Name:

Year & Section:

Multiple choice:

1. The company’s assets are P12,000,000 of which 1/3 represents owner’s equity. How much is total liabilities.
a. P6,000,000 b. P3,000,000 c. P8,000,000 d. P4,000,000
2. The assets of the business at the start of the month totaled P1,000,000 with owner’s equity at P800,000. Before
the month ended equipment worth P500,000 were purchased, with a down payment of P150,000, the balance
on credit
At the start of the month, liabilities are
a. P200,000 b. P1,800,000 c. P1,200,000 d. zero
3. Refer to no.2, at the end of the month, liabilities are
a. P1,150,000 b. P550,000 c. P800,0000 d. P1,000,000
4. A transaction caused a P10,000 decrease in total assets. This could have been due to a/an
a. Payment of a loan
b. Purchase of equipment on account
c. Cash investment made by the owner
d. Purchase of equipment for cash
5. Karma Nature Trip, a travel agency, purchased equipment for P120,000, made a down payment of P50,000 and
signed a note for the balance. This transaction will:
a. Increase total assets by P120,000
b. Not affect owner’s equity
c. Increase total liabilities by P50,000
d. All of the above choices are correct
6. On January 1, the assets were P500,000 and the liabilities were P200,000. During the year the assets increased
by P100,000 and the liabilities decreased by P50,000.
Owner’s equity on January 1 was:
a. P800,000 b. P700,000 c. P300,000 d. none
7. Refer to no.6, Owner’s equity on December 31 was:
a. P300,000 P350,000 c. P250,000 d. P450,000
8. The firm regularly prepares and presents financial statements for two periods – the current year and the
preceding year. It follows the qualitative characteristic of
a. Consistency b. Neutrality c. Comparability d. Relevance
9. The accountant submitted audited financial statements to the stakeholders duly certified by an independent
CPA that these are in conformity with generally accepted accounting principles. It follows the qualitative
characteristic of
a. Reliability b. Neutrality c. Objectivity d. Relevance
10. The accountant prepares and distributes general purpose reports common to all users based on the qualitative
characteristic of
a. Consistency b. Neutrality c. Comparability d. Relevance
11. In preparing performance reports, the accountant uses a cut-off of 5% and reports only those cost and expenses
over and above this percentage following the rule of
a. Materiality b. Neutrality c. Comparability d. Relevance
12. Controlled resources of an enterprise resulting from past events and for which economic benefits are expected
to flow to the enterprise
a. Equity b. Assets c. Net worth d. Liabilities
 13. Present obligations of a firm arising from past events, expected to decrease the assets when it will be the
liquidated in the future
a. Equity b. Assets c. Net worth d. Liabilities
14. The owner wrote on a piece of paper electric bill that supposedly was incurred by the firm. The accountant
refused to reimburse the owner and record this as business expense
a. Reliability b. Neutrality c. Objectivity d. Relevance
15. Investment made by the owner will
a. Increase both assets and liabilities
b. Decrease both assets and liabilities
c. Increase both assets and owner’s equity
d. Decrease both assets and owner’s equity
16. Payment of owner’s liability out of the cash of the business
a. Decreases liabilities and increases owner’s equity
b. Does not affect the business
c. Decreases both assets and liabilities
d. Decreases both assets and owner’s equity
17. Payment of cash to the bank for money borrowed by the business will
a. Decreases assets and liabilities
b. Decreases assets and owner’s equity
c. Increases assets and liabilities
d. Increases assets and owner’s equity
18. Purchasing supplies on cash
a. Decreases assets and liabilities
b. Does not affect total assets
c. Increases assets and liabilities
d. Increases assets and decreases liabilities
19. The owner of the grocery store took home a loaf of bread and a bottle of milk from the grocery’s shelf was not
recorded by the accountant. This
a. Is not a business transaction
b. Will understate the assets of the business
c. Will understate assets and owner’s equity
d. Will overstate assets and owner’s equity
20. At the beginning of the year, the liabilities of Caltex Service station amounted to P120,000 but it decreased by
P50,000 during the year. The assets increased by P160,000 during the year and at the end of the year amounted
to P360,000. The owner’s equity at the start of the year is
a. P1,060,000
b. P80,000
c. P240,000
d. P260,000
e. P200,000
21. The assets of the business at the start of the month is P1,000,000 and the owner’s equity is P800,000.
Equipment worth P500,000 were purchased during the month of which only P150,000 were paid for. At the end
of the month, owner’s equity will become
a. P550,000 b. P1,150,000 c. P800,000 d. P1,000,000

Problem:

Dr. Tom Cruz opened the Makati Diagnostic Center, a laboratory where the overseas contract workers of Cruz
Manpower Services (also owned by Dr. Tom Cruz) go for laboratory examination as well as the applicants and employee
of Hotel International and New World. He made the following investments: cash of P150,000; laboratory equipment of
P1,500,000 ; land of P250,000 ; and building of P2,500,000. The following are the additional transactions for October:

Oct.
3 Purchased furniture and fixtures for cash, P15,000
4 Purchased office equipment worth P75,500 on account from Olympia, whose owner is a friend of Dr. Cruz
5 Bought office supplies and paid cash of P15,000
7 Bought laboratory supplies and paid cash of P30,000
8 Received cash of P14,500 from various patients for laboratory work done.
10 Placed an ad in the Philippine Star to run for three Sundays starting on the 14th. Paid one third for P18,000
14 Billed the following establishments for laboratory examinations done: Hotel International P16,000 and New
World, P18,000.
18 Paid for semi-monthly salaries, P25,750
19 Paid Olympia, P50,000
20 Collected P10,000 from Hotel International and P14,000 from New World
23 Billed Cruz Manpower Services for laboratory examinations of contract workers, P10,000
25 Received bills from – PLDT, P3,000 and Meralco, P2,500
27 Returned defective equipment to Olympia and received a reduction of P1,500 from the outstanding account
28 Paid half of the balance owing to Philippine Star
29 Paid for the semi-monthly salaries, P25,750
30 Received cash from various patients for laboratory examinations, P7,500
31 Collected in full from Cruz Manpower Services.
31 Used up half of the laboratory supplies and P5,000 of the office supplies

Makati Diagnostic Center

Chart of Accounts
Assets Capital
101 Cash 401 Cruz, Capital
102 Accounts Receivable Revenue
103 Office Supplies 501 Laboratory Fees Revenue
104 Laboratory Supplies Expenses
201 Furniture and Fixtures 601 Advertising Expense
202 Laboratory Equipment 602 Salaries Expense
203 Office Equipment 603 Utilities Expense
204 Land 604 Supplies Expense
205 Building
206 Rent Deposit
Liabilities
301 Accounts Payable
302 Utilities Payable

Required:

1. Prepare journal entries

2. Post journal entries to ledger thru T-Account
3. Prepare trial balance

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“The only limit to our realization of tomorrow will be our doubts of today.” – Franklin D. Roosevelt
God Bless, future CPAs! :)