Quiz #1 Investment, Incurring Liabilities, and Borrowing of Money
CHOOSE WISELY
08.31.16
Investments of the owner - owners of merchandising business establish the operation through investments of cash and non-cash assets.
Incurring Liabilities - possible to acquire assets which cash is limited.
Borrowing of money - funds can be borrowed with agreement of paying the interest upon maturity or deducting it from the loan proceeds.
7/10 I am always nervous every time there is an online quiz in bookkeeping. I got that score because I had a wrong answer in items 2, 9, and 10. In item #2, I became confused of the two and ended up with the answer merchandise ending of the previous accounting period and acquisition of merchandise during the business operation which the correct answer should be investment of merchandise and merchandise ending of the previous accounting period as the two sources of Merchandise Inventory Beginning in a periodic system. Next, in item #9, I answered (Dr)Cash P15,000 (Cr)Account Payable P15,000 which is wrong because the correct answer is (Dr)Cash P14,962.50 (Dr)Interest Expense 37.50 (Cr)Account Payable P15,000 as the journal entry in the transaction "On July 1, the business borrowed an amount of money from a bank, P15,000, at an interest rate of 3% per annum and must be payable in 30 days. The interest is to be paid upon maturity." I thought my answer is correct because in my Task Sheet #2 Categorizing Grid Merchandising Accounts, I recorded interest expense in the owner's equity because I journalized the transaction in the maturity date and now, the answer is the journal entry upon maturity date. Lastly, in item #10, my answer is (Dr)Account Payable P10,000.00 (Dr)Interest Expense 41.67 (Cr)Cash P10,041.67 which is wrong because the correct journal entry upon full payment is (Dr)Cash P 10,000 (Cr)Account Payable P10,000 to the transaction "The business borrowed an amount of money from the bank, P10,000 at an interest rate of 5% per annum, payable in 30 days. The interest is collected in advance." I thought that it was journalized upon entry but I learned that it should be journalized upon payment because the item #10 is asking for journal entry upon full payment.
I learned that I should've analyzed first the given items in order for me to get the correct answer. I should study hard to not be confused with the transactions. The quiz is multiple choice and I should not guess it only because it might lead me to bad result.
