Adjusting Entries

QUIZ 1: MULTIPLE CHOICE

1. Which of the following statements regarding the trial balance is most likely to be invalid?
a. The purpose of preparing a trial balance is to determine whether the total debits and total
credits in the ledger are equal.
b. If total debits and credits are not equal, an error surely exists in the accounts.
c. The trial balance is a prerequisite inpreparing financial statements.
d. The preparation of the trial balance creates a starting point for the preparation of the
financial statements.

2. This trial balance is prepared before adjusting entries are made.

a. Unadjusted trial balance
b. Adjusted trial balance
c. Post-closing trial balance
d. Pre-closing trial balance

3. The heading of a trial balance does not include which of the following?
a. Name of the business
b. Title of the report
c. Type of activity that the business is engaged with
d. Date of the report

4. Accounts are listed in the trial balance in this sequence.

a. Asset, Liabilities, Equity, Expense, and Income
b. Asset, Equity, Liabilities, Expense, and Income
c. Asset, Liabilities, Equity, Income, and Expense
d. Asset, Expense, Liabilities, Equity, and Income

5. The purpose of adjusting entries is

I. to take up unrecorded income and expense of the period.
II. to split mixed accounts into their real and nominal elements.
III. to transfer financial data from the journal to the ledger.
a. I only
b. I, II, and III
c. I and II
d. II and III

“Formal education will make you a living; self-education will make you
a fortune.”- Jim Rohn
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NAME: Date:

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Professor: Section: Score:

QUIZ 2:ADJUSTING ENTRIES

1. Entity A received a 12%, ₱200,000, one-year, note receivable on October 1, 20x1. Entity A uses a
calendar year period. The principal and interest on the note are due on October 1, 20x2. What is
the adjusting entry to take up accrued interest income on December 31, 20x1?
2. Entity A is renting out its building to a tenant for a monthly rent of ₱30,000. As of December 31,
20x1, the tenant has not yet paid the rent for the months of November and December. What is
the adjusting entry to take up accrued rent income on December 31, 20x1?
3. Entity A issued a 12%, ₱500,000, one-year, note payable on July 1, 20x1. The principal and
interest are due on July 1, 20x2. What is the adjusting entry to take up accrued interest expense
on December 31, 20x1?
4. Entity A has equipment with a historical cost of ₱1,000,000. The equipment was estimated to
have a 10-year useful life when it was acquired four years ago. What is the adjusting entry to
take up the annual depreciation expense on December 31, 20x1?
5. Entity A has total accounts receivable of ₱640,000 on December 31, 20x1. Of that amount, ₱70,000
is doubtful of collection. What is the adjusting entry to take up the uncollectible accounts
expense on December 31, 20x1?
“There is no greater education than one that is self-driven.” -Neil deGrasse Tyson

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SOLUTIONS TO QUIZ 2:
1.
Dec. 31, Interest receivable (200,000 x 12% x 3/12) 6,000
20x1 Interest income 6,000
to accrue interest income earned but not yet collected

2.
Dec.31, Rent receivable (30,000 x 2 months) 60,000
20x1 Rent income 60,000
to accrue rent income

3.
Dec. 31, Interest expense (500,000 x 12% x 6/12) 30,000
20x1 Interest payable 30,000
to accrue interest expense incurred but not yet paid

4.
Dec. 31, Depreciation expense (1M ÷ 10 yrs.) 100,000
20x1 Accumulated depreciation 100,000
to record the depreciation expense for the period

5.
Dec. 31, Bad debts expense 70,000
20x1 Allowance for bad debts 70,000
to record the bad debts expense for the period

NAME: Date:
Professor: Section: Score:

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QUIZ 3:METHODS OF INITIAL RECORDING OF INCOME AND EXPENSE

Use the following information for the next two items:

Entity A providesbookkeeping services to Entity Bfor a monthly retainer fee (fixed monthly fee) of
₱100,000. On December 1, 20x1, Entity A receives advanced fees of ₱300,000 covering the months of
December 20x1 and January and February of 20x2.

1. Provide the journal entry to record the receipt of the advanced fee on December 1, 20x1 under
each of the following methods: (a) Liability method and (b) Income method.
2. Provide the adjusting entry on December 31, 20x1 under each of the following methods: (a)
Liability method and (b) Income method.
Use the following information for the next two items:
Entity A prepays one-year insurance for ₱240,000 on September 1, 20x1.

3. Provide the journal entry to record the prepayment of the insurance on September 1, 20x1 under
each of the following methods: (a) Asset method and (b) Expense method.
4. Provide the adjusting entry on December 31, 20x1 under each of the following methods: (a)
Asset method and (b) Expense method.
“He that loves reading has everything within his reach.” -William Godwin

SOLUTIONS TO QUIZ 3:
1.
Liability method Income method
Dec. 1, 20x1 Dec. 1, 20x1
Cash 300,000 Cash 300,000
Unearned income300,000 Service fee 300,000
to record the receipt of 3months advance fees to record the receipt of 3months advance fees
2.
Liability method Income method
Dec. 31, 20x1 Dec. 31, 20x1
Unearned income100,000 Service fee 200,000
Service fee 100,000 Unearned income 200,000
to recognize the earned portion of the advance fees to recognize the unearned portion of the advance fees
3.
Asset method Expense method
Sept. 1, 20x1 Sept. 1, 20x1
Prepaid insurance 240,000 Insurance expense 240,000
Cash240,000 Cash 240,000
to record the prepayment of 1-year insurance to record the prepayment of 1-year insurance
4.
Asset method Expense method
Dec. 31, 20x1 Dec. 31, 20x1
Insurance expense 80,000 Prepaid insurance 160,000
Prepaid insurance80,000 Insurance expense 160,000
to recognize the expiredportion of the 1-year insurance to recognize the unexpiredportion of the 1-year insurance