PART 1. TRUE OR FALSE. Write TRUE if the statement is correct, while FALSE is the statement is wrong.

1. The purpose of the worksheet is to accompany the financial statements and prove that everything is complied with.

2. A trade discount of 10%, 20% signifies that the invoice price of the item is 72% of its list price.

3. When the sum of the debits exceeds the sum of the credits in the Income Statement columns in the worksheet, it indicates that a company earned a net income for the period.

4. When payment is received for services not yet rendered, no entry is recorded until that service has been rendered.

5. On December 30, 2019, Company A purchased P100,000 worth of merchandise from Company B, FOB destination, freight collect. The merchandise was not included in Company A's ending inventory as it was still in transit as of December 31, 2019 when it conducted its physical count. The exclusion of the ending inventory overstated Company A's cost of goods sold for the year.

6. The primary function of an account in the accounting system is to determine at what point a transaction should be recorded.

7. The inventor of double-entry bookkeeping was Luca Pacioli.

8. Sales returns and allowances is an expense account.

9. If title to merchandise purchased passes to the buyer when the goods are shipped from the seller, the terms are FOB shipping point.

10. The balance sheet shows the permanent or nominal accounts.

11. X sold to Y merchandise on account FOB shipping point, 2/10, net 30, for P10,000. X paid the P200 shipping charge. The amount that Y will remit on the date of payment is net of P200.

12. The purpose of the post-closing trial balance is to ensure that the ledger is in balance for the start of the next period.

13. A journal entry may include debits to more than one account and credits to more than one account, but the total of the debits must always equal the total of the credits.

14. A management accounting system incorporates all types of financial and non-financial information.

15. Under the periodic inventory systems, the balance in the inventory account is reduced when products are sold.

PART 2. MULTIPLE CHOICE THEORY. Choose the letter of the best answer.

1. Merchandise is ordered on Dec. 12; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on Dec. 15. The merchandise is received by the buyer on Dec. 17. The entry is made in the buyer's accounts on Dec. 18. The credit period begins with what date?

a. December 12

b. December 15

c. December 17

d. December 18

2. When comparing a retail business to a service entity, the financial statement that changes the most is the

a. Balance Sheet

b. Income Statement

c. Statement of Changes in Equity

d. Statement of Cash Flow

3. An account that has two sides is called the

a. Asset and liability

b. Debit and credit

c. Journal and ledger

d. Income and expense

4. When a buyer returns merchandise purchased for cash and the seller refunds the amount it received, the buyer may record the transaction using the following entry

a. debit Merchandise Inventory; credit Cash

b. debit Cash; credit Purchase Returns and Allowances

c. debit Cash; credit Sales Returns and Allowances

d. debit Sales Returns and Allowances; credit Cash

5. The liquidity, profitability, and solvency of the business organization are assessed in this phase of accounting

a. Summarization

b. Classification

c. Recording

d. Interpreting

6. The primary difference between a periodic and perpetual inventory system is that a

a. Periodic system determines the inventory on hand only at the end of the accounting period.

b. Periodic system keeps a record showing the inventory on hand at all times.

c. Periodic system provides an easy means to determine inventory shrinkage.

d. Periodic system records the cost of sales on the date of the sale is made.

7. Which of the following is not included in the post-closing trial balance preparation?

a. Allowance for bad debts

b. Drawing account

c. Unearned rent income

d. Accumulated depreciation

8. Which of the following statements regarding a trial balance is incorrect? A trial balance

a. Helps to localize errors within an identifiable time period

b. Proves that no errors of any kind have been made in the accounts during the accounting period

c. Is a test of the equality of the debit and credit balances in the ledger

d. Is a list of all of the open accounts in the ledger with their balances as of a given date

9. Which of the following adjusting entries cannot be reversed?

a. Dr. Accrued rent income; Cr. Rent income

b. Dr. Unused Supplies; Cr. Supplies Expense

c. Dr. Unearned service income; Cr. Service income

d. Dr. Salaries expense; Cr. Salaries payable

10. Reversing entries are

a. Required by generally accepted accounting principles.

b. Made prior to preparing a post-closing trial balance.

c. Made to record a change in corporate policies. d. Optional.

11. The following statements pertaining to closing entries are true except

a. All nominal accounts are closed

b. Closing entries are done at the end of the accounting period

c. Closing entries are recorded in the General Journal

d. Income accounts are closed by a credit entry

12. If the buyer is to shoulder the transportation costs of delivery merchandise, delivery terms are stated as

a. FOB Shipping Point

b. FOB Destination

c. Freight Prepaid

d. Freight Collect

13. The income summary account is used to close the following accounts except

a. Interest expense

b. Unearned revenue

c. Merchandise inventory, beginning

d. Salaries expense

14. Under this fundamental concept, it is assumed that the entity has neither the intention nor the need to enter liquidation or to cease trading.

a. Periodicity

b. Going concern

c. Stable monetary unit

d. Entity

15. On January 5, 2020, C sent a purchase order to D for purchase of the merchandise. D processed the order and completed the invoice on January 8, 2020. On January 9, the merchandise, together with the invoice was sent to the shipping company. The merchandise was received by C on January 11, 2020. Which of the following statement is most correct?

a. C becomes the owner of the merchandise purchased on January 8, 2020 when the invoice was completed.

b. On January 10, 2020, D still has the ownership over the goods shipped if the term agreed upon was FOB Shipping point.

c. Ownership of goods is transferred to C on January 9, 2020 if the term was FOB Shipping point.

d. D still owns the goods as of January 11, 2020 if the term was FOB Destination.