preliminary exam

Question 1

which method of recording bad debt is consistent with accrual accounting?

Answer 1

Allowance method

Question 2

It is measured at face value in the statement of financial position.

Answer 2

Cash

Question 3

which of the following describes accounting?

Answer 3

aptly called the language of business

Question 4

what internal control feature is specific to petty cash?

Answer 4

Imprest system

Question 5

which of the following item must be added to the cash balance per ledger in preparing a bank reconciliation that ends with an adjusted cash balance?

Answer 5

notes receivable collected by the bank in favor of the depositor and credited to the account of the depositor

Question 6

An entity uses allowance method to recognize doubtful account expense. what is the effect of the collection of an account previously written off?

Answer 6

increase in allowance for doubtful account for no effect on doubtful account expense

Question 7

Which is the best way to discourage a sales clerk from using sales invoice to make a cash sale to a customer and then pocketing a cash and destroying the company’s copy of the sales invoice?

Answer 7

serialization of sales invoice

Question 8

These are receivables are the results of the normal operating undertakings of a firm.

Answer 8

Trade receivables

Question 9

What is compensating balance?

Answer 9

Minimum deposit required to be maintained in connection with a borrowing arrangement

Question 10

It is the process of determining the monetary amounts of the transaction to be carried or recognized in the financial statement.

Answer 10

Measuring

Question 11

It is an extensive network of approvals by authorized individuals acting independently to insure that all disbursements by check are proper

Answer 11

Voucher system

Question 12

Which internal control is being applied if the work assignment for one (1) employee is designed to check on the work of another employee?

Answer 12

Independent internal verification

Question 13

It is used by companies to avoid frequent changes in catalogs, alter prices for different quantities purchase, or hide the true invoice price from the competitors.

Answer 13

Trade discount

Question 14

Which activity in the accounting process means recognition or non-recognition of accountable events?

Answer 14

Identifying

Question 15

What is the main product of the accounting process?

Answer 15

General purpose financial statement

Question 16

statement 1.the overall objective of accounting is to provide quantitative financial information about business that is useful to the users of the financial statement in making economic decisions.
statement 2. economic activities are outside the scope of accounting.

Answer 16

Statement 1 is incorrect; statement 2 is correct

Question 17

After recording the business transaction, Kenneth posted all the transaction in their corresponding ledgers. Which communicating process did he perform?

Answer 17

Classifying

Question 18

which of the following is NOT a part of cash?

a. currency
b. checking account balance
c. money market instrument
d. saving account balance

Answer 18

Money market instrument

Question 19

statement 1. measurement activity refers to the recognition and non-recognition accountable events.
statement 2. measurement activity refers to the process of preparing and distributing accounting reports to potential users of accounting information.

Answer 19

All statement are incorrect

Question 20

Suppose point-of-sale (POS) system of a large department store indicates a sales revenue of P250,000 but the cash received is P249,800. Which of the following entries must the store make to record the day’s sales?

Answer 20

Dr. cash P249,800 short or over 200 Cr. sales P250,00

Question 21

statement 1. identifying is the process of determining the monetary amounts at which the elements of financial statement are to be recognized.
statement 2. classifying refers to the preparation of financial statement.

Answer 21

Both statement are incorrect

Question 22

DC Company provided the following data on December 31, 2X14: checkbook balance - P4,000,000; bank statement balance- P5,000,000; check drawn on DC company’s account, payable to supplier, dated and recorded on December 31, 2X14, but not mailed until January 15, 2X15 - P500,000; and cash in sinking fund - P2,000,000. on December 31,2X14, what should be reported as “cash” under current asset?

Answer 22

P4,500,00

Question 23

Suppose the point-of-sale (POS) system of a large department store indicates a sales revenue of P252,000, but the cash received is P249,800. Which of the following entries must the store make to record the day’s sale?

Answer 23

Dr Cash P249,000; Dr Cash Short and Over P2,200; Cr Sales P252,000

Question 24

Mia accounted for all ABC Company’s sales transactions in its journal for November. Which communicating process did she perform?

Answer 24

Recording

Question 25

What value are the accounts receivable usually reported?

Answer 25

Net Realizable Value

Question 26

Austin Company records sale on account using the gross method and offers terms of 3/15, n/45. How would the company record the entry of a credit sale of P1,000?

Answer 26

Dr Accounts Receivable P1,000; Cr Sales P1,000

Question 27

When is imprest petty cash fund is used, which of the following is TRUE?

Answer 27

The reimbursement of the petty cash fund should be credited to the cash account.

Question 27

Which of the following is NOT acceptable in estimating uncollectible accounts receivable?

Answer 27

No estimate of uncollectible accounts is made, but accounts are written off when it is determined that accounts cannot be collected.

Question 28

Shayne Co. had the following account balances on December 31, 2X14: cash in bank - P2,250,000; cash on hand - P125,000; cash restricted for addition to plant (expected to be disbursed in 2X15) P1,600,000; Cash in bank included P600,000 of compensating balance against short term borrowing arrangement. The compensating balance is not legally restricted as to withdrawal. On December 31, 2X14, what is the total cash to be reported under current assets?

Answer 28

P2,375,000

Question 29

Which of the following is NOT considered as a cash equivalent?

Answer 29

A three-year treasury note maturing on January 31 of the next year purchased by the entity on October 1 of the current year.