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Basic Accounting Problems
Financial Accounting 1 (Ateneo de Manila University)
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BASIC ACCOUNTING GUIDE QUESTIONS AND ANSWERS
(PROBLEMS)
MULTIPLE CHOICE
1. If at the end of the accountng period the liabilites total ₱18,000, and equity totals ₱32,000,
then what must be the total of the assets?
a. ₱14,000
b. ₱18,000
c. ₱32,000
d. ₱50,000
2. Assets total ₱100,000 and liabilites total ₱20,000. What is the equity of the business?
a. ₱80
b. ₱800
c. ₱8,000
d. ₱80,000
3. If during the accountng period the assets decreased by ₱10,000, and equity increased by
₱2,000, then how did liabilites change?
a. Increased by ₱12,000
b. Increased by ₱8,000
c. Decreased by ₱12,000
d. Decreased by ₱8,000
4. If during the accountng period the assets increased by ₱14,000, and equity increased by ₱4,000,
then how did liabilites change?
a. Increased by ₱10,000
b. Increased by ₱4,000
c. Decreased by ₱4,000
d. Decreased by ₱10,000
5. At the end of the accountng period, the business had ₱4,500 of ofce supplies on hand. At the
beginning of the period, the amount of supplies on hand was ₱3,000. If the business purchased
₱12,000 of ofce supplies during the year, what amount of ofce supplies were used during
year?
a. ₱16,500
b. ₱14,250
c. ₱10,500
d. ₱ 9,750
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6. Cash ₱15,000 Accounts Payable ₱15,000
Accounts Receivable 35,000 Notes Payable 25,000
Supplies 4,000 Mortgage Payable 85,000
Prepaid Insurance 3,000 Capital, Mary Ling 195,000
Other Prepaid 1,000 Withdrawals, Mary Ling 22,000
Equipment 65,000 Revenues 190,000
Buildings 140,000 Salaries Expense 73,000
Land 40,000 Rent Expense 65,000
Patents 10,000 Utlites Expense 37,000
Assuming all of the accounts have normal balances, what is the total of the trial balance?
a. ₱532,000
b. ₱508,000
c. ₱488,000
d. ₱510,000
7. At the beginning of the year, a business had a two-year, ₱2,400 insurance policy on its ofce
equipment. On July 1, it purchased a three-year, ₱3,600 policy on a newly constructed building.
Which of the following will be the December 31, year-end, adjustng entry?
a. Insurance Expense, debit, ₱6,000; Prepaid Insurance, credit, ₱6,000
b. Insurance Expense, debit, ₱2,400; Prepaid Insurance, credit, ₱2,400
c. Insurance Expense, debit, ₱2,100; Prepaid Insurance, credit, ₱2,100
d. Insurance Expense, debit, ₱1,800; Prepaid Insurance, credit, ₱1,800
8. At the end of the fscal year, an adjustng entry was made for accrued salaries of ₱1,500. The
salaries for one week, ₱3,750, were paid on the frst Friday of the new fscal period. Which of the
following is the entry to record paying the salaries expense for the week?
a. Salaries Expense, debit, ₱3,750; Cash, credit, ₱3,750
b. Salary Exp., debit, ₱1,500; Salaries Payable, debit, ₱2,250; Cash, credit, ₱3,750
c. Salaries Expense, debit, ₱3,750; Salaries Payable, credit, ₱3,750
d. Salary Exp., debit, ₱2,250; Salaries Payable, debit, ₱1,500; Cash, credit, ₱3,750
9. A tenant rented space in your company's ofce building on November 1 at ₱1,800 per month,
paying six months' rent in advance. The bookkeeper recognized a current liability of ₱10,800.
The December 31, year-end adjustng entry would be which of the following?
a. Unearned Rent, debit, ₱7,200; Rent Revenue, credit, ₱7,200
b. Rent Revenue, debit, ₱3,600; Unearned Rent, credit, ₱3,600
c. Unearned Rent, debit, ₱3,600; Rent Revenue, credit, ₱3,600
d. Cash, debit, ₱10,800; Rent Rev., Credit, ₱7,200; Unearned Rent, credit, ₱3,600
10. An NBA basketball team sells season tckets worth ₱40 million before the basketball season
starts late in the year. Assume this ₱40 million is debited to Cash and credited to Unearned
Ticket Revenue. By the end of the year, 15% of the games have been played. What adjustng
journal entry should be made at the end of the year?
A) Unearned Ticket Revenue, debit, ₱6 million; Cash, credit, ₱6 million
B) Ticket Revenue, debit, ₱6 million; Unearned Ticket Revenue, credit, ₱6 million
C) Unearned Ticket Revenue, debit, ₱6 million; Ticket Revenue, credit, ₱6 million
D) Ticket Revenue, debit, ₱6 million; Cash, credit, ₱6 million
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11. An item of merchandise with a list price of ₱200 was purchased with a trade discount of 40%
and credit terms of 3/10, n/30. The vendor was paid within the discount period. From the
buyer's standpoint, which is the correct journal entry to record the payment?
a. Accounts Payable, debit, ₱200.00; Purchases Discount, credit, ₱86.00; Cash,
credit, ₱114.00
b. Accounts Payable, debit, ₱80.00; Merchandise Inventory, credit, ₱2.40; Cash,
credit, ₱77.60
c. Accounts Payable, debit, ₱120.00; Merchandise Inventory, credit, ₱3.60; Cash,
credit, ₱116.40
d. Purchases, debit, ₱200.00; Purchase Discount, credit, ₱86.00; Cash, credit,
₱114.00
12. The buyer received an invoice from the seller for merchandise with a list price of $400 and credit
terms of 2/10, n/60. The term 'n/60' in the credit terms is which of the following?
a. Credit period
b. Trade discount
c. Cash discount allowed for early payment of the invoice
d. Discount period
13. A retailer who uses a perpetual inventory system purchased $8,000 of merchandise on credit.
The credit terms were 2/10, n/30, FOB destnaton. The freight costs were $130. What was the
journal entry for the purchaser to record this transacton?
a. Merchandise Inventory, debit, $8,000; Freight-In, debit, $130; Accounts Payable,
credit, $8,130
b. Merchandise Inventory, debit, $8,130; Accounts Payable, credit, $8,130
c. Merchandise Inventory, debit, $8,000; Accounts Payable, credit, $8,000
d. Merchandise Inventory, debit, $7,870; Freight-In, debit, $130; Accounts Payable,
credit, $8,000
14. Under a perpetual inventory system merchandise is purchased for cash. Which is the correct
journal entry to record this purchase?
a. Debit to Purchases and a credit to Cash
b. Debit to Merchandise Inventory and a credit to Accounts Payable
c. Debit to Merchandise Inventory and a credit to Cash
d. Debit to Purchases Returns and Allowances and a credit to Cost of Goods Sold
15. The recording of fnancial transactons and events manually or electronically is called which of
the following?
a. Bookkeeping
b. Budgetng
c. Auditng
d. Reportng
16. Which form of ownership burdens owners with the greatest risk of loss of their personal assets?
a. Limited partnership (LP)
b. Limited liability partnership (LLP)
c. Corporaton
d. Sole proprietorship
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17. An accountant has the responsibility to coordinate the annual budget processes of the business
corporaton she works for. In which of the following areas of accountng is she most likely to be
employed?
a. Managerial accounting.
b. Public accountng.
c. Financial accountng.
d. Not-for-Proft accountng.
BASIC ACCOUNTING GUIDE QUESTIONS AND ANSWERS
(PROBLEMS)
SOLUTION:
1. FORMULA: ASSETS - LIABILITIES = EQUITY
LIABILITIES ₱18,000
ADD:
EQUITY ₱32,000
TOTAL ASSETS: ₱ 50,000
2. FORMULA: ASSETS – LIABILITIES –EQUITY
ASSETS ₱ 100,000
LESS:
LIABILITIES ₱ 20,000
TOTAL EQUITY: ₱ 80,000
3. ASSET (DECREASED) ₱ 10,000
ADD:
EQUITY (INCREASED) ₱ 2,000
TOTAL LIABILITIES: ₱ 12,000 (DECREASED)
4. ASSET (INCREASED) ₱ 14,000
LESS:
EQUITY (INCREASED) ₱ 4,000
TOTAL LIABILITIES: ₱ 10,000 (INCREASED)
5. SUPPLIES ON HAND ₱ 3,000
OFFICE SUPPLIES ₱ 12,000
TOTAL: ₱ 15,000
LESS:
OFFICE SUPPLIES ON HAND ₱ 4,500
TOTAL: ₱ 10,500
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6.
Cash ₱15,000
Accounts Receivable 35,000
Supplies 4,000
Prepaid Insurance 3,000
Other Prepaid 1,000
Equipment 65,000
Buildings 140,000
Land 40,000
Patents 10,000
Accounts Payable ₱15,000
Notes Payable 25,000
Mortgage Payable 85,000
Capital, Mary Ling 195,000
Withdrawals, Mary Ling 22,000
Revenues 190,000
Salaries Expense 73,000
Rent Expense 65,000
Utlites Expense 37,000
₱ 510,000 ₱ 510,000
7. TO 17 JOURNAL ENTRIES and THEORIES:
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