5/18/2021 EA07: Adjusting Entries - 1B-FNDC003 BOM12 2S2021 - EA07: Adjusting Entries - DLSU-D College/GS

1B-FNDC003 BOM12 2S2021

EA07: Adjusting Entries

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Question 1
B Joe is the author of a bestseller book being published by Rex Publishing House. A royalty fee of P50 is earned by B Joe per copy.
The publishing house was able to sell 210 copies. What adjusting entry will Rex prepares on December 31?

Response: Dr. Royalty Fees Receivable 10,500; Cr. Royalty Fees Income 10,500

Question 2
The customer made an advance payment for the ordered goods amounting to P80,200 on December 05, 2019. As of December 31,
2019, the company has shipped 80% of the ordered goods. Under Revenue Method, which will be included in the Adjusting Journal
Entry.

Response: Cr. Deferred revenue P64,160

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Question 3
The effect of failure to record the accrued income on the financial statements

Response: Net Income: Understated; Current Assets: Overstated

Question 4
On May 31, the Company renewed and paid the one – year rent contract from July 01, 2020 to June 30, 2021 for the total amount of
P288,000. The Company is using the fiscal period from October 01 to September 30.
Under Asset Method, which entry will not be recorded:

Response: Dr. Prepaid rent P216,000

Question 5
On April 30, 2019 the Triple Safety Agency received an advance payment of P540,000 for a one - year security contract covering
the period June 01 to May 31, 2020. The Company is using the calendar year reporting period.
How much is the deferred revenue to be reported on December 31, 2019?

Response: P315,000

Question 6

Instructions: Fill - in the blanks on the type of adjusting entry or the pro-forma adjusting entry for the
following:

1. The pro-forma adjusting entry to correct the remaining supplies on hand under the Asset
method. _____
2. The type of adjusting entry that records the remaining obligation from the advance payment
on revenue. _____
3. The pro-forma adjusting entry to record expenses that are already incurred but not yet paid
nor recorded. _____
4. The pro-forma adjusting entry to record the correct amount of sales from advance payment
under the Revenue method. _____
5. Examples of this type of adjusting entry are depreciation expense and bad debts expense.
_____

Below are the Choices in filling - in the blanks:

Accrual
Deferral
Estimation
Dr. Supplies expense; Cr. Supplies
Dr. Accrued interest receivable; Cr. Interest income

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Dr. Expenses; Cr. Accrued payable

Dr. Supplies; Cr. Supplies expense
Dr. Sales; Cr. Deferred revenue
Dr. Rent expense; Cr. Prepaid rent
Dr. Deferred revenue; Cr. Sales
Dr. Prepaid rent; Cr. Rent expense

Response: Dr. Supplies expense; Cr. Supplies

Response: Dr. Deferred revenue; Cr. Sales

Response: Dr. Expenses; Cr. Accrued revenue

Response: Dr. Sales; Cr. Deferred revenue

Response: Estimation

Question 7
Instruction: Fill - in the blank on the type/nature of the adjustment or the pro-forma entry of the
adjustment on the following:
1. The type of adjustment to delay the recording of the unexpired or unused portion as
expense. _____
2. The pro-forma entry to record portion of the income that was already earned during the
accounting period but not yet paid. _____
3. The type of adjustment to record portion of the expense or income that was incurred during
the accounting period. _____
4. The pro-forma entry to record the advance payment made by customers for sales under the
liability method. _____
5. The pro-forma adjusting entry to record the unused office supplies under the expense
method. _____

Use the following Choices in filling the blanks:

Depreciation
Bad Debts
Deferral
Accrual
Estimation
Dr. Accrued interest receivable; Cr. Interest income

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Dr. Interest expense; Cr. Accrued interest payable

Dr. Cash; Cr. Deferred revenue
Dr. Cash; Cr. Sales
Dr. Office supplies; Cr. Office supplies expense
Dr. Office supplies expense; Cr. Office supplies
Dr. Bad debts expense; Cr. Allowance for bad debts
Dr. Bad debts expense; Cr. Accounts receivable
Response: Deferral

Response: Dr. Accrued interest receivable; Cr. Interest income

Response: Accrual

Response: Dr. Cash; Cr. Deferred revenue

Response: Dr. Office supplies; Cr. Office supplies expense

Question 8
The unadjusted trial balance of ABC Company on December 31, 2019, end of its first year of operation, showed among others:
Accounts Receivable, P1,250,000 and Cash Sales, P4,560,000.

Among its transactions for the year 2020 are the following:
a. Sales on account, P5,500,000
b Total collections during the year, P3,500,000
c. The management adopted a policy of providing for doubtful accounts based on 5% of the outstanding receivable at the end of the
year.

How much is the allowance for bad debts as of December 31, 2020?

Response: P62,500

Question 9
Renewed the fire insurance policy on July 01, 2019 for another two - year insurance coverage on account. The policy’s expiration
date is on July 31, 2019 with insurance premium of P16,800. The company's reporting period is calendar year.
Under Asset Method, which entry will not be recorded:

Response: Dr. Prepaid Insurance P13,300

Question 10
Problem: ABC Company paid a 1-year insurance premium on April 1, 2020 amounting to P24,000.
The company is using the Expense method. On December 31, 2020, the accountant prepared the
adjusting entry.
Determine the following:
1. What account was credited on April 1, 2020? _____
2. What is the account to be debited on the adjus ng entry on December 31, 2020? _____
3. How much is the amount to be credited on December 31, 2020? _____

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INSTRUCTIONS:
1. Choose from the following accounts for the journal entries:
Insurance expense
Prepaid insurance
Cash

2. For the amounts of debit and credit, encode your answer in whole number without decimal places,
no comma and peso sign (eg. if your answer is 4,000, encode it as 4000).
Response: Cash

Response: Prepaid insurance

Response: 24000

Question 11
Problem: ABC Company collected P30,000 on August 31 representing 6 months rent. The
Company is using the Liability method on advance payment.

Determine the following:

1. What account was credited on August 31, 2020? _____
2. What is the account to be credited on the adjus ng entry on December 31, 2020? _____
3. How much is the amount to be credited on December 31, 2020? _____

INSTRUCTIONS:
1. Choose from the following accounts for the journal entries:
Deferred revenue
Rent income
Cash

2. For the amounts of debit and credit, encode your answer in whole number without decimal places,
no comma and no peso sign (eg. if your answer is 4,000, encode it as 4000).
Response: Deferred revenue

Response: Rent income

Response: 15000

Question 12
Bad debts accounts are estimated to be doubtful at 5% of the accounts receivable. An extract from the trial balance shows the
following balances:

Accounts Receivable P200,000

Allowance for Bad Debts, credit 2,000
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Entry to record the adjustment is:

Response: Dr. Bad Debt Expense 12,000; Cr. Allowance for Bad Debts 12,000

Question 13
On May 31, the Company renewed and paid the one – year rent contract from July 01, 2020 to June 30, 2021 for the total amount of
P288,000. The Company is using the fiscal period from October 01 to September 30.
Under Asset Method, which will be included in the Adjusting Journal Entry.

Response: Cr. Prepaid rent P72,000

Question 14
The customer made an advance payment for the ordered goods amounting to P80,200 on December 05, 2019. As of December 31,
2019, the company has shipped 80% of the ordered goods.
Under Revenue Method, which entry will not be recorded:

Response: Dr. Deferred revenue P16,040

Question 15
The company generated a total sales of P3,000,000 during the period. The accounts receivable balance is P300,000. The
management is certain that P30,000 of receivable from customer Rizza is worthless and will no longer be collected. What would be
the journal entry under the direct write-off method?

Response: Dr. Bad Debt Expense 30,000; Cr. Accounts Receivable 30,000

Question 16
Problem: On July 1, 2020, ABC Company acquired vehicle costing P750,000. The management
estimates that they can use it for 10 years and will be able to sell it at P75,000 at the end of its
life.
Determine the following:
1. What account was credited on the adjus ng entry on December 31, 2020? _____
2. How much deprecia on expense was recorded as adjus ng entry on December 31, 2020? _____
3. How much is the net book value of the vehicle on December 31, 2020? _____

INSTRUCTIONS:
1. Choose from the following accounts for the journal entries:
Depreciation expense
Accumulated depreciation - vehicle

2. For the amounts of debit and credit, encode your answer in whole number without decimal places,
no comma and peso sign (eg. if your answer is 4,000, encode it as 4000).
Response: Accumulated depreciation - vehicle

Response: 67500

Response: 682500
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Question 17
B Joe is the author of a bestseller book being published by Rex Publishing House. A royalty fee of P50 is earned by B Joe per copy.
The publishing house was able to sell 210 copies. What adjusting entry will B Joe prepares on December 31?

Response: Dr. Royalty Fees Income 10,500; Cr. Royalty Fees Payable 10,500

Question 18
Renewed the fire insurance policy on July 01, 2019 for another two - year insurance coverage on account. The policy’s expiration
date is on July 31, 2019 with insurance premium of P16,800. The company's reporting period is calendar year.
Under Asset Method, which will be included in the Adjusting Journal Entry.

Response: Cr. Prepaid insurance P4,200

Question 19
Problem: An excerpt from the trial balance of ABC Company shows the following:
Accounts Receivable P1,000,000
Allowance for Bad Debts P100,000

It is the company's policy to provide 2% of the net amount of Accounts Receivable as bad
debts.

Determine the following:

1. How much is the amount of adjus ng entry for bad debts based on the company's policy? _____
2. What is the account to be credited on the adjus ng entry? _____
3. How much is the net balance of Accounts Receivable a er the adjustment? _____

INSTRUCTIONS:
1. Choose from the following accounts for the journal entries:
Bad debts expense
Accounts receivable
Allowance for doubtful accounts

2. For the amounts of debit and credit, encode your answer in whole number without decimal places,
no comma and peso sign (eg. if your answer is 4,000, encode it as 4000).
Response: 120000

Response: Allowance for doubtful accounts

Response: 880000

Question 20
Bought office supplies of P21,400 in cash on May 29, 2019. At the end of the fiscal reporting period on September 30, 2019, the
physical inventory indicated the stock on hand amounting to P6,800.
Under Asset Method, which entry will not be recorded:
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Response: Cr. Supplies expense P6,800

Question 21
INSTRUCTIONS:

1. ROUND - OFF TO THE NEAREST WHOLE NUMBER.

2. ENCODING: P20,000 SHOULD BE ENCODED 20000. DO NOT USE PESO SIGN, COMMA AND PERIOD IN
ENCODING YOUR ANSWER.

Question:

Determine the Depreciation Expense for the calendar year 2019 on the following non – current assets of ABC Company based on
straight – line method of depreciation:

Acquisition Salvage Est.

Asset Cost Depreciation
Date Value Life

Furniture Feb 28, 2019 P90,000 P3,000 5 _____

Equipment A Oct 31, 2018 P245,000 P2,000 6 _____

Response: 17400

Response: 40500

Question 22
Adjustment for accrued revenue requires a/an

Response: decrease liabilities and increase revenues

Question 23
INSTRUCTIONS:

1. ROUND - OFF TO THE NEAREST WHOLE NUMBER.

2. ENCODING: P20,000 SHOULD BE ENCODED 20000. DO NOT USE PESO SIGN, COMMA AND PERIOD IN
ENCODING YOUR ANSWER.

Question:

Determine the Depreciation Expense for the calendar year 2019 on the following non – current assets of ABC Company based on
straight – line method of depreciation:

Acquisition Salvage Est.

Asset Cost Depreciation
Date Value Life

Vehicle Dec 31, 2018 P900,000 P40,000 8 _____

Computer Jun 01, 2019 P70,000 P10,000 4 _____

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Response: 107500

Response: 15000

Question 24
The company generated a sales of P3,000,000 during the period. The accounts receivable balance is P300,000. The management
estimate that 1% of sales during the period is doubtful. What would be the journal entry under the direct write-off method?

Response: Dr. Bad Debt Expense 30,000; Cr. Accounts Receivable 30,000

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