FAR ELMS VER (1) PDF - Accounting Past Paper

REVIEWER IN FAR ELMS VER. Review of the Accounting Process Question 1 Which of the following is the effect of a credit entry to an account? Feedback: Correct! The normal balance for liability is credited Correct answer: Increase liability Question 2 What is the effect on the components of basic a...

REVIEWER IN FAR ELMS VER. Review of the Accounting Process Question 1 Which of the following is the effect of a credit entry to an account? Feedback: Correct! The normal balance for liability is credited Correct answer: Increase liability Question 2 What is the effect on the components of basic accounting equation upon receipt of payment from account customer (seller's perspective)? Feedback: Correct! When a seller receives payment from account customer, an asset account (Cash) is increased and another asset account (Receivable) is decreased. Thus, there is no effect in the accounting equation. Correct answer: No effect Question 3 Which account is considered temporary? Feedback: Correct! It is a temporary account that is closed or reduced to zero (0) at the end of the accounting period. Correct answer: Withdrawal Question 4 Which of the following is the first step in the recording process? Feedback: Correct! The first step is to analyze first the transaction. Correct answer: Basic Analysis Question 5 What is the effect of performing services on account on the components of the basic accounting equation? Feedback: Correct! When services are performed on account, assets are increased, and owner’s equity is increased. Correct answer: Increase assets and increase owner’s equity Question 6 RM Company has purchased a tract of land and plans to build a production plant on the land in approximately five (5) years. During the five (5) years before construction, the land will be idle. The land should be reported as: Feedback: Correct! Long-term investments include long-term assets such as land that a company is not currently using in its operating activities. Correct answer: Long-term investment Question 7 In 202X, Kim's Company’s assets decreased by P50,000, and its liabilities decreased by P50,000. Its owner’s equity therefore is: Feedback: Correct! In this situation, owner’s equity does not change because only assets and liabilities are decreased by P50,000. Correct answer: Unchanged Question 8 Which account increases equity? Feedback: Correct! Equity is increased by credits from revenues. Correct answer: Revenues Question 9 On the last day of the period, Jeon Company bought a machine worth P900 on credit. This transaction will affect the: Feedback: Correct! This transaction will cause assets to increase by P900 and liabilities to increase by P900. Correct answer: Balance sheet only Question 10 What is the normal balance of a contra asset account? Feedback: Correct! Contra asset accounts have a credit balance such as accumulated depreciation. Correct answer: Credit Accounting for Merchandising Business Question 1 V Company has reported the Cost of Goods manufactured amounting to P25,000, the total manufacturing cost of P10,000, and ending inventory of P5,000. Which of the following must be reported as inventory by the start of the production? Feedback: Correct! Beg. Inv. = COGM + End. Inv. – TMC P25000 + P5000 – P10000 = P20000 Correct answer: P20,000 Question 2 Spark Company has manufactured Product B, which reported a total manufacturing cost of P30,000. How much will be reported as the cost of direct materials if the direct labor is P9,000 and manufacturing overhead is P6,000? Feedback: Correct! DM = TMC – DL – MO P30000 – P9000 – P6000 = P15000 Correct answer: P15,000 Question 3 Jisoo Manufacturing incurred the following costs in its production of Product X: Direct Materials of P15,000; Direct Labor of P9,000; and Manufacturing Overhead of P6,500. How much will Jisoo Manufacturing record as conversion cost? Feedback: Correct! DL + MOH = Conversion Cost P9,000 + P6,500 = P15,500. Correct answer: P15,500 Question 4 Suga Manufacturing incurred the following costs in its production of Product X: Direct Materials of P10,000; Direct Labor of P8,000; and Manufacturing Overhead of P7,500. How much will ABC record as prime cost? Feedback: Correct! DM + DL = Prime Cost P10,000 + P8,000 = P18,000 Correct answer: P18,000 Question 5 LM Manufacturing incurred the following costs in its production of Product B: Direct Materials of P12,000; Direct Labor of P10,000; and Manufacturing Overhead of P9,000. How much will be recorded as product cost? Feedback: Correct! DM + DL + MOH = Product Cost P12000 + P10000 + P9000 = P31000 Correct answer: P31,000 Question 6 JK Company incurred the following costs in its production of Product A: Direct Materials of P15,000; Direct Labor of P10,000; and Manufacturing Overhead of P12,000. Compute the cost of goods manufactured if the company has P25,000 worth of beginning WIP inventory and P13,000 ending WIP inventory. Feedback: Correct! Beg. WIP + (DM + DL + MO) – End. WIP = COGM P25000 + (15000+10000+12000) – P13000 = P49000 Correct answer: P49,000 Question 7 The following are product costs in a manufacturing business, EXCEPT: Feedback: Correct! This is a period cost. Correct answer: Salary of the Security Guard Question 8 Bogum Company incurred the following costs in its production of Product ABC: Direct Materials of P11,000; Direct Labor of P9,000; and Manufacturing Overhead of P16,000. Compute for the total manufacturing costs with P20,000 beginning WIP inventory and P15,000 ending WIP inventory. Feedback: Correct! DM + DL + MOH = TMC P11000 + P9000 + P16000 = P36000 Correct answer: P36,000 Question 9 The following are period costs in a manufacturing business, EXCEPT: Feedback: Correct! This is a product cost. Correct answer: Raw materials bought in making the products Question 10 Cha Company incurred the following costs in its production of Product Blue: Beginning finished goods of P10,000; Cost of goods manufactured amounting to P6,500 and ending finished goods of P5,000. What amount will be reported as the cost of goods sold? Feedback: Correct! Beg. Finished Inv. + COGM – End. Finished Inv. = COGS P10000 + P6500k - P5000 = P11500 Correct answer: P11,500 Basic Financial Statements I Question 1 The following are the accounts reported as assets of Hyung Company. Cash - P25,000; Accounts Receivable - P15,000; Inventory - P20,000; Prepaid Expenses - P15,000; and Equipment - P50,000, respectively. What amount will be reported as total non-current assets of Hyung Company? Feedback: Correct! Only equipment is a non-current asset. Correct answer: P50,000 Question 2 Adjusting entries are made to ensure that: Feedback: Correct! Adjusting entries are usually made on the last day of an accounting period (year, quarter, month) so that a company's financial statements comply with the accrual method of accounting. In other words, the adjusting entries are needed so that a company's: Income statement reports the revenues that have been earned during the accounting period; Balance sheet reports the receivables that it has a right to receive as of the end of the accounting period; Income statement reports the expenses and losses that were incurred during the accounting period; and Balance sheet reports the liabilities it has incurred as of the end of the accounting period. Correct answer: All of these Question 3 Which of the following best describes a debt to asset ratio? Feedback: Correct! Correct answer: It indicates that creditors finance a certain percentage of a company’s assets, and owners of the company finance the remaining Question 4 The following are the accounts reported as assets by Jung Company: Cash - P25,000; Accounts Receivable - P15,000; Inventory - P20,000; Prepaid Expenses - P15,000; and Equipment - P50,000, respectively. What amount will be reported as total current assets of Jung Company? Feedback: Correct! Cash + AR + Inventory + Prepaid Expenses P25000 + P15000 + P20000 + P15000 = P75000 Correct answer: P75,000 Question 5 The following are classified as current assets, EXCEPT: Feedback: Correct! This is a non-current asset Correct answer: Intangible Assets Question 6 The following are the accounts reported as liabilities of Rose Company. Accounts Payable - P2,500; 6-months Notes Payable - P1,500; Bonds Payable - P5,000; and Long-term Debt - P15,000, respectively. What amount will be reported as total non-current liabilities of Rose Company? Feedback: Correct! Bonds Payable + Long-term Debt P5000 + P15000 = P20000 Correct answer: P20,000 Question 7 Which of the following best describes a current ratio? Feedback: Correct! Correct answer: It indicates the company’s higher capability to pay off its short-term liabilities if the computation result to higher than one (1) value Question 8 The following are the accounts reported as liabilities of Yoongi Company. Accounts Payable - P2,500; 6-months Notes Payable - P1,500; Bonds Payable - P5,000; and Long-term Debt - P15,000. What amount will be reported as total current liabilities of Yoongi Company? Feedback: Correct! AP + Notes P2500 + P1500 = P4000 Correct answer: P4,000 Question 9 Which of the following best describes a quick ratio? Feedback: Correct! Correct answer: It indicates a company’s capacity to pay its current liabilities without needing to sell its inventory or get additional financing Question 10 Which of the following defines a Statement of Financial Position? Feedback: Correct! Correct answer: Presents the financial condition of a company at a point in time. Basic Financial Statements II Question 1 Which of the following defines an income statement? Feedback: Correct! Correct answer: Reports the success or profitability of the company’s operations over a specific period. Question 2 LMH Company reported gross sales of P100,000 for selling Product Mic. The company also reported P15,000 worth of sales returns during its operation and granted a P5,000 sales discount. How much will be reported as the company’s gross profit with its P50,000 cost of sales? Feedback: Correct! (Gross sales – SRA – SD) – COS; (P100000 - P15000 - P5000) – P50000 = P30,000 Correct answer: P30,000 Question 3 CEW Company reported gross sales of P10,000 for selling Product Pink. The company also reported P1,000 worth of sales returns during its operation and granted a P500 sales discount. How much will be reported as the company’s revenue? Feedback: Correct! Gross sales – SRA – SD Revenue P10000 - P1000 -. P5000 = P8,500 Correct answer: P8,500 Question 4 LMH Company reported gross sales of P100,000 for selling Product Mic. The company also reported P15,000 worth of sales returns during its operation and granted a P5,000 sales discount. How much will be reported as the company’s revenue with its P50,000 cost of sales? Feedback: Correct! Gross sales – SRA – SD Revenue; P100000 - P15000 - P5000 = P80,000 Correct answer: P80,000 Question 5 Zia Company reported the following: Inventory Jan. 1 P1,500; Purchases P1,000; and Inventory Dec. 31 P1,000. What amount should the company report as cost of sale? Feedback: Correct! Inv. Jan 1 + Purchases = GAS – Inv. Dec. 31 = COS P1500 +P 1000 – P1000 = P1,500 Correct answer: P1,500 Question 6 Yoonah Company reported the following: Revenue P50,000; Inventory Jan. 1 P15,000; Purchases P10,000; and Inventory Dec. 31 P12,000. What amount should the company report as cost of sale? Feedback: Correct! Inv. Jan 1 + Purchases = GAS - Inv. Dec. 31 = COS P15000 + P10000 - P12000 = P13,000 Correct answer: P13,000 Question 7 Which of the following defines a statement of owner’s equity? Feedback: Correct! Correct answer: Reconciles the beginning and ending balances in a company’s equity during the reporting period. Question 8 Yoonah Company reported the following: Revenue P50,000; Inventory Jan. 1 P15,000; Purchases P10,000; and Inventory Dec. 31 P12,000. What amount should the company report as gross profit? Feedback: Correct! Revenue – (Inv. Jan 1 + Purchases – Inv. Dec. 31) = GP P50000 - (P15000 + P10000 - P12000) = P37,000 Correct answer: P37,000 Question 9 Which of the following defines a statement of cash flows? Feedback: Correct! Correct answer: Shows the inflow and outflow of cash arising from the business' operating, financing, and investing activities. Question 10 Z Company reported the following: Inventory Jan. 1 P1,500; Purchases P1,000; and Inventory Dec. 31 P1,000. What amount should the company report as total goods available for sale? Feedback: Correct! Inv. Jan 1 + Purchases = GAS P1500 + P1000 = P2,500 Correct answer: P2,500 Basic Financial Statements III Question 1 Which of the following is an example of investing cash flow activity? Feedback: Correct! Investing Correct answer: Purchasing and selling of investment in debt or equity securities Question 2 Choi Company reported Gross Profit of P200,000: Revenue of P500,000; Net Income of P50,000 and Total Assets of P100,000. Which of the following will be the company’s net profit margin? Feedback: Correct! Net Income / Revenue P50000/P500000 = 0.1 x 100% = 10% Correct answer: 10% Question 3 Which of the following is an example of financing cash flow activity? Feedback: Correct! Financing Correct answer: Selling of common stocks Question 4 Tek Company was incorporated on January 1, 2X14, with proceeds from the issuance of P7,500,000 in share capital and borrowed funds of P1,100,000. During the first year, sales and consulting revenue amounted to P8,200,000, and operating costs and expenses totaled P6,400,000. On December 15, 2X14, the entity declared P300,000 dividends, payable to shareholders on January 1, 2X15. The liabilities increased to P2,000,000 by December 31, 2X14. What should be reported as total assets on December 31, 2X14? Feedback: Correct! Liabilities P2,000,000 + Share capital P7,500,000 + Retained earnings P1,500,000 (8,200,000 – 6,400,000 – 300,000) = P11,000,000 Correct answer: P11,000,000 Question 5 Given the following account balances of Sweet Corn for the month ended June 30, 2X18, how much is its total expenses? Feedback: Correct! Total expenses = Popcorn P22,800 + Toppings and seasonings P17,300 + Employees’ wages and benefits. P10,700 + Lease payments P24,000 + Utilities P3,200 + Advertising P900 + Miscellaneous P300 = Total expenses P79,200 Correct answer: P79,200 Question 6 Given the following account balances of Sweet Corn for the month ended June 30, 2X18, how much is its total assets?  Feedback: Correct! Cash P6,200 + Equipment = P18,700 Correct answer: P18,700 Question 7 Given the following account balances of Sweet Corn for the month ended June 30, 2X18, how much is its total owner’s equity? Feedback: Correct! Total assets P18,700 – Total liabilities P1,850 = P16,850 Correct answer: P16,850 Question 8 Choi Company reported Gross Profit of P200,000: Revenue of P500,000; Net Income of P50,000 and Total Assets of P100,000. Which of the following will be the company’s gross profit margin? Feedback: Correct! Gross Profit / Revenue; P200,000/P500,000 = 0.4 x 100% = 40% Correct answer: 40% Question 9 These are inflows from the sale of goods or services in the ordinary course of business. Feedback: Correct! Revenues are inflows from the sale of goods or services in the ordinary course of business. Correct answer: Revenues Question 10 Tek Company was incorporated on January 1, 2X14, with P5,000,000 from the issuance of share capital and borrowed funds of P1,500,000. During the first year, the net income was P2,500,000. On December 15, the entity paid a P500,000 cash dividend. On December 31, 2X14, the liabilities had increased to P1,800,000. What should be reported as total assets on December 31, 2X14? Feedback: Correct! Liabilities P1,800,000 + Share capital P5,000,000 + Retained earnings P2,000,000 (P2,500,000 - P500,000) = P8,800,000 Correct answer: P8,800,000