NAME: Date:

Professor: Section: Score:

Instruction: Please encircle the best answer.

1. The following statements are given for your perusal.

 Statement 1. Assets at the beginning amounted to P400,000 while the total capital at the beginning amounted to P350,000. Assets
increase by P30,000 while liabilities decrease to P90,000. The ending balance of capital is P240,000. False – P340,000
 Statement II Chloe Company’s total assets on December 31, 2023 were 25% higher than the total assets on January 1, 2023. Total
equity on January 1, 2023 amounting to P90,000 which was 40% lower than the total liabilities on that date. During 2022, total
liabilities decreased by 20%. Chloe Company’s total equity at December 31, 2023 is P180,000. False – P200,000
 Statement III. An entity’s revenue may result from an increase in a liability from incidental transactions. False - A decrease in a
liability from primary operations
 Statement IV. The fundamental qualitative characteristic of faithful representation has the components of Comparability, consistency,
and confirmatory value. False - Completeness, neutrality, and freedom from error.

From the given statements above,

a. Two statements are false.
b. All statements are false.
c. Only one statement is true.
d. All Statements are true.

2. The following statements are given for your perusal.

 Statement I. Only accountable events are recorded in the accounting books. True
 Statement II. Financial information is information expressed in terms of money. True
 Statement III. Financial information is always qualitative information. True

Accounts and corresponding balances from the ledger of Felix Company are as follows:
Accounts Payable 75,000
Accounts Receivable 80,000
Accrued Expenses 30,000
Felix, Capital 100,000
Cash on hand 60,000
Inventory 50,000
Prepaid Insurance 15,000

 Statement IV. The sum of accounts with debit balances is P205,000 - True

From the given statement above.

a. Two statements are false.
b. All statements are false.
c. Only one statement is true.
d. All Statements are true.

3. Statement I. The branch of accounting that deals with providing financial information to external decision makers is Public Accounting. –
False
Statement II. Time period concept states that the life of the business is divided into series of reporting periods. Thus, businesses normally
prepare financial statements at least annually. – True
Statement III. The official accounting standard setting body in the Philippines is the Financial Accounting Standards Board – False -
Financial Reporting Standards Council (FRSC) or Financial and Sustainability Reporting Standards Council (FSRSC).
Statement IV. Information has this qualitative characteristic if two different users could reach a general agreement as to what the
information intends to represent. This concept is called Verifiability. True

From the statement above.

a. Two statements are false.
b. All statements are false.
c. Only one statement is true.
d. All Statements are true.

4. These statements are given to you.

 Total expenses of ₱360,000 and loss of ₱40,000 would result to income of ₱400,000. False – P320,000
 At the start of the period, a business has total assets of ₱500,000 and total liabilities of ₱300,000. During the period, the business
earned total income of ₱1,000,000 and incurred total expenses of ₱640,000. No additional investments or withdrawals were made by
the owner. The total equity at the end of the period is P520,000. False – P560,000
 At year-end, Entity A’s total assets and total liabilities are ₱180M and ₱70M, respectively. If Entity A had a beginning equity of
₱75M and there were no contributions from, or distributions to, the owner during the period, The profit of Entity A earn during the
year is P25M. False – P35M
 An increase to an account is recorded in the debit side of that account. False - in the side of that account that represents its normal
balance.
From the statement above.
a. Two statements are false. c. Only one statement is true.
b. All statements are false. d. All statements are true.

5. Consider the following.

 Confirmatory value is an enhancing quality that relates to both relevance and faithful representation. False - Comparability
 Completeness, neutrality, and freedom from error are the fundamental qualitative characteristic of faithful representation. True
 Relevance is the concept that supports the issuance of interim reports. True
 An essential characteristic of an asset is that an asset provides future welfare. True – welfare is synonymous to benefit

From the statement above.

a. Only one statement is true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

6. The following are given for your assessment.

 Entity A had total assets, liabilities, and equity of ₱120M, ₱75M and ₱45M, respectively, at the beginning of the period. During the
period, Entity A’s total liabilities decreased by ₱20M, while its profit was ₱25M. There were no other transactions or events that
affected equity during the period. Entity A’s ending total assets is P125M. True
  Entity A had total assets, liabilities, and equity of ₱140M, ₱90M and ₱50M, respectively, at the beginning of the period. During the
period, Entity A’s total liabilities decreased to ₱40M, while its profit was ₱25M. There were no other transactions or events that
affected equity during the period. Entity A’s ending total assets is P115M. True
 Entity A has ending total assets of ₱160M and ending total liabilities of ₱90M. Entity A had a beginning equity of ₱30M. If Entity A
incurred total expenses of ₱50M during the year, The total income is P90M. True
 The primary purpose of accounting is to provide information that is intended to be useful in making economic decisions. - True

From the statement above.

a. Only one statement is true. c. Only one statement is false.
b. Two statements are true. d. All statements are true.

7. The following independent problems are given to you.

 Problem 1.
The assets and liabilities for DM Company are as follows:

Account December 31, 2022 December 31, 2023

Asset P 2,500,000 P3,800,000

Liabilities P 900,000 P1,850,000

During the year, Daena Company made an additional investment of P150,000 and withdrew P80,000.

 Problem 2.
The beginning cash balance of Jane Company was P2,000,000. During the year, total sales amounted to P3,500,000 of which
P1,900,000 were collected. On the other hand, total expenses amounted to P2,600,000 of which P2,000,000 were paid. Jane made an
additional investment of P150,000, although made a total cash withdrawal of P90,000

 Problem 3.
The capital balance of Oprah Company was P4,000,000. During the year total income amounted to P2,700,000 while total expenses
was P1,600,000. Additional investment made by Oprah amounted to 200,000 while total withdrawals amounted to P500,000.

 From the given problem above

 Statement 1. On Problem 1, the Net Income (Loss) for 2023 is P280,000. true – P280,000
 Statement 2. On problem 2, The ending cash balance is P1,960,000. true – P1,960,000
 Statement 3. On problem 3, The balance of Oprah, capital at the end the year is P4,800,000. True

From the statement above.

a. Only one statement is true. c. Only one statement is false.
b. All statements are false. d. All statements are true

8. The following are given below.

Problem 1. Interest receivable, beginning P200,000. Total interest income for the period P300,000. Interest receivable, ending
P325,000.
Problem 2. Total rental collected during the year, P1,500,000. Unearned rent end, P400,000; Unearned rent beginning, P550,000.
Problem 3. Total insurance expense reported P180,000. Prepaid insurance, beginning P90,000. Prepaid insurance, ending
P120,000
Problem 4. Salaries payable, beginning, P400,000; Salaries paid during the year totaled P1,500,000. Salaries payable, ending
P600,000

From the given problems above

Statement 1. The interest collected in problem 1 is P175,000 – True
Statement 2. Rent collected for the period on problem 2 is P1,650,000 – False – its given P1.5M
Statement 3. Total insurance premiums paid is P210,000 – True
Statement 4. Total salaries paid during the year is P1,500,000. True

From the statement above.

a. Only one statement is true. c. Only one statement is false.
b. All statements are false. d. All statements are true

9. The following situation are given to you

 Situation 1. An entity is a resort located in Boracay. The entity collects cash when guests make a reservation. During December
2023, the entity collected P5,000,000 of cash and recorded the receipt by recognizing revenue. The entity had earned P4,000,000 of
this amount and the balance will be earned during January 2024.
 Situation 2. An entity recorded all purchases of supplies as expense. Prepaid supplies totaled P500,000 on January 1, 2023. Supplies
in the amount of P5,000,000 were purchased during the current year. Actual year-end supplies unused amounted to P1,500,000. No
reversing entry was made on January 1, 2024.

From the given situation, the following statements are for your perusal
Statement 1. The impact of the adjusting entry on Situation 1 on December 31, 2023 is 1,000,000 increases in liability. True
Statement II The adjusting entry on Situation 2 on December 31, 2023 Debit prepaid supplies and credit supplies expense
P1,000,000. True
Statement III. The impact of the adjusting entry on December 31, 2023 is 1,000,000 decreases in liability. False

From the statement above.

a. Two statements are true. c. Only one statement is true.
b. All statements are false. d. All statements are true

10. The following statements are given to you.

 All events are recorded in the books of account. False
 Auditing is the branch of accounting that involves the inspection of entity’s financial statement or business processes to ascertain
their correspondence with established criteria. True
 If income is greater than expenses, there is profit. If income is less than expenses there is loss. True
 Income and profit increase equity while expenses and loss decrease equity. True

From the statement above.

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

11. The following statements are given to you.

  The business acquires equipment for a total cost of ₱1M. Instead of expensing right away the ₱1M cost, the business allocates it
over the 5-year useful life of the equipment. The portion of the cost that is expensed during the period is recorded as Depreciation
expense. True
 The business borrowed ₱1M from the bank. At maturity date, the business pays the bank ₱1.4M to settle the loan. The ₱.4M
difference between the settlement amount and the principal (i.e., 1.4M – 1M = .4M difference) is recorded as interest expense.
True
 At the beginning of the period, a business has a cash balance of ₱20,000. During the period, total cash collections and total cash
payments amounted to ₱100,000 and ₱70,000, respectively. The cash balance at the end of the period is P50,000. True
 The “Allowance for bad debts” account is a contra account of Accounts receivable. True

From the statement above.

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

12. The following statements are given to you.

 Mr. JC makes a sale. Mr. JC will most likely record the sale in two journal entries – one to record sales revenue and one to record
cost of sales. True
 A compound journal entry is one that contains two or more debits or more credits. True
 Business transactions are normally identified from source documents. True
 Transactions are recorded in the journal chronologically. true

From the statement above.

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

13. The following statements are given/

 The systematic and chronological recording of transactions and events in books of account is known as accounting process. False
– Bookkeeping
 Double-entry means that dual effect of each accountable event is recorded with a debit and a credit. True
 The series of well-defined steps followed and completed within an accounting period to record transactions and prepare financial
statements under the double-entry bookkeeping system is accounting cycle. True
 The accounting equation must remain in balance only at the time the trial balance is prepared. False - throughout each step in the
accounting cycle
From the statement above.
a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

14. Which of the following statements pertaining to the use of special journals is (are) true?
Statement 1 – Transactions that cannot be appropriately recorded in a special journal are recorded in the general journal.
Statement 2 – Voucher register and check register are also classified as special journals.

A. Only statement 1 is true C. Statements 1 and 2 are true

B. Only statement 2 is true D. None of the statements is true

15. On March 1, 2023 Ched Corp, received P 3,000 cash from a client as an advance for 12months 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 made at December 31 would
include
A. Debit to Delivery service revenue, P 2,500
B. Credit to Unearned Delivery service revenue, P 500.
C. Credit to Delivery service revenue, P 500
D. No adjusting entry because the delivery service was for a one-year period Exactly

16. Identify the following as pertaining to the recording phase (RP) and summarizing phase (SP) of an accounting cycle
(1) Analyzing each event (3) Preparing the Financial Statements
(2) Preparing a trial balance (4) Posting to the ledger accounts

A. RP, RP, RP, SP C. RP, SP, RP, SP

B. RP, SP, SP, RP D. SP, RP, SP, SP

17. The following statements are given for your perusal

 Transferring debit and credit amounts of journal entry to the ledger is called “Posting”. True
 Adjusting entries are usually recorded at the end of each period. True
 In accounting, the phrase “to defer” means to postpone. true
 All adjusting entries involve at least one balance sheet account a done income statement account. True

From the statements above.

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

18. Your business is renting a commercial space. The monthly rent is P100. At the start of Month 1, you paid three-month advance rent of
P300.
 If you prepare financial statements at the end of month 1, your balance sheet will show a “prepaid rent of P100. False – P200
 If you prepare financial statements at the end of month 1, your income statement will show a “Rent expense” of P100. True.
 The year-end adjusting entry for prepayment or advance collection is opposite of the method used on initial recording. True
a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

19. On May 1, 20x1. Mr. JC received one-year advance rent of P480,000 from one of its tenants. The advanced rent covers the months of May
1, 20x1 to April 30, 20x2

Statement I. The adjusting entry on December 31, 20x1 when Mr. JC used “Income method” will be a credit to Rent Income
mounting to P320,000. False – credit to Unearned rent – P160,000
Statement II. The journal entry on May 1, 20x1 when Mr. JC uses “Liability method” is a Credit to Unearned REnd amounting
to P480,000. True
 Statement III. The adjusting entry on December 31, 20x1 when Mr. JC used “Liability method” will be a credit to Rent Income
mounting to P320,000. True
Statement IV. The journal entry on May 1, 20x1 when Mr. JC uses “Income method” is a Credit to Rental Income amounting to
P480,000. True

From the statements above.

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

20. The following transaction occurs.

 Your business issued a 14%, P300,000, one-year, note payable on April 30, 20x1. Both the principal and interest on the notes are
due at maturity date.
 Your business issued a 14%, P400,000, one-year, note payable on April 01, 20x1. Both the principal and interest on the notes are
due at maturity date.
 Company X has 100k employees, each earning an average daily rate of P900. Company X’s last salary payment date in 20x1 was
on December 27, 20x1. However, 25 employees were required to render overtime work during the last three days of December
20x1. The compensation for the overtime word was “triple-time pay and was paid during the first week of January 20x2.
 Mr. Ervin Gupitan Services has accounts receivable of P2,489,186. Mr. Ervin estimates that 2.05% is doubtful and need to be
charge to expense.

Statement I. On 1st transaction. The adjusting entry on December 31, 20x1 is a credit Interest payable P28,000. True
Statement II. On the 2nd transaction. The adjusting entry on December 31, 20x1 is a credit Interest payable P42,000. True
Statement III. On 3rd Transaction. The adjusting entry of Company X for December 31, 20x1 is a debit to salaries expense of P202,500. –
True
Statement IV. On 4th Transaction. The adjusting entry of Mr. Ervin will be a debit to Bad debt expense of 5,102.83. False – Dr to
P51,028.31

From the statements above

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

21. The following transaction occurs

 Mr. JC received a 10% P1,000,000, one-year, note from a client on August 1, 20x1. Both principal and interest on the note are
due at maturity date.
 Mr. John issued a 12%, P350,000, one year, note on May 1, 20x1. The principal and interest on the note are due on May 1, 20x2.
 On March 1, 20x1, Mr. Ervin acquired pickup for P2,500,000 by paying Cash of P500,000 and issuing a note amounting for the
balance. The salvage value of the pickup is P300,000. The economic life of the pick up is 10 years but its useful life is only 5
years.

Statement I. On the first transaction. The interest income is P41,666.67. True

Statement II. On the 2nd transaction. The interest income is P28,000. True
Statement III. On 3rd transaction. The adjusting entry on December 31, 20x1 is P333,333. False – P416,666.67

From the statements above

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.
22. The purpose of adjusting entries is
I. To take up unrecorded income and expenses for the period.
II. To split mixed accounts into their real and nominal elements.
III. To transfer data from the journal to the ledger

a. I only c. I and II
b. 1, II, and III d. II and III

23. Mr. John total expense for 20x1 were P239,000. Before possible adjustment for the following
 Salaries already earned by employees but not yet paid P22,000
 Mr. John acquired a machine for P100,000 three years ago. The machine has a useful life of 10 years. No depreciation has yet been
recognized in the current year.
 Of the total accounts receivable balance of P120,000. 5% is estimated to be a doubtful of collection. The related allowance account
has a zero balance.

How much is the adjusted total expense

a. 257,000 c. 283,000
b. 277,000 d. 291,000
c.
24. Mr. Christian’s total income and expenses for the year ended December 31, 20x1 were P450,000 and P280,000, respectively, before any
adjustment for the following:
 Unpaid utilities used during the period, P200,000
 The general ledger includes an “Unearned rent income” account with a balance of P90,000. One-third of this amount is earned during
the period.
 The general ledger shows “prepaid insurance” of P12,000. However, the insurance expires on December 31, 20x1.
 Mr. Christian has 12% P500,000 note receivable dated September 30, 20x1. The principal and interest on the note are due after one
year.

How much is the adjusted profit?

a. 183,000 c. (53,000)
b. 207,000 d. (21,000)

25. The general ledger of Mr. Ervin Fernandez shows a balance of P100,000 in the “Office supplies” account. If unused supplies at year-end
amount to P20,000, which of the following statements is incorrect.
a. Mr. Ervin Fernandez balance sheet will show a current asset of P20,000
b. Mr. Ervin Fernandez’s income statement will show supplies expense of P80,000
c. The year-end adjusting entry involves a debit to “supplies expense for P80,000 and a credit to “Office supplies” for the same amount
d. Mr. Ervin Fernandez uses expense method of initial recording of prepayments of expenses.

Use the following information for the next two questions:

ABC Company provides bookkeeping services to entity B for a monthly retainer fee (fixed monthly fee) of P100,000. On December 20x1, ABC
Company receives advanced fees of P300,000 covering the months of December 20x1 to February 20x2.
 26. If ABC Company uses the liability method of initial recording of advanced collection of income, the year-end adjustment would include
a. Credit to service fee of P100,000 c. debit to unearned income P200,000
b. Credit to service fee of P200,000 d. credit to unearned income of P200,000

27. If entity uses the income method of initial recording advanced collection of income, the year-end adjustment would include a
a. Debit to service fees of P100,000 c. debit to unearned income of P200,000
b. Credit to service fees of P200,000 d. credit to unearned income of P200,000

Use the following information for the next two questions:

XYZ Company prepays one-year insurance for P240,000 on September 1, 20x1

28. If XYZ company uses the asset method of initial recording of prepayment of expenses, the year-end adjustment would include a
a. Debit to prepaid insurance of P80,000 c. debit to insurance expense of P160,000
b. Credit to prepaid insurance of P80,000 d. credit to insurance expense of P160,000
c.
29. If XYZ company uses the expense method of initial recording of prepayments of expenses, the year-end adjustment would include a
a. Debit to prepaid insurance of P80,000 c. debit to insurance expense of P80,000
b. Credit to prepaid insurance of P160,000 d. credit to insurance expense of P160,000

Use the following information for the next two questions:

The unadjusted trial balance if Mr. John shows the following:
Accounts receivable 280,000
Allowance for bad debts -
Equipment 360,000
Accumulated depreciation 144,000

Additional information:
 3% of the total accounts receivable are doubtful of collection.
 The Equipment was acquired 2 years ago and was estimated to have a 5-year useful life.

30. What is the adjusted (net) carrying amount of accounts receivable to be presented in the year-end statement of financial position
a. 271,600 c. 280,000
b. 288,400 d. 276,100

31. What is the adjusted (net) carrying amount of equipment to be presented in the year-end statement of financial position?
a. 360,000 c. 144,000
b. 216,400 d. 72,000

32. Mr. John’s Profit for 20x1 was P360,000 before any adjustment:
 Mr. John issued a 16%, 300 notes payable on July 31, 20x1. The principal and interest on the note are due after one year.
 The general ledger includes a “Rent income” account with a balance of P90,000. One-third of this amount is earned during the period.
 The general ledger includes a “Supplies expense” account with a balance of P60,000. The year-end physical count revealed that one-
fourth is unused.
 Mr. John collected advance retainers’ fees of P40,000 on December 1, 20x1. The amount collected covers the months of December
20x1 and January 20x2. Entity A uses the income method.

How much is the adjusted profit(loss)

c. 315,000 c. 245,000
d. 275,000 d. 435,000

33. Which if the following is incorrect regarding reversing entries?

a. A reversing entry is the exact opposite of an adjusting entry.
b. The reversing entry for an adjusting entry this year is recorded next year.
c. Not all adjusting entries can be reversed.
d. The preparation of reversing entries is a mandatory step in the accounting cycle.

34. Identify which if the following adjusting entries may be reversed.

I. Bad debt expense 3,000
Allowance for bad debt 3,000
II. Depreciation expense 20,000
Accumulated depreciation 20,000
III. Salaries expense 4,000
Salaries payable 4,000
IV. Interest expense 20,000
Salaries payable 20,000
V. Insurance expense 5,000
Prepaid insurance 5,000
VI. Rent Income 8,000
Unearned Rent 8,000
a. IV, V and VI c. III, IV, V, and VI
b. III, IV and VI d. I, III, IV, V, and VI

35. The following statements pertain to the underlying assumptions.

I. The term going concern means the ability to continue in operation for the foreseeable future.
II. The economic entity assumption is applicable only to corporate form of business organization.
III. When a parent and subsidiary relationship exists, consolidated financial statements are prepared in
recognition of legal entity.
IV. Inflation is ignored in accounting due to accounting period assumption.
a. All statements are true. c. Only one statement is true
b. All statements are false. d. Two statements are false
 36. The International Accounting Standards Board (IASB) follows specific steps (“due process”) in developing International Financial Reporting
Standards (IFRS). Place the following steps in the correct order:
1) Research and analysis conducted; preliminary views of pros and cons issued.
2) Topics identified and placed on the agenda.
3) Board evaluates responses, final standard issued.
4) Public hearing on proposed standard
5) Board evaluates research, issues exposure draft.

A. 1, 2, 3, 4, 5 B. 2, 1, 4, 5, 3 C. 1, 2, 5, 4, 3 D. 1, 2, 5, 3, 4

37. Which of the following statements about users of financial information is (are) true?
I. The Board of Directors of an entity are considered to be internal decision-makers
II. The providers of risk capital and their advisers are concerned with the risk inherent in and return provided by their investments.
III. External decision makers can obtain whatever financial data they need and whenever they need it.
IV. Trade creditors and suppliers are interested in the ability of the enterprise to meet its short
V. term obligations as they fall due

A. Only I is true C. I, II, and IV are true

B. I and II are true D. All statements are true

38. Mr. Monterola paid P7,200 to renew its only insurance policy for three years on March 1, 20x1, the effective date of the policy. At March 31,
20x1, Monterola’s unadjusted trial balance showed a balance of P300 for prepaid insurance and P7,200 for insurance expense. What amounts should
be reported for prepaid insurance and insurance expense in Monterola’s financial statements for the three months ended March 31, 20x1?
Prepaid Insurance Insurance Expense
A 7,000 300
B 7,000 500
C 7,200 300
D 7,300 200

39. Cena’s advertising expense account had a balance of P146,000 at December 31, 20x1, 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 20x2.
• Radio advertisements broadcast during December 20x1 were billed to Cena on January 2, 20x2. Cena paid the P9,000 invoice on January 11, 20x2

What amount should Cena report as advertising expense in its income statement for the year ended December 31, 20x1?
a. P122,000 c. P140,000
b. P131,000 d. P155,000
40. The following statements pertain to the fundamental and enhancing qualitative characteristics.
I. Accounting information is considered relevant when it is capable of making a difference in a decision.
II. Relevant information must possess predictive value and confirmatory value.
III. To achieve faithful representation, the financial statements must be complete, neutral and free from
error.
a. All statements are true. c. Two statements are false.
b. One statement is false. d. All statements are false.

41.The following statements pertain to qualitative characteristics of financial statements.

I. Qualitative characteristics are either fundamental or enhancing.
II. The fundamental qualitative characteristics are relevance, faithful representation and materiality.
III. The enhancing qualitative characteristics are comparability, understandability, verifiability and
timeliness.
a. All statements are true. c. Only two statements are true.
b. All statements are false. d. Only one statement is true

42. Which of the following statements pertaining to accounting is NOT CORRECT?

A. Because financial statements have certain limitations, external users lose confidence on the reliability of the information presented
therein.
B. A reporting entity’s basic financial statements prepared under PAS 1 contain the economic effects of completed transactions and other
events as well as significant non-financial information pertaining to a reporting entity.
C. The practice of accounting requires considerable professional judgment
D. All general-purpose financial statements are prepared under accrual accounting and were developed primarily because all outside party
users have the common information needs

43. Closing entries are best described as _______________

I. Made at the end of an accounting period
II. Prepared after the adjusting entries and financial statements have been prepared
III. Prepared for the purpose of reducing all nominal and temporary accounts to zero
A. I only C. I and III only
B. I and II only D. I, II and III

44. Assume that Cajucom Company’s fiscal year ends on December 31. Which of the following events involves an adjusting entry that would be
affected by how the event was originally recorded?
A. Term purchase of machinery and its estimated useful life in the production of goods for sale
B. Sale of merchandise on account
C. Salaries earned by employees this year will be paid next year.
D. Advance collection of revenue for services to be rendered by the entity the following year

45. The following problems has been given for your perusal.
 Problem I. ABC Co has a beginning inventory of ₱280,000. During the period Entity A purchased inventories costing ₱890,000. Freight
paid on the purchase totaled ₱30,000. If the ending inventory is ₱220,000.
 Problem II Entity A has gross purchases of ₱360,000. Freight paid on the purchases amounted to ₱50,000. Purchase discounts totaled
₱20,000 while purchase returns totaled ₱15,000. Statement II - the net purchases P375,000. True
 Problem III. Under the perpetual inventory system, increases and decreases in inventory are recorded through the purchases, freight-in,
purchase returns, and purchase discounts accounts.
 Under the periodic inventory system, all increases and decreases in inventory, such as purchases, freight-in, purchase returns, purchase
discounts, cost of goods sold, and sales returns are recorded in the Inventory account. False - Perpetual
 From the problems above
Statement I. The Cost of goods on Problem 1 is P950,000 – False – P980,000
Statement II. The Net Purchase on Problem II is P375,000 – True
Statement III. Problem 3 should pe periodic inventory system - True
Statement IV. Problem 4 should be periodic inventory System – False – Perpetual

From the statements above

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

46. The following statement has been given for your perusal.

 The primary purpose of posting is to classify transaction. True

 Posting refers to refers to process of transferring the amounts of debits and credits in a recorded journal entry to the ledger accounts. - True
 Obtaining a loan result to increase in both asset and liability – True
 Analyzing is the step in the accounting cycle where the identified accountable events are recorded in the journals. – False – Journalizing

From the statements above

a. Two statements are true. c. Only one statement is false.
b. All statements are false. d. All statements are true.

47. Closing entries are best described as _______________

I. Made at the end of an accounting period
II. Prepared after the adjusting entries and financial statements have been prepared
III. Prepared for the purpose of reducing all nominal and temporary accounts to zero
A. I only C. I and III only
B. I and II only D. I, II and III

48. The qualitative characteristic of faithful representation, according to IASB framework for the
preparation and presentation of financial statements, includes____________
A. Comparability and Consistency
B. Neutrality, Completeness, and Free from error
C. Timeliness, Predictive value, and Feedback value
D. Predictive value, Confirmatory value, and Materiality

49. What is the authoritative status of Conceptual Framework?

A. The Conceptual framework has the highest level of Authority
B. In the absence of a Standard or an Interpretation that specifically applies to transaction, the Conceptual Framework should be followed.
C. In the absence of a Standard or an Interpretation that specifically applies to transaction, management should consider the applicability of the
Conceptual framework in developing and applying an accounting policy that results in information that is relevant and reliable
D. The conceptual framework applies only when new or revised standards are developed.

50. The full disclosure principle is best described by which of the following?
A. All information related to an entity’s business and operating objectives is required to be disclosed in the financial statement.
B. Information about each account balance appearing in the financial statement is to be included in the note to the financial statements.
C. Enough information should be disclosed in the financial statement so a person wishing to invest in the entity can make a profitable decision.
D. Disclosure of any financial fact significant enough to influence the judgement of an informed reader.