ADAMSON UNIVERSITY

INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
1. The older the information, the less useful

Materiality

Timeliness

Verifiability

Relevance

2. It is the goal achieved by consistency.

Comparability

Relevance

Completeness

Verifiability

3. It is the capacity of the information to influence a decision.

Comparability

Relevance

Completeness

Verifiability

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
4. Expenses are reported whenever the accountant records them rather than when related revenues are earned.

Substance over Form

Cost Principle

Going Concern

Matching Principle
5. This quality of information deals with the specific question: Is the item large enough to influence the
decision of the user of the information?

Materiality

Completeness

Substance over Form

Timeliness

6. A business is assured to have an indefinite existence

Going Concern

Relevance

Historical Cost

Consistency

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
7. This user considers not only the price and quality of the product but also the company's reputation and ability
to deliver the product on time.

Government

Customer

Investor

Employee

8. This user is interested in the operations of a business because if the business earns well remuneration will be
higher and more benefits will be enjoyed.

Government

Customer

Investor

Employee

9. Financial statements users need accounting to be able to

minimize losses
prepare reports

make sound decisions

interpret the results of the reports

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
10. Three features of a business transaction includes the following except

two parties are involved

information may be financial or non-financial

exchange of values

in terms of money

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
The following accounts and amounts in Philippine Peso appear in the trial balance of Danielle Martinez, Interior
Designer, for December 31, 2020:
Debit Balance(s)

Cash – 187,600

Accounts Receivable – 71,200

Prepaid Rent – 19,200

Equipment – 177,500

Martinez, Drawings – 19,000

Salaries Expense – 82,500

Supplies Expense – 17,000

Utilities Expense – 37,800

Credit Balance(s)

Accounts Payable – 23,500

Notes Payable – 12,000

Martinez, Capital – 300,000

Professional Fees – 276,300

HINT: Prepare a Trial Balance using the information above

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
UNADJUSTED TRIAL BALANCE

Account Title Dr Cr
Cash 187,600
Accounts Receivable 71,200
Prepaid Rent 19,200
Equipment 177,500
Accounts Payable 23,500
Notes Payable 12,000
Martinez, Capital 300,000
Martinez, Drawings 19,000
Professional Fees 276,300
Salaries Expense 82,500
Supplies Expense 17,000
Utilities Expense 37,800
---------------- ----------------
 611,800 611,800
========= =========

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
Additional data for the required adjustments are as follows:

Prepaid Rent is for the period October 1, 2020 to May 31, 2021

Rent Expense 7,200

Prepaid Rent 7,200
19,200 / 8 mos. = 2,400; 2,400 X 3 mos. = 7,200

Equipment which was acquired on July 1, 2020 has a scrap value of P35,000 and a useful life of five (5) years

Depreciation Expense - Equipment 14,250

Accumulated Depreciation - Equipment 14,250
177,500 – 35,000 / 5 = 28,500; 28,500 X 6/12 = 14,250

Salaries incurred but unpaid as of December 31, 2020, P12,000

Salaries Expense 12,000

(Accrued) Salaries Payable 12,000

The note was issued on December 31, 2020 for 30 days at 12%

No adjusting journal entry is required because the note was issued on December 31, 2020

It was estimated that 5% of the outstanding Accounts Receivable may be uncollected

Depreciation Expense - Equipment 3,560

Accumulated Depreciation - Equipment 3,560
71,200 X 5% = 3,560
 ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
Supplies on hand, P5,000

Supplies 5,000
Supplies Expense 5,000
To recognize and record the remaining P5,000 of Supplies

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
ADJUSTED TRIAL BALANCE
Cash 187,600
Accounts Receivable 71,200
Allowance for Doubtful Accounts 3,560
Prepaid Rent (11) 12,000
Supplies 5,000
Equipment 177,500
Acc. Depr. - Equipment 14,250
Accounts Payable 23,500
Notes Payable 12,000
Accrued Salaries Payable 12,000
Martinez, Capital 300,000
Martinez, Drawings 19,000
Professional Fees 276,300
Salaries Expense 94,500
Supplies Expense 12,000
Utilities Expense 37,800
Rent Expense (12) 7,200
Depr. Exp. – Equipment 14,250
Doubtful Accounts Expense 3,560
---------------- ----------------
641,610 641,610
========= =========

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
INCOME STATEMENT
REVENUES
Professional Fees 276,300

EXPENSES
Salaries Expense 94,500
Supplies Expense 12,000
Utilities Expense 37,800
Rent Expense 7,200
Depr. Exp. – Equipment 14,250
Doubtful Accounts Expense 3,560 (18) 169,310
----------------
NET INCOME (19) 106,990
=========

STATEMENT OF CHANGES IN OWNER’S EQUITY

Martinez, Capital, Beginning 300,000
Add: Net Income 106,990
Less: Drawings 19,000
----------------
Martinez Capital, End (20) 387,990
=========
 ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
BALANCE SHEET
ASSETS
Cash 187,600
Accounts Receivable 71,200
Allowance for Doubtful Accounts 3,560 (15) 67,640
----------------
Prepaid Rent 12,000
Supplies 5,000
Equipment 177,500
Acc. Depr. - Equipment 14,250 (13) 163,250
---------------- ----------------
TOTAL ASSETS (16) 435,490
=========

LIABILITIES & OWNER’S

EQUITY
LIABILITIES
Accounts Payable 23,500
Notes Payable 12,000
Accrued Salaries Payable 12,000
----------------
(17) 47,500
OWNER’S EQUITY
Martinez, Capital 387,990
----------------
TOTAL LIABILITIES & 435,490
OWNER’S EQUITY
=========

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
11. The adjusted balance of the Prepaid Rent is

2,400

7,200
12,000

12. The adjusted trial balance would show Rent Expense of

2,400

7,200

12,000

13. The net book value of the Equipment is

163,250

159,750

149,000

142,000

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
14. The accrued interest on the note is

120

1,440

1,560

15. The net realizable value of the Accounts Receivable is

74,760

71,200

67,640

63,560

16. The adjusted trial balance would show total assets of

432,740
435,490

453,300

455,500

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
17. The adjusted trial balance would show total liabilities of

35,620

47,500

47,620

65,310

18. The adjusted trial balance would show total expenses of

162,430

169,310

169,430

170,750

19. Upon considering all of the adjustments, the Net Income of the business would be

113,870

106,990

106,870

105,550
 ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
DIAGNOSTIC TEST 01
20. In the Statement of Changes in Owner’s Equity, the account Martinez, Capital would show an ending
balance of

394,870

387,990

387,870

386,550