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Easy round #5

Arid Company paid P1,704 on June 1, 2013, for a two-year insurance policy and recorded the entire amount as
Insurance Expense. The December 31, 2013, adjusting entry is
a. debit Prepaid Insurance and credit Insurance Expense, P497.
b. debit Insurance Expense and credit Prepaid Insurance, P497.
c. debit Insurance Expense and credit Prepaid Insurance, P1,207.
d. debit Prepaid Insurance and credit Insurance Expense, P1,207.

Easy round #6
Iowa Cattle Company uses a periodic inventory system. Iowa purchased cattle from Big D Ranch at a cost of
P27,000 on credit. The entry to record the receipt of the cattle would be
a. Debit: Purchases (27,000); Credit: Accounts Payable (27,000)
b. Debit: Inventory (27,000); Credit: Accounts Payable (27,000)
c. Debit: Purchases (27,000); Credit: Cash (27,000)
d. Debit: Inventory (27,000); Credit: Cash (27,000)

Easy round #7
Crescent Corporation's interest revenue for 2013 was P13,100. Accrued interest receivable on December 31,
2013, was P2,275 and P1,875 on December 31, 2012. The cash received for interest during 2013 was
a. 1,350
b. 10,825
c. 12,700
d. 13,100
Easy round #8
How would proceeds received in advance from the sale of nonrefundable tickets for the Super Bowl be reported
in the seller’s financial statements published before the Super Bowl?
a. Revenue for the entire proceeds.
b. Revenue less related costs.
c. Unearned revenue less related costs.
d. Unearned revenue for the entire proceeds.

Easy round #9

Carbon Company’s accounting records provided the following information (all amounts in thousands of pesos):
Balances 12/31/2012 Balances 12/31/2013
Current Assets P240 P? 222
Property, Plant, and Equipment 1,600 1,700
Current Liabilities ? 130
Long-term Liabilities 580 ?

All assets and liabilities of the firm are reported in the schedule above. Working capital of P92 remained
unchanged from 2012 to 2013. Net income in 2011 was P64. No dividends were declared during 2013 and there
were no other changes in owners’ equity. Total long-term liabilities at the end of 2013 would be
a. 340
b. 432
c. 580
d. 616

Balances 12/31/2012 Balances 12/31/2013


Current Assets P240 P222
Property, Plant, and Equipment 1,600 1,700
Current Liabilities 148 130
Long-term Liabilities 580 616
Equity 1,176 1,176

Easy round #10


Which of the following characteristics may result in the classification of a liability as current?
a. Short-term obligations expected to be refinanced with long-term debt
b. Debts to be liquidated from funds that have been accumulated and are reported as

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noncurrent assets
c. Violation of provisions of a debt agreement
d. Obligations for advance collections that involve long-term deferment of the delivery of
goods or services

AVERAGE ROUND

Average round #1
Which of the following would not be reported for capital stock in the contributed capital section of a classified
balance sheet?
a. Dividends per share
b. Shares authorized
c. Shares issued
d. Shares outstanding

Average round #2
Southeast Company's adjusted trial balance at December 31, 2021, includes the following account balances:

Common Stock, P3 par P300,000


Additional Paid-In Capital 400,000
Treasury Stock, at cost 25,000
Net Unrealized Holding Loss on Available-For-Sale
Securities 10,000
Retained Earnings-Appropriated for Uninsured Earthquake
Losses 75,000
Retained Earnings-Unappropriated 100,000

What amount should Southeast report as total owners' equity in its December 31, 2021, balance sheet?
a. 840,000
b. 860,000
c. 890,000
d. 910,000
840,000= 300,000+400,000-25,000-10,000+75,000+100,000

Average round #3
Simultaneous recognition of both a revenue and an expense may result from certain transactions or events. An
example of an expense so recognized may be
a. Expired portion of prepaid insurance.
b. Salespersons’ monthly salaries.
c. Transportation to customers.
d. Electricity used to light offices.
Transportation to customers is correct because the revenue transaction (sales of goods to customers) directly
causes the incurrence of the expense (transportation to customers).

Average round #4
UVW Broadcast Co. entered into a contract to exchange unsold advertising time for travel and lodging services
with Hotel Co. As of June 30, advertising commercials of P10,000 were used. However, travel and lodging
services were not provided. How should UVW account for advertising in its June 30 financial statements?
a. Revenue and expense is recognized when the agreement is complete.
b. An asset and revenue for P10,000 is recognized.
c. Both the revenue and expense of P10,000 are recognized.
d. Not reported.
UVW has provided P10,000 in advertising services and has a receivable for the travel and lodging services.

Average round #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, Key’s 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 Key’s December 31, 2017 financial statements?
a. 1,200
b. 1,250

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c. 1,100
d. 1,010
Based on the information given, Key has only one prepaid insurance policy at 12/31/2017. The 3-year policy
acquired on 11/1/2017 has been in force for 2 months, so 34 months remain unexpired. Therefore,
12/31/2017 prepaid insurance is P3,400 (P3,600 x 34/36). Key must make an adjusting entry to transfer
P3,310 (P3,400 - P90) from insurance expense to prepaid insurance. This will leave the account balances at
P3,400 for prepaid insurance (P90 + P3,310) and P1,100 for insurance expense (P4,410 - P3,310). (Apparently,
Key Co. records policy payments as charges to insurance expense during the year and adjusts the prepaid
insurance account at the end of the year.)

Average round #6
What is the correct order of the following events in the accounting process?

I Financial statements are prepared.


II Adjusting entries are recorded.
III Nominal accounts are closed.

a. I, II, III
b. II, I, III
c. III, II, I
d. II, III, I

Average round #7
Which of the following is not an implication of the going-concern assumption?
a. The historical cost principle is credible.
b. Depreciation and amortization policies are justifiable and appropriate.
c. The current/noncurrent classification of assets and liabilities is justifiable and significant.
d. Amortizing research and development costs over multiple periods is justifiable and
appropriate.
Average round #8
According to the conceptual framework, the process of reporting an item in the financial statements of an entity
is
a. realization.
b. recognition.
c. matching.
d. allocation.

Average round #9
The following balances have been excerpted from Edwards' balance sheets:

December 31, 2013 December 31, 2012


Prepaid Insurance P6,000 P7,500
Interest Receivable 3,700 14,500
Salaries Payable 61,500 53,000

Edwards Company paid or collected during 2013 the following items:

Insurance premiums paid 41,500


Interest collected 123,500
Salaries paid 481,000

The insurance expense on the income statement for 2013 was


a. 28,000
b. 40,000
c. 43,000
d. 55,000
Prepaid insurance, Dec 31, 2012 7, 500
Insurance premiums paid, 2013 41, 500
Less: Prepaid insurance, Dec 31, 2013 6,000
Insurance expense 2013 43,000

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Average round #10
The debit and credit analysis of a transaction normally takes place when the
a. entry is posted to a subsidiary ledger.
b. entry is recorded in a journal.
c. trial balance is prepared.
d. financial statements are prepared.

DIFFICULT ROUND

Difficult round #1
James Lee, M.D., keeps his accounting records on a cash basis. During 2017, Dr. Lee collected P100,000 in fees
from his patients. At December 31, 2007, Dr. Lee had accounts receivable of P20,000. At December 31, 2017, Dr.
Lee had accounts receivable of P30,000, and unearned fees of P1,000. On an accrual basis, how much was Dr.
Lee’s patient service revenue for 2017?

a. 111,000
b. 109,000
c. 90,000
d. 89,000

Accrual basis Beg. End.


Service = Cash fees + End. – Beg. + unearned – unearned
Revenue collected AR AR fees fees

Therefore, Dr. Lee's patient service revenue for 2017 is P109,000 (P100,000 + P30,000 – P20,000 + P0 - P1,000

Difficult round #2
Which of the following is an accrued liability?
a. Cash dividends payable.
b. Wages payable.
c. Rent revenue collected 1 month in advance.
d. Portion of long-term debt payable in current year.

Difficult round #3
Smith a partner in an accounting firm, decided to withdraw from the partnership, Smith’s share of the
partnership profits and losses was 20%. Upon withdrawing from the partnership, he was paid P88,800 in final
settlement for his interest. The total of the partners’ capital accounts before recognition of partnership goodwill
prior to Smith’s withdrawal, was P252,000. After his withdrawal the remaining partners’ capital accounts,
excluding their share of goodwill totaled P192,000. The total goodwill of the firm was
a.P147,500 b.P152,800 c. P144,000 d.P185,000

Total partners’ capital before recognition of partnership goodwill prior to Smith’s withdrawal P252,000
Remaining partners’ capital accounts, excluding their share of goodwill totaled (P192,000)
Smith’s interest 60,000
Paid for Smith’s withdrawal (88,800)
Portion of Goodwill allocated to Smith 28,800
Smith’s profit or loss ratio /20%
Goodwill 144,000

Difficult round #4
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, Key’s 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 Key’s December 31, 2017 financial statements?
a. 1,200
b. 1,250
c. 1,100
d. 1,010

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Based on the information given, Key has only one prepaid insurance policy at 12/31/2017. The 3-year policy
acquired on 11/1/2017 has been in force for 2 months, so 34 months remain unexpired. Therefore,
12/31/2017 prepaid insurance is P3,400 (P3,600 x 34/36). Key must make an adjusting entry to transfer
P3,310 (P3,400 - P90) from insurance expense to prepaid insurance. This will leave the account balances at
P3,400 for prepaid insurance (P90 + P3,310) and P1,100 for insurance expense (P4,410 - P3,310). (Apparently,
Key Co. records policy payments as charges to insurance expense during the year and adjusts the prepaid
insurance account at the end of the year.)

Difficult round #6
The balance sheet category receivables represents claims to cash. Accounts receivable typically constitutes the
largest dollar value of receivables. An estimated allowance for doubtful accounts should be deducted from the
gross amount of accounts receivable to arrive at the estimated amount collectible. Plant assets are reported on
the balance sheet at their historical cost less any accumulated depreciation. The allowance for doubtful
accounts and accumulated depreciation are both termed contra-asset accounts. Which of the following
statements regarding these two contra-asset accounts is true?
a. Both result in the valuation of their related asset account at net realizable value.
b. Accumulated depreciation deducted from the related asset account shows the
unallocated portion of the historical cost of the related asset.
c. Accumulated depreciation deducted from the related asset account shows the net
realizable value of the related asset.
d. Accumulated depreciation deducted from the related asset account shows the current
replacement cost of the related asset.

Difficult round #7
On August 1 of the current year, Kyle Company borrowed P278,000 from the local bank. The loan was for 12
months at 9 percent interest payable at the maturity date. The adjusting entry at the end of the fiscal year
relating to this obligation would include a
a. debit to interest expense of P25,020.
b. debit to interest expense of P10,425.
c. credit to note payable of P10,425.
d. debit to interest receivable of P10,425.

Difficult round #8
On December 31 of the current year, Holmgren Company's bookkeeper made an entry debiting Supplies
Expense and crediting Supplies on Hand for P12,600. The Supplies on Hand account had a P15,300 debit balance
on January 1. The December 31 balance sheet showed Supplies on Hand of P11,400. Only one purchase of
supplies was made during the month, on account. The entry for that purchase was
a. debit Supplies on Hand, P8,700 and credit Cash, P8,700.
b. debit Supplies Expense, P8,700 and credit Accounts Payable, P8,700.
c. debit Supplies on Hand, P8,700 and credit Accounts Payable, P8,700.
d. debit Supplies on Hand, P16,500 and credit Accounts Payable, P16,500.

Difficult round #9
In the AA-BB partnership, AA and BB had a capital ratio of 3:1 and a profit and loss ratio of 2:1, respectively. The
bonus method was used to record CC’s admittance as a new partner. What ratio would be used to allocate, to
AA and BB, the excess of CC’s contribution over the amount credited to CC’s capital account?
a) AA and BB’s new relative ratio
b) AA and BB’s new relative profit and loss ratio
c) AA and BB’s old capital ratio
d) AA and BB’s old profit and loss ratio

Difficult round #10


The partners, A and B, share profits 3:2. However, A is to receive a yearly bonus of 20% of the profits, in addition
to his profit share. The partnership made a net income for the year of P24,000 before the bonus. Assuming A’s
bonus is computed on profit after deducting said bonus, how much profit share will B receive?

15,200
a) 9,600
b) 8,000
c) 9,000 A B Total
Bonus to A [(24,000/120%)x20%] 4,000 4,000
Balance, 3:2 12,000 8,000 20,000
Total 16,000 8,000 24,000
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