FABM2 Final Exam Reviewer

A sole proprietorship reported total assets of ₱950,000 and total liabilities of ₱550,000. If the owner withdrew ₱80,000 and the business earned ₱120,000 this year, what is the beginning capital?

• ₱280,000

• ₱360,000

• ₱440,000

• ₱320,000

You are analyzing the SCI of Cozy Café. The café prepaid ₱60,000 for rent covering 6 months. At the end of two months, how should this be reflected in the financial statements?

• Report ₱60,000 as rent expense

• Report ₱20,000 as rent expense

• Report ₱40,000 as prepaid rent

• Both B and C

The accountant of Zea's Art Studio failed to record depreciation on equipment worth ₱500,000 with a 10% annual rate. What is the impact on the Income Statement?

• Net income overstated

• Expenses understated

• Both A and B

• No effect

Ryle's Electronics earned ₱400,000. The owner withdrew ₱15,000 monthly. What is the effect on the capital account at year-end?

• Increase of ₱400,000

• Decrease of ₱180,000

• Increase of ₱220,000

• Increase of ₱180,000

You found that sales revenue was recorded but the related accounts receivable were not. What financial reporting risk does this cause?

• Understated liabilities

• Overstated equity

• Overstated income

• Understated assets

An enterprise received ₱360,000 in January for a year-long service. What adjustment is necessary by June 30?

• Record ₱180,000 as revenue

• Report ₱180,000 as unearned revenue

• Report full amount as revenue

• Record ₱180,000 as prepaid

As a financial officer, which situation below calls for a year-end adjusting entry?

• Payment of employee salaries on time

• Purchase of land for future expansion

• Insurance paid for 12 months last June

• Issuance of capital

Failure to record the owner's drawing will result in:

• Understated equity

• Overstated assets

• Overstated capital

• Understated liabilities

If income is earned but not yet billed, what adjusting entry should be made?

• Debit Accounts Receivable; Credit Service Revenue

• Debit Unearned Revenue; Credit Cash

• Debit Cash; Credit Service Revenue

• Debit Service Revenue; Credit Accounts Receivable

Why must depreciation be recorded even if no cash is involved?

• It increases equity

• It reflects matching principle

• It boosts revenue

• It reduces cash