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    Inbound 5316695339238506982

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    Rodgie P. Maslog

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    Inbound 5316695339238506982

    Uploaded by

    Rodgie P. Maslog
    6 views2 pages

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    inbound5316695339238506982

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    © All Rights Reserved
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    6 views2 pages

    Inbound 5316695339238506982

    Uploaded by

    Rodgie P. Maslog

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    PRACTICE EXERCISES – CASH AND ACCRUAL BASIS

    PRACTICE EXERCISES:
    1. Under the cash basis of accounting, revenues are recorded
    a. When they are earned and realized.
    b. When they are earned and realizable.
    c. When they are earned.
    d. When they are realized.
    2. When converting from cash basis to accrual basis accounting, which of the following adjustments should be
    made to cash receipts from customers to determine accrual basis service revenue?
    a. Subtract ending accounts receivable
    b. Subtract beginning unearned service income
    c. Add ending accounts receivable
    d. Add cash sales
    3. When converting from cash basis to accrual basis of accounting, which of the following adjustments should
    be made to cash paid for operating expenses to determine accrual basis operating expenses?
    a. Add beginning accrued liabilities
    b. Add beginning prepaid expenses
    c. Subtract ending prepaid expense
    d. Subtract interest expense
    4. Information on an entity’s accounts is shown below:
    Increase in accounts receivable 800,000
    Decrease in trade notes receivable 200,000
    Collections on trade notes receivable 2,000,000
    Recoveries of accounts previously written-off (included in collections) 10,000
    Collections on accounts receivable 1,000,000
    Write-offs 100,000
    Sales returns (from credit sales) 20,000

    Requirements: Compute for the following:


    a. Net sales revenue under the accrual basis of accounting
    b. Net sales revenue under the cash basis of accounting
    5. Information on an entity’s accounts is shown below:
    Increase in accounts payable 800,000
    Decrease in inventory 200,000
    Payments to suppliers 2,000,000
    Purchases returns 20,000

    Requirements: Compute for the following:


    a. Cost of goods sold under the accrual basis of accounting
    b. Cost of goods sold under cash basis of accounting
    6. Information on an entity’s accounts is shown below:
    Prepaid utilities, beg. 100,000
    Prepaid utilities, end. 120,000
    Accrued utilities payable, beg. 80,000
    Accrued utilities payable, end. 50,000
    Utilities expense 220,000

    Requirement: Compute for the payments for utilities during the period.
    7. Information on an entity’s accounts is shown below:
    Rent receivable, beg. 1,000,000
    Receivable, end. 800,000
    Unearned rent income, beg. 600,000
    Unearned rent income, end. 720,000
    Rent income 2,100,000
    Requirement: Compute for the following for the collections of rentals during the period.

    8. A comparative balance sheet for Bell Industries is given below:


    Assets 2022 2021
    Cash 40,000 10,000
    Accounts receivable 100,000 92,000
    Merchandise inventory 30,000 43,000
    Land, buildings, and equipment 325,000 200,000
    Accumulated depreciation – buildings and equipment (75,000) (50,000)
    Total assets 420,000 295,000

    Liabilities
    Accounts payable 65,000 75,000
    Net assets 335,000 220,000

    The entity’s profit under the cash basis of accounting is P70,000.

    Requirement: Compute for the profit under the accrual basis of accounting.

    --- END ---

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