Divine Word College of Legazpi

School of Business, Mgt. & Accountancy

Acctg. Ed. 01- Exercises -Adjusting Entries October 7, 2019

Name : ____________________________________Score: _____________________

1. Indicate with a Yes or No whether or not each of the following accounts normally requires an adjusting
entry:

a. Accumulated Depreciation k. Pam San Jose, Capital

b. Albert Santiago, Drawing L. Prepaid Expense
c. Office Equipment m. Prepaid Rent
d. Salaries Payable n. Wages Expense
e. Supplies o. Computer Equipment
f. Unearned Rent p. Accounts Receivable
g. Building q. Insurance Expense
h. Cash r. Accounts Payable
i. Interest Expense
j. Miscellaneous Expense

2. Classify the following items as (1) prepaid expense, (2) unearned revenue, (3)accrued revenue and
(4)accrued expense.

a. Cash Received for services not yet
rendered
b. Insurance paid
c. Rent revenue earned but not yet
received
d. Salaries owed but not yet paid
e. Supplies on Hand
f. Fees received but not yet earned
g. Wages owed but not yet paid
h. Fees earned but not yet received
i. Cash received for use of land next
month
j. Rent expense owed but not yet paid
k. Water expense used but not yet paid
l. Insurance paid for the next 2 years.

3. Journalize the following adjustments

a. The supplies account had a beginning balance of P2,400 and was debited for P 3,975 for supplies
purchased during the year. Assume that the supplies on Hand is P 1,375.

b. The prepaid insurance account had a beginning balance of P 7,200 and was debited for P4,800 of
premiums paid during the year. Assume that the amount of unexpired insurance related to future periods is P
8,000.

c. The balance in the unearned fees account, before adjustment at the end of the year is, P18,900. Assume
that the amount of unearned fees at the end of the year is P18,650.

d. On August 1, 2012, Star Co. received P10,500 for the rent of land for 12 months. Adjusting entry required
for unearned rent on December 31, 2012.

e. At the end of the current year, P 11,600 of fees have been earned but have not been billed to clients.
(accrued fees)

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f. Stress Free Realty Co. pays weekly salaries of P18,900 on Friday for a five-day workweek ending on that
day. Assume that the period ends on a Thursday.

g. Effect of omitting adjustments:

For the year ending January 31, 2012, Balboa Medical Com. Mistakenly omitted adjusting entries for (1)
depreciation of P7,200; (2) fees earned that were not billed of P33,300, and 93) accrued wages of P6,000.
Indicate the combined effect of the errors on a) revenues, (b) expenses, and ( c) net income for the year
ended January 31, 2012. ( effect of omitting adjustments)

3. For each of the following errors, considered individually, indicate whether the error would cause the
adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be
unequal , indicate whether the debit or credit total is higher and by how much.

1. The adjustment for accrued wages of P3,600 was journalized as debit to Wages Expense for P3,600
and credit to Accounts Payable.

2. The entry for P1,480 of supplies used during the period was journalized as a debit to Supplies
Expense of P1,480 and a credit to Supplies of P1,840.

3. The adjustment for P17,520 for accrued fees earned was journalized as a debit to Accounts
Receivable for P17,520 and a credit to Fees earned for P17,250.

4. The adjustment of depreciation of P4,000 was omitted from the end of period adjusting entries.

4. Effects of Errors on financial statements:

The accountant of Hallmark Medical Co., a medical services consulting firm, mistakenly omitted
adjusting entries for (a) unearned revenue during the year P 18,000 and (b) accrued wages P 3,000..
Indicate the effect of each error, considered individually, on the income statement for the current year
ended May 31. Also indicate the effect of each error on the May 31balance sheet. Set up a table similar to
the following, and record your answers by inserting the peso amount in the appropriate spaces. Insert a zero
if the error does not affect the item.

ERROR A ERROR B
Particulars Overstated Understated Overstated Understated
Revenue for the year would be
Expenses for the year would be
Net income for the year would be
Assets at may 31 would be
Owner’s equity at May 31 would be

5. Journalizing Adjusting Entries;

On January 31, 2012, the following data were accumulated to assist the accountant in preparing the
adjusting entries for Bright Realty:

a. Fees accrued but unbilled at January 31 are P10,280.

b. The supplies account balance on January 31 is P6,100. The supplies on hand at January 31 are P1,300.

c. Wages accrued but not yet paid at January 31, are P 3,000.

d. The unearned rent account balance at January 31, is P 4,500, representing the receipt of an advance
payment on January 1 of three month’s rent from tenants.

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e. Depreciation of office equipment is P1,400.

Required: Journalize the adjusting required at January 31, 2012.

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