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Intermediate Accounting 1 Test Bank
BS Accountancy (Urdaneta City University)
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1. Which of the following is considered as an income?
a. Discount on Notes Receivable
c. Deferred Revenue
b. Unearned Interest Income
d. None of these
2. Which of the following adjusting entries may a reversing entry be used?
a. Debit insurance expense, credit prepaid insurance
b. Debit interest receivable, credit interest income
c. Debit unearned rental income, credit rental income
d. Debit depreciation expense, credit accumulated depreciation
3. Issuing of accounting standards is the responsibility of the
a. PICPA
b. FRSC
c. AASC
d. CPE Council
4. These are the principal means through which an entity communicates its financial information to
those outside it.
a. Managerial reports b. segment reports
c. Financial statement d. directors’ statements
5. Which of the following is not among the economic resources of a business enterprise?
a. Money
c. Obligations to pay money
b. Products or output of the enterprised. Ownership interests in other enterprises
6. An accounting (financial reporting) period may be
a. One month
b. one quarter
c. one year
d. a, b or c
7. Business entity produces financial statements at arbitrary points in time in with which basic
accounting concept?
a. Objectivity
b. Periodicity
c. Conservatism
d. Matching
8. Comparability is sometimes sacrificed for
a. Reliability
b. Conservatism
c. Objectivity
d. Relevance
9. One of the fundamental qualitative characteristics of financial statements is
a. Relevance
b. Timeliness
c. Neutrality
d. Completeness
10. The valuation basis used in conventional financial statement is
a. Replacement Cost
c. Original Cost
b. b. Fair Value
d. A mixture of cost and value
11. They are interested in information that enables them to determine whether their loans, and the
interest attaching to them, will be paid when due.
a. Investors
b. lenders
c. suppliers
d. public
12. Who has the primary responsibility for the preparation and presentation of the financial statements of
an entity?
a. Shareholders
b. board of directors
c. management
d. accountant
13. This information is useful in assessing am entity’s its investing, financing and operating activities
during the reporting period
a. Economic resources b. Financial structure c. Cash Flow
d. performance
14. A systematic compilation of a group of accounts; also called a “book of secondary entry”
a. Trial balance
b. ledger
c. worksheet
d. journal
15. The appropriate book of account in which the receipt of a cash dividend is recorded
a. cash receipts journal b. Sales journal
c. Purchases journal d. general journal
16. The normal balance of any account is the
a. Left side
c. side which increases that account
b. Right side
d. side which decreases that account
17. It is the difference between the debit and the credit side of a T account.
a. Normal balance
c. account balance
b. discount
d. a and c
18. The effect of the closing entries is to:
a. Change assets
c. Change retained earnings
b. Change liabilities d. Change the debit balances of all accounts into credits and vice versa
19. Which of the following would not be classified as cash?
a. Personal checks
b. Travelers checks
c. Cashier’s checks
d. Postdated checks
20. When making payments to suppliers, an entity normally credits this account
a. Cash
b. Vouchers payable
c. Cash in Bank
d. Accounts payable
21. In an imprest system, it is the fund set aside for small disbursements
a. Pretty cash fund
b. Dividends Fund
c. payroll fund
d. Petty cash fund
22. A petty cash system is designed to
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a. Cash checks for employees.
c. Account for all cash receipts and disbursements
b. Handle cash sales
d. Pay small miscellaneous expenses
23. Which of the following should be recorded in Accounts Receivable?
a. Receivables from officers
c. Dividends receivable
b. Receivables from subsidiaries
d. None of These
24. Receivables arising from sales to customers are best described as
a. Accounts receivables b. Note receivables c. trade receivables d. non-trade receivables
25. Materials amounts of anticipated discounts and allowances should be recorded
a. In the period of sale
c. when the boss says so
b. When discounts are availed of
d. they are not recorded
26. The allowance for uncollectible accounts is based on all of the following except:
a. Experience
c. Customer Fortunes
b. Profitability expectancy
d. Industry Expectations
27. Loans and receivables are measured, subsequent to initial recognition at
a. Historical value
b. Fair value
c. net realizable value
d. effective Value
28. At December 31, before adjusting and closing the accounts had occurred, the Allowance for Doubtful
Accounts of Wise Corporation showed a debit balance of P5,300 of the accounts receivable indicated
the amount probably uncollectible to be P3,900. Under these circumstances, a year –end adjusting
entry for uncollectible accounts expense would include a:
a. Debit to the Allowance for Doubtful Accounts for P1,400
b. Debit to Uncollectible Accounts Expense, P9, 200
c. Credit to the Allowance for Doubtful Accounts for P1,400
d. Debit o Uncollectible Accounts Expense, P3,900
29. Consistency is an important factor in comparability within a single entity, although the two are not the
same. The consistency standard of reporting requires that
a. Some costs should be recognized as expenses on the basis of a presumed direct association with
specific revenue.
b. Assets whose prices or utility are increased by external events other than transfers should be
retained in the accounting records at their recorded amounts until they are exchange.
c. Historical cost should be the primary basis used in measuring inventory; intangible assets and
property, plant and equipment.
d. Changes in circumstances or in the nature of the underlying transactions should be disclosed.
30. A T-Account is
a.
b.
A way of depicting the basic form of an account.
c. A special account used instead of a trial balance
A special account used instead of a journal.
d. None of these
31. The inclusion of footnotes and supporting schedules in the financial statements reflect application of
the
a. Time period assumption
c. Full-disclosure principle
b. Industry peculiarities constraint
d. Relevance quality
32. During the accounting period, transactions involving revenue, expenses, and withdrawals are recorded
in
a. permanent accounts
c. temporary financial accounts
b. financial statements
d. temporary capital accounts
33. The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in
favor of understating assets and revenues and overstating liabilities and expenses is known as the
a. conservatism constraint.
c. substance over form principle.
b. materiality constraint.
d. industry practices constraint.
34. A proof of cash, also known as a four-column bank reconciliation, is
a. A reconciliation of beginning balances, deposits-receipts, checks-disbursements, and ending
balances.
b. Bank reconciliation for four selected periods.
c. Reconciliation of beginning balances, receipts, and disbursements, usually for 1 month.
d. Reconciliation of the beginning account balance and the ending account balance, taking into
account deposits in transit, outstanding checks, and other reconciling items.
35. The fundamental qualitative characteristic of faithful representation has the components of
a. Predictive value and confirmatory value.
b. Comparability, consistency, and confirmatory value.
c. Comparability, verifiability, timeliness, and understandability.
d. Completeness, neutrality, and freedom from error.
Use the following data for items 36 and 37
The general ledger trial balance of Jovy Company includes the following statement of financial position
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accounts as of December 31, 2016:
Accounts Receivable
P 550,000
Accounts Payable
P
270,000
Accumulated Depreciation – equipment 100,000
Equipment
280,000
Cash and Cash Equivalents
560,000
Bonds Payable
670,000
Bank Overdraft
75,000
Treasury Stock
230,000
Inventory
280,000
Prepaid Rent
97,000
Allowance for Doubtful Accounts
50,000
Utilities Payable
80,000
36. What amount should be reported as current assets in the statement of financial position of Jovy
Company?
a. 1,362,000
b. 1,462,000
c. 1,437,000
d. 1,587,000
37. What amount should be reported as current liability in the statement of financial position of Jovy
Company?
a. 425,000
b. 350,000
c. 1,095,000
d. 1,020,000
Use the following data for items 38 and 39
The general ledger of Angel Company contains the following accounts for December 31, 2016:
Net income for the year (after 30% tax) P 399,000
Dividends paid- 2012 P 123,000
Operating Expenses for the year
320,000
Cost of Goods Sold
230,000
Retained earnings, ending balance
750,000
38. How much is the sales that is reported in the statement of comprehensive income of Angel Company?
a. 949,000
b. 1,120,000
c. 1,243,000
d. 476,000
39. How much is the beginning balance of the Retained Earnings of Angel Company?
a. 627,000
b. 1,026,000
c. 873,000
d. 474,000
Use the following data for items 40 and 41
Jovelyn Company established a petty cash fund amounting to 12,000 on July 1, 2016. The following expenses
were incurred by the company:
Postage Stamps
P 500 Miscellaneous expense
1,100
Travel Expense
2,100
A petty cash count shows that the balance of the petty cash fund as of July 31, 2016 is P5,200
40. How much is the cash shortage or overage? (indicate after the amount if it is a cash shortage or
overage)
a. 6,800 shortage
b. 6,800 overage
c. 3,100 shortage
d. 0
41. How much should be credited to “Payable to Petty Cashier account” upon the discovery of the cash
shortage or overage?
a. 6,800
b. 3,700
c. 3,100
d. 0
Clark Co.’s advertising expense account had a balance of P146,000 at December 31, 2016, before any
necessary year-end adjustment relating to the following:
• Included in the P146,000 is the P15,000 cost of printing catalogs for a sales promotional campaign in
January 2017.
• Radio advertisements broadcast during December 2016 were billed to Clark on January 2, 2017. Clark
paid the P9,000 invoice on January 11, 2017.
42. What amount should Clark report as advertising expense in its income statement for the year ended
December 31, 2016?
a. 146,000
b. 161,000
c. 131,000
d. 140,000
An analysis of Thrift Corp.’s unadjusted prepaid expense account at December 31, 2016, revealed the
following:
• An opening balance of P1,500 for Thrift’s comprehensive insurance policy. Thrift had paid an annual
premium of P3,000 on July 1, 2015.
• A P3,200 annual insurance premium payment made July 1, 2016.
• A P2,000 advance rental payment for a warehouse Thrift leased for one year beginning January 1,
2017.
43. In its December 31, 2016 balance sheet, what amount should Thrift report as prepaid expenses?
a. 3,600
b. 5,200
c. 6,700
d. 5,100
44. Malatik Company showed net income of P480,000 in its income statement for the current year. Selling
expenses were equal to 15% of sales and also 25% of cost of sales. All other expenses were 13% of
sales. Ignoring Income Tax, what is the gross profit for the current year?
a. 4,000,000
b. 2,400,000
c. 1,600,000
d. 480,000
45. One-Day-Millionaire received cash (P106,208 from Customer A and P53,104 from Customer B) in
advance for revenue that will be earned later. The cash receipt entry debited cash and credited
unearned revenues. At the end of the period, P51,151 is still unearned relating to the services to
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customer A and P13,331 is earned relating to the services to customer B. The adjusting entry will
include a credit to Revenue account of how much?
a. 64,482
b. 68,388
c. 94,830
d. 159,312
46. On December 31, Ruth Company has the following data:
Trade receivables
232,500
Allowance for uncollectible accounts
(5,000)
Claim against shipper for goods lost in transit,
FOB shipping point
7,500
Selling price of unsold consigned goods
65,000
Security deposit
75,000
How much is the total current receivables?
a. 310,000
b. 300,000
c. 240,000
d. 235,000
47. The following changes in Patriot Corporation's account balances occurred during 2016:
Increase
Assets. . . . . . . . . . P267,000
Patriot paid dividends of P39,000 during the year.
Liabilities. . . . . . . . .. 81,000
There were no changes in Retained Earnings for 2016 except
Capital Stock. . . . . 198,000
dividends and net income. What was Patriot's net income for 2016?
a. 27,000
b. 186,000
c. 225,000
d. 147,000
48. Thompson Company sublet a portion of its office space for ten years at an annual rental of P36,000,
beginning on May 1. The tenant is required to pay one year's rent in advance, which Thompson
recorded as a credit to Rental Income. Thompson reports on a calendar-year basis. The adjusting entry
on December 31 of the first year would include a debit to?
a. Rental Income P36,000
c. Rental Income P12,000
b. Unearned Rental income P36,000 d. Unearned Rental Income P12,000
49. Zita Co. uses a four-column bank reconciliation. The bank reconciliation for March shows outstanding
checks for P3,000. During May, the company wrote checks totaling P236,000. The bank statement for
May shows P230,100 of checks clearing the company’s account. What is the amount of outstanding
checks on the May bank reconciliation?
a. 2,000
b. 8,900
c. 5,900
d. None
50. The bank reconciliation for Ronnie Company includes the following: balance per bank P 147,300;
balance per accounting records P142,100; Unrecorded services charges P200; Unrecorded NSF cheque
P100; Outstanding cheques P13,700; The amount of deposits in transit is:
a. 7,800
b. 8,800
c. 8,000
d . 8,200
51. What is the traditional accounting period? 12 months
52. Posting refers to the process of transferring information from: journals to general ledger accounts
53. During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance
with which basic accounting concept? Periodicity
54. The financial statements should be stated in terms of a common financial denominator. Monetary unit
55. Which of the following is not among the economic resources of a business enterprise? Obligations to pay money
56. Which of the following is an example of a deferral? Recording prepaid rent
57. Normally, revenue is recognized: when the title of the goods changed
58. Jim is the sole owner and manager of Clean Laundry Service. Jim purchased a car for personal use. Jim uses a van
in the business. Which of the following is violated if Jim recorded the cost of the car as an asset of the business?
Separate entity assumption
59. The total credits in the balance sheet column of the worksheet amounted P1,440,800 while the total debits in the
income statement columns is P493,600. If the total debits in ths adjusted trial balance is P1,980,000, how much is
the profit/(loss) for the period? 45,600
60. Poison Co. received a P1,000,000, 15%, 4-year note on September 1, 200A. Principal, on equal annual installments,
plus interest is collected every September 1. At year-end, an adjusting entry was made to take up accrued interest.
Poison Co. records all collections using nominal accounts. If reversing entries were made, what is the beginning
balance of the interest income account in 200B? 0
61. Consider the following: Cash in Bank – checking account of $13,500, Cash on hand of $1,000, Post-dated checks
received totaling $3,500, and Certificates of deposit totaling $124,000. How much should be reported as cash in
the following sheet? $14,500
62. In which account are postage stamps classified? Office Supplies
63. Dwight Company has the following item at year-end:
Cash in bank $40,000
Petty Cash 600
Short-term paper with maturity of 2 months 11,000
Dwight should report cash and cash equivalents of: $51,600
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64. All of the following may be included under the heading of “cash” except: money market funds
65. Under which section of the balance sheet is “cash restricted for factory expansion” reported? Non-current assets
66. A process of classifying accounts receivable in terms of how long they have been outstanding is called a/an ___ of
accounts receivable. Aging
67. When a firm writes off a bad debt under the allowance method of accounting for bad debts: the realizable value
of accounts receivable will not change
68. If the ___method id used, the accounts receivable would be recorded by deducting first the discount whether it is
availed of or not by the customer. Net
69. Statement 1: In order to meet the requirements of the matching principle, the direct write-off method of recording
bad debts should be used.
Statement 2: Estimating bad debts by focusing on the income statement would involve the determination of bad
debts based on the history of uncollected credit sales. False True
70. A 90-day, 11%, promissory note that is dated June 24 will have a maturity date of: September 22
71. Under a perpetual inventory system, part of the merchandise purchased on account at an earlier time is now being
returned. None of the goods have been paid for. The current journal entry for this return will be a: debit to
Accounts Payable and a credit to Merchandise Inventory
72. A method of accounting that records the cost of inventory purchased but does not track the quantity on hand or
sold to customers is call a ___ inventory system. Periodic
73. An item of merchandise was sold for $800 cash by a business using the perpetual inventory system. The product
sold cost the business $600. After the sale entry has been recorded, a second entry will: debit Cost of Goods and
credit Merchandise Inventory $600
74. The Sun Set Shade Company purchased three pieces of office equipment for a total price of P2,100. One piece of
equipment costing P800 was damaged on delivery and was returned to the vendor. The invoice has not been paid.
The proper journal entry for the return is: Accounts Payable, debit P800; Office Equipment, credit, P800
75. Which od the following is considered as inventory? Apartment housed being sold by Camella Homes
76. When using the double balance method in computing depreciation, which of the following is not used?
Depreciable amount
77. Which among the following is not a capitalizable cost? Ordinary Repairs
78. Ukraine Company had the following costs in relation to its PPE for 2022: Fee for title search P12,345; Cash price of
land and dilapidated building purchased P789,012; Cost of razing dilapidated building P34,567; Cost of constructed
building P2,345,678; Cost of open house party P23,456; Cost of grading, leveling and landfill P10,987; Cost of
temporary fence during building construction P5,678; Cost of permanent fence around the building P123,456;
Salvage proceeds from razed building P34,567; Driveways and parking lots P234,567; Delinquent property taxes
paid on purchased land P21,098. What is the cost to be capitalized to the land account? 822,455
79. Statement 1: If land and building are acquired on a lump-sum basis, the assessed value of the land and building
may be used as basis for allocation.
Statement 2: If the equipment is purchased inclusive of VAT, the capitalizable cost of the equipment will be the cost
exclusive of VAT. True, true
80. Which of the following is true with regards to PPE? None of these
81. J Company had the following information regarding its biological assets:
Advertising costs P120,000
Cost to sell 60,000
Estimated selling price 500,000
Historical cost 340,000
a. How much is the fair value of the biological assets? 500,000
b. How much is the fair value less cost to sell of the biological assets? 440,000
82. Sky Company had the following info regarding its biological assets:
Beginning balance P375,000
Purchase of biological assets 130,000
Gain due to Price Change 60,000
Gain due to Physical Change 80,000
How much is the total value of biological assets of Sky Co.? 645,000
83. J Company had the following assets:
Land $35
Trees on land $50
Cash $40
Inventory $25
Picked fruits $10
Elephants $90
Sheep $70
Wool $20
How much is the total value of the biological assets? 210
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