FDNACCT Comprehensive Examination Reviewer 2024 PDF

DE LA SALLE UNIVERSITY FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT (FDNACCT) COMPREHENSIVE EXAMINATION REVIEWER GENERAL INSTRUCTIONS: 1. This is a reviewer for your comprehensive examination for FDNACCT. 2. This is not the actual examination, nor th...

DE LA SALLE UNIVERSITY FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT (FDNACCT) COMPREHENSIVE EXAMINATION REVIEWER GENERAL INSTRUCTIONS: 1. This is a reviewer for your comprehensive examination for FDNACCT. 2. This is not the actual examination, nor the actual questions that would be given in the exam. Some questions may have easier or harder concepts that would be given in the actual examination. This examination is simply a simulation, not the actual examination. 3. Read the questions carefully. Take note of the vocabulary or the words being asked in the paper as some may be quite confusing 4. It is best to answer the questions first before consulting with your friends or the control answers needed. Practice makes perfect 5. Practice more questions aside from the questions given in this exam and pray so that you may obtain a high score. God loves you :) 6. Bawi FDNACCT Compre. Bawi Ultra FDNACCT Compre. Good luck. 7. Pabasbas po sa makaka 4.0 sa FDNACCT. I. TRUE OR FALSE THEORY (25 points) 1. The accrual basis of accounting assumes the existence of accounts payables and receivables. 2. Verifiability, consistency, understandability, and timeliness are enhancing characteristics of useful financial information 3. Economic costs, such as opportunity costs, are sometimes accounted for as temporary accounts and are treated as a deduction to net income in the income statement. 4. The statement of changes in equity vary from businesses according to the type of business organization that they possess. 5. In calculating for the equity statement in a sole proprietorship, investments from the owner in the form of non-cash assets are recorded at cost, with the excess of fair value over cost is accounted for as a gain. 6. Purchase returns and allowance always leads to an uptick in net income due to a decreased cost of purchases. 7. Financial statements are made to be understood only by those with a general understanding of financial statements. 8. If an asset is bought wherein the cost is higher than it’s fair value, depreciation is to be initially recorded in the purchaser’s accounts to account for the mismatch between cost and fair value. 9. A purchase of equipment with an initial down payment and the rest on account would lead to an increase in the assets as well as an increase in liabilities. 10. A note that is payable in the next year or accounting period but within 12 months is still treated as a current liability. 11. Some of the primary users of financial statements include investors, existing creditors, inside credit-risk management, and potential creditors. 12. The salvage value of the asset is the fair value of the asset at purchase price minus all depreciation that is to occur. 13. In the perpetual inventory system, cost of goods sold still has to be calculated using the cost of goods sold formula. 14. The salvage value of an asset is the actual selling price of the asset after being fully depreciated. 15. Luke Pacita is known as the father of accounting. 16. Inventories, depreciation, and doubtful accounts expenses are typically estimated instead of being expensed 17. Depending on the substance of the account, deferred expenses may be treated as current assets or non-current assets. 18. The accrual basis of accounting gives a more accurate understanding of an entity’s net income. 19. A purely sales type business usually has the need to have a cost of goods sold account. 20. The book of original entry– or the journal– can, in some cases, have more than 6 individual accounts per entry. 21. The normal balance of the expense account is debit which is only increased by a increase in the liability account from activities arising in the normal course of a business. 22. A business’ total assets, total liabilities, and net equity is always greater than or equal to 0. 23. In general, adjusting entries are always required at every end of an accounting period. 24. Liability accounts can never be subject to adjusting entries. 25. Under the income method for deferred income, cash receipts from items of income are initially credited to an income account. II. MULTIPLE CHOICE THEORY (25 points) 1. Statement 1: Sales discounts underestimate the cost of goods sold because discounts on the price lead to goods being sold for a lower price. Statement 2: Sales returns and allowances are part of the determining the actual cost of goods sold because it indicates that the company has experienced an uptick in inventory. a. Both statements are true b. Both statements are false c. Only statement 1 is true d. Only statement 2 is false 2. Statement 1: An entity can use the dollar sign in its financial statements. Statement 2: In regards to financial statements, an entity does not have to start its fiscal year on January 1. a. Both statements are true b. Both statements are false c. Only statement 1 is true d. Only statement 2 is false 3. Statement 1: Accumulated depreciation is generally adjusted for at the end of the business period. Statement 2: Adjusting entries does not affect statement of comprehensive income accounts. a. Both statements are true b. Both statements are false c. Only statement 1 is true d. Only statement 2 is false 4. This following make use of the accrual basis of accounting, except: a. Statement of Financial Position b. Statement of Comprehensive Income c. Statement of Cash Flows d. Statement of Changes in Owner’s Equity e. None of the above 5. The accountant failed to adjust for salaries incurred but not yet paid. Which of the following is a false statement? a. Total expenses would be understated b. Total liabilities will be overstated c. Net income would be overstated d. Owners equity account would be overstated e. None of the above 6. It is known that topnotchers (top 1) of accounting exams get free starbucks gift cards. On October 15, you started studying for an exam which you take on October 21. On October 23, you receive the results and find out you are the highest. On October 28, you receive the gift card and use it on October 30. When should income be recorded? a. October 15 b. October 21 c. October 28 d. October 30 e. None of the above 7. It is known that topnotchers (top 1) of accounting exams get free starbucks gift cards. On October 15, you started studying for an exam which you take on October 21. On October 23, you receive the results and find out you are the highest. On October 28, you receive the gift card and use it on October 30. The entry on October 28 should include:  a. A debit to accounts payable b. A debit to accounts receivable c. A credit to accounts receivable d. A debit to cash e. None of the above 8. Which of the accounts are contra accounts with a debit normal balance? a. Purchase returns b. Accumulated depreciation c. Net sales d. Cost of goods sold e. None of the above 9. How many of the following variables are not included in the cost of goods sold formula in a business that uses the periodic system in recording inventories?: Purchase discounts, Purchase returns, Beginning Inventory, Average Inventory, Trade discounts, Sales discounts a. 0 b. 1 c. 2 d. 3 e. 4 10. How many of the following variables are not included in the net income formula in a business that uses the periodic system in recording inventories?: Purchase discounts, Purchase returns, Beginning Inventory, Average Inventory, Trade discounts, Sales discounts a. 0 b. 1 c. 2 d. 3 e. 4 11. A business starts its fiscal year on April 1 and ends on March 31. On June 30 of that year, the company purchased an equipment that accumulates depreciation each year. How many months of depreciation should the company record on its fiscal year? a. 6 b. 7 c. 9 d. 10 e. None of the above 12. A business bought equipment worth P800,000 with fair value of P750,000, produced using P250,000 of materials and P150,000 of labor and overhead, wherein that same brand of equipment was sold 5 days ago at P730,000. How much should the equipment be recorded at on acquisition? a. P750,000 b. P400,000 c. P800,000 d. P250,000 e. P730,000 13. The business owners invested into the business an equipment worth P800,000 with fair value of P750,000, produced using P250,000 of materials and P150,000 of labor and overhead, wherein that  same brand of equipment was sold 5 days ago at P730,000. How much should the equipment be recorded at on acquisition? a. P750,000 b. P400,000 c. P800,000 d. P250,000 e. P730,000 14. Statement 1: Worksheets are prepared before adjusting entries are made. Statement 2: PPE, Prepaid expenses, and unearned revenue accounts are some of the accounts that may be affected by adjusting entries. Statement 3: Adjusting entries are necessary before creating financial statements. a. True, False, True b. False, True, False c. True, True, True d. False, True, False e. False, True, True 15. Which of the following are not enhancing qualitative characteristics of useful financial information? a. Comparability b. Timeliness c. Usefulness d. Verifiability e. All of the above are useful enhancing qualitative characteristics 16. Opportunity costs or benefits foregone from business decisions are reported as: a. A contra-asset in the balance sheet b. An expense in the income statement c. A contra-revenue in the income statement d. A deduction to income e. None of the above 17. An accountant recording inventory at the lower of cost and market value is applying: a. Faithful representation b. Relevance c. Cost-saving measures d. Prudence e. None of the above 18. In general, purchased assets are initially measured at: a. Market value on purchase date b. Book value of the original owner c. Actual cost incurred on purchase date d. Fair value net costs to sell e. None of the above 19. If a transaction of an asset purchased from another asset is understated in the journal (or a purchase of an asset for another asset) yet the balances of the accounts remain equal, what will be the effects on the accounts? a. Liabilities overstated, equity understated b. Liabilities understated, equity overstated c. Assets will be overstated, zero effects on liabilities and equity d. Expenses understated, equity is overstated e. None of the above 20. Which of the following is not an asset? a. Prepaid expenses b. Supplies bought under a loan c. Unearned revenue wherein cash is already recieved d. Plant items held in another business location e. All of the above are assets. 21. Which of the following are not part of the accounting cycle? a. Journalizing b. Trial balance c. Adjusting entries d. Worksheet e. All of the above are part 22. Which of the following assets can either be current or non current? a. PPEs to be used in the long-term b. Land c. Receivables d. Prepaid expenses to be used in 2 months e. All of the above 23. On October 1, you receive a 4 year P50,000 note from a business activity. The note yields 1% interest every year. How much is the interest income you received for the year? a. P500 b. P166.7 c. P125 d. P2000 e. None of the above 24. A small business forgot to record the full collection of cash from a costumer who has a P75,000 payable to the business. The costumer is deemed as a VIP by the business. How many of the following statements are false: The business’ cash account will be understated by P5,000 The business’ payable account will be overstated by P5,000. The business is applying the cost-benefit test in not recording the cash. The business’ equity account will not be overstated. The business’ asset account remains the same. a. 0 b. 1 c. 2 d. 3 e. 4 25. Assume that a business’ pre-adjusted trial balance shows a equal debits and credits. Which statement is true? a. An equal trial balance implies there aren’t any errors in the accounting process. b. An equal trial balance always shows that assets are greater than liabilities. c. An equal trial balance does not require adjusting entries. d. The worksheet process is not needed for an equal trial balance. e. The recievables account should always exist for a trial balance to be equal.  III. PROBLEM SOLVING (50 points, 25 questions each) PROBLEM 1 Basbas Incorporated reported a purchase worth P204,500 for the month. The inventory had a fair value at period end of P350,000. The company also incurred P85,000 of advertising expenses that same month. In regards to the inventory purchase however, Basbas Incorporated reported that the company only paid P200,410 for the purchase because Basbas Incorporated paid within the discount period. 1. How much is the cash discount rate (explain your answer in %: example: 10%) 2. Assume 75% of the purchases were sold, how much is the total expenses for the month? PROBLEM 2 In order to determine the financial state of the Baroque Works Co., the business’ CEO, Crocodile, hired you to audit the business’ accounts to determine the amount of profits the business is experiencing. The following are the accounts of Baroque Works Co. at the end of the period: Cash and cash equivalents P375,550 Accounts receivable P895,300 Equipment P80,200 Loans payable due in less than 30 days P8,400 Loans payable due in more than one year P19,200 Merchandise inventory, January 1 P395,200 Merchandise inventory, December 31 P299,000 Purchases made on account P83,400 Purchases made on cash-basis P406,500 Cash discounts received for paying early P11,000 Advertising expenses P1,200 Distributive and administrative expenses P184,280 Sales on account P1,029,450 Sales on cash-basis P320,920 Cash drawings made by the owner early in the year P50,000 Capital, December 31 P? The business had zero investments during the year. 3. How much is the total gross profit for the period? 4. How much is the net income of the business for the period? 5. How much is the business’ capital on December 31? 6. How much is the total equity of the business? PROBLEM 3 On January 1, 2024, Miyu Trading had total assets of 4,250,000, with 60% comprising interest to creditors, while the rest remaining to the owner. At the end of the year, the assets increased to 4,600,000, while liabilities decreased by 30,000. Miyu made no investments during the year but withdrew 30,000 worth of assets, with a fair value of 40,000 at the date of withdrawal. 7. How much is the Net income/loss for the year 2024? PROBLEM 4 Jajanken Co., a business who reports financial statements monthly, reported cash of P245,020 on April 1. It also reported the following transactions related to its cash account: DATE TRANSACTION April 3 Received cash of P50,000 from goods sold on March 31 April 7 Purchased machinery worth P200,000 and paid 20% cash as down payment April 10 Paid P47,000 employee’s salaries plus P5,000 bonuses in cash on the business’ first payday April 20 Received cash of P60,000 from selling an old equipment at an auction April 23 Paid 50% of outstanding salaries payable balance of P120,000 April 25 Received a P50,000 loan from a bank payable in 2 years April 28 Purchase of merchandise worth P28,000 to be sold within 2 months 8. How much is the net cash flows from operating activities? 9. How much is the cash balance on April 30? PROBLEM 5 On December 31, Army Proprietorships, a hybrid merchandising-service type business, reported: - sales of P800,000, - cost of sales of P450,000, - administrative expenses of P120,000, - interest income of P12,600 from a 3-year 8% note with face value of P? that was received 16 months ago. Its inventories amounted to P120,000 on January 1 and P200,000 on December 31. Furthermore, in that same year, the business’ owner won a competition (something that was treated as a business activity due to the efforts of the business). The business won: - P50,000 cash, - a decorative medal originally in the grantor’s books for P2,400, originally produced with P750 of materials and P200 of conversion costs, with appraised value of P2,850 - a crown with fair value of P7,000. - free TV airtime that would normally be worth P1,200 if purchased - other prices with fair value of P5,500 - a P1,000 gift card from Petron. The price of gas during the competition was worth P65 but decreased to P55 10. How much is the other income to be reported by the business? 11. How much is the net cost of purchases for the period? 12. How much is the net income received by the business that same year? 13. How much is the maturity value of the note received? PROBLEM 6 Potato Co is a cooking service business which reports financial statements annually on January 1. It’s business is self proclaimed as “one of the best in the world”, leading to the business spending P0 on advertising. Below are the transactions in relation to its business activities: March 31: Bought a large business sign to attract customers worth P25,000. The sign will be sold in 3 years for P7,000. April 30: Bought kitchen supplies worth P150,000. Supplies are to be used evenly each month within 2 years. July 1: Signed a labor contract hiring new employees worth P640,000 for 18 months. Pay is every month. July 31: Bought a kitchen stove worth P18,000 with salvage value of P3,200. The kitchen stove is useful for 3 years. August 1: Bought Christmas supplies worth P107,000 to run a promo which would potentially profit the company P250,000. Christmas supplies are only to be used during the ber-months. P2,000 was spent on the first month, P3,500 on the second, and P47,000 on the subsequent months. December 1: Extended the labor contract by 18 months for the same price. 14. How much is the total prepaid expenses as of December 31? 15. How much is accumulated depreciation as of December 31? PROBLEM 7 Below are the following transactions for Ganggang Corporation, a rental company whose business who records financial statements monthly: *rental is P15,000 per month. - Had one of its rooms rented out on November 30 Y69 until February 1 Y70. Payment is to be received on February 1 Y70. - Received 100% cash payment for a room to be rented out starting January 1 Y70 until December 31 Y70. - Received cash on November 30 Y69 for a 4 month rental to start on January 1 Y70. 16. How much is the total accrued rental revenue to be recorded by the company on December 31 Y69? PROBLEM 8 Below are the accounts of Corporate Incorporated, a merchandising company, on December 31: Net purchases P850,000 Purchase discounts P80,000 Cost of sales P700,000 Net cost of purchases P1,000,000 17. How much is the freight in incurred by the company during the year? PROBLEM 9 On December 31, – Chopper Sales, a new sales company who is currently experiencing high amounts of income reported P1,200,000 worth of assets in the beginning of year, which increased by P5,000,000 during the year. Meanwhile, the company reported P600,000 worth of liabilities in the beginning of the year which increased to P1,000,000 at the end of the year. The owners also invested P600,000 in the middle the year while the owners withdrew P50,000 in October that same year. 18. How much is the total net income of the business? 19. How much is the increase in equity of the business? PROBLEM 10 In order to check if the business is experiencing profits, Illo’s Ramen Co, a merchandising business, has hired an auditor to determine the business’ financial state. The auditor reported sales of P1,100,000 (60% cash basis), a decrease in its inventory balance by P80,000 despite purchasing P640,000 worth of inventories plus freight in of P30,000, owner’s drawings of P80,000 and investments of P70,000. The auditor then determined that the business has a net income of P35,000. The auditor determined that 30% of all operating expenses are utilities expenses. 20. How much is the total utilities expense? 21. How much is the cost of goods sold incurred by the company during the year? PROBLEM 11 On December 31, Honey Lemon Chicken Company Co. reviewed its accounts receivable, which totaled P600,000. After an aging analysis, it was estimated that 5% of the outstanding accounts receivables would be uncollectible. The allowance for doubtful accounts had a credit balance of P4,000 before adjustment. 22. How much would be the net realizable value of the accounts receivable on December 31? PROBLEM 12 On December 31, Honey Lemon Company reported assets of P821,394, an increase of P30,493 from January 1 that same year. Meanwhile, its equity increased by P95,933 from P694,938. The increase in equity can be attributed to revenues of P450,823. The owner deposited P128,500 of cash into the company in September that same year. An audit of the company’s expenses state that the company incurred expenses of P410,000. 23. How much is the change in liabilities of the company (indicate if decrease or increase)? PROBLEM 13 On December 28, Fettucini Company purchased a building for P1,000,000 in order to use it for long-term related business activities in regards to making more fettucini. The building was purchased with a downpayment of P250,000 and the balance of the loan is due in ten semi-annual installments plus interest of 10% the principal amount. Fettucini Company also purchased as an investment P45,000 par value of Tomato Company's 2% bonds, maturing in ten years. The purchase price is P70,000. Furthermore, the company incurred utilities expenses of P50,000 and administrative costs of P110,000 during the year. 24. How much is the net cash flows from investing activities (indicate if increase or decrease)? PROBLEM 14 On December 31, Mec Sales and Merchandising reported the following accounts: Sales P10,000,000 Depreciation expense P? Interest income P87,500 Cost of sales P5,000,000 Administrative expenses P100,000 Equipment* (salvage value: P500,000) P10,500,000 *The equipment was bought 2 years ago. 25. How much is the net income of Mec Sales? exam finishes here c: Basbas Incorporated