P5, 000.00. Payment was
made after the discount period.
45. How much is the balance of cash on the cash receipts journal?
a. P 70,000
c. P 65,000
b. P 69,100
d. P 71,100
46. How much is the balance of sales discount in the cash receipts journal?
a. P 1,300
c. P 100
b. P 1,200
d. P1,800
47. How much is the total amount of accounts receivable credited in the cash receipts journal?
a. P 60,000
c. P 67,000
b. P 69,600
d. P 60,900
Use the following information for no. 48-50
BLK Company have the following assets as of December 31, 2018. The total equity as on
December 31, 2018 is P75, 000.
Accounts
Notes Receivable(to be collected on
December 31, 2020)
Accounts Receivable
Furniture and Fixtures
Office Supplies
Cash
Office Equipment
Inventories
Land
Building
Total Assets
Amounts
P
15,000
12,000
10,000
500
21,500
33,100
20,000
10,000
3,000
125,100
48. How much is total current assets as of December 31, 2018 to be presented of the Statement of
Financial position?
a. P 54,000
c. P 71,100
b. P 69,000
d. P 60,900
49. How much is the total non-current assets as of December 31, 2018 to be presented of the
Statement of Financial position?
a. P 56,100
b. P 71,100
c. P 54,000
d. P 60,900
50. How much is the total current liabilities as of December 31,2018 to be presented in the
Statement of Financial Position , if non-current liabilities is equal to P 30,000?
a. P 10,200
c. P 50,100
b. P 41,100
d. P 20,100