Adjusting Entries Quiz

UNIVERSITY OF SANTO TOMAS
AMV – COLLEGE OF ACCOUNTANCY

1A&B – FUNADAMENTAL OF ACCOUNTING PART 1
QUIZ – 3 ADJUSTING ENTRIES
NAME: SCORE:
SECTION:
True/False
Indicate whether the statement is true or false.
____ 1. Accruals are needed when an unrecorded expense has been incurred or an unrecorded
revenue has been earned.
____ 2. If the debit portion of an adjusting entry is to an asset account, then the credit portion
must be to a liability account.
____ 3. The updating of accounts is called the adjusting process.
____ 4. Adjusting entries are made at the end of an accounting period to adjust accounts on the
balance sheet.
____ 5. Adjusting entries affect only expense and asset accounts.
____ 6. An adjusting entry would adjust revenue so it is reported when earned and not when cash
is received.
____ 7. An adjusting entry would adjust an expense account so the expense is reported when
incurred.
____ 8. An adjusting entry to accrue an incurred expense will affect total liabilities.
____ 9. The difference between deferred revenue and accrued revenue is that accrued revenue has
been recorded and needs adjusting and deferred revenue has never been recorded.
____ 10. Deferrals are recorded transactions that delay the recognition of an expense or revenue.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 11. Adjusting entries affect at least one

a. income statement account and one balance sheet account
b. revenue and the drawing account
c. asset and one owner's equity account
d. revenue and one capital account
____ 12. The general term employed to indicate an expense that has not been paid and has not yet
been recognized in the accounts by a routine entry is
a. Capital
b. Deferral
c. Accrual
d. Inventory
____ 13. Prepaid expenses are eventually expected to
a. become expenses when their future economic value expires.
b. become revenues when services are performed.
c. become expenses in the period when they are paid.
d. become revenues when the liability is no longer owed.
____ 14. Which of the following is considered to be unearned revenue?
a. Concert tickets sold for tonight’s performance.
b. Concert tickets sold yesterday on credit.
c. Concert tickets that were not sold for the current performance.
d. Concert tickets sold for next month’s performance.
____ 15. Which of the following is an example of accrued revenue?
a. Swimming pool cleaning that has been paid for three months in advance.
b. Swimming pool cleaning that has been provided but has not been billed or paid.
c. An agreement has been signed for swimming pool cleaning for the next three months.
d. Swimming pool cleaning that has been provided and paid on the same day.
____ 16. Which of the following is considered to be an accrued expense?
a. A computer technician has installed the latest software updates and was paid on the same
day.
b. A computer technician has been paid in advance to install software updates as they become
available.
c. A computer technician has just signed an agreement with you regarding pricing for future
work.
d. A computer technician has installed the latest software updates, but you have not received
their invoice for payment.
____ 17. Which account would normally not require an adjusting entry?
a. Wages Expense
b. Accounts Receivable
c. Accumulated Depreciation
d. Smith, Capital
____ 18. Which one of the accounts below would likely be included in an accrual adjusting entry?
a. Insurance Expense
b. Prepaid Rent
c. Interest Expense
d. Unearned Rent
____ 19. Which one of the following accounts below would likely be included in a deferral
adjusting entry?
a. Interest Revenue
b. Unearned Revenue
c. Salaries Payable
d. Accounts Receivable
____ 20. The entry to adjust for the cost of supplies used during the accounting period is
a. debit Supplies Expense; credit Supplies
b. debit Owner Capital; credit Supplies
c. debit Accounts Payable; credit Supplies
d. debit Supplies; credit Owner Capital
Problem
A.
(1) A business pays weekly salaries of P22,000 on Friday for a five-day week ending on
that day. Compute the salaries expense at the end of the fiscal period, assuming that the
fiscal period ends on Wednesday.
(2) The balance in the prepaid insurance account before adjustment at the end of the year
is P18,000. The amount of insurance expired during the year is P5,300. Compute the
insurance expense
B. On November 1st, clients of Great Designs Company prepaid P2,800 for services to be
provided in the future at a rate of P70 per hour.
(3) As of November 30th, Great Designs shows that 16 hours of services have been provided on this
agreement. How much is the unearned fees?
(4) Determine the total unearned fees in hours and Pesos at November 30th.
C.
(5) The beginning balance of the Supplies account was P245. During the month the
company bought additional supplies in the amount of P735. At the end of the month a
physical inventory showed P343 of unused supplies. Compute the supplies expense.
(6) The company has a 12% Note Payable in the amount of P17,000 due in 6 months. The
interest expense for the month has not been recorded. Copmute the interest expense.
(7) The company has two employees. The manager is paid on the 15th of every month for
work performed during the first half of the month and on the 1st of the following month
for the work performed during the second half of the month. His monthly salary is
P5,500. The other employee is paid P650 for each 5 day work week (Monday - Friday).
The last day of the month fell on Thursday. Compute the accrued salaries.
(8) The unearned revenue account shows a balance of P46,000. According to the manager
60% of that amount has been earned. Compute the unearned income.
D. Jacki Lopez started JVL Consulting on January 1, 2015. The following are the account
balances at the end of the first month of business, before adjusting entries were recorded:
Accounts Payable P350

Accounts Receivable 750
Cash 4,325
Consulting Revenue 4,925
Equipment 7,000
Jacki Lopez, Capital 15,000
Jacki Lopez, Drawing 1,400
Prepaid Rent 6,000
Supplies 800
Adjustment data:
Supplies on hand at the end of the month: P300
Unbilled Consulting Revenue: P50
Rent expense for the month: P2,000
Depreciation on equipment: P150
Compute the following:
(9) Net income
(10) Ending capital
(11) Total assets

E. Encore Consulting is completing the accounting information processing at the end of the
fiscal year, December 31, 2015. The following trial balances are available.
Accounts Unadjusted Trial Balance Adjusted Trial Balance

Debits Credits Debits Credits
Cash 13,000 13,000
Accounts Receivable 1,500 1,800
Prepaid Insurance 600 200
Supplies 3,800 3,000
Machines 30,000 30,000
Accumulated Deprecia- 12,000 17,500
tion - Machines
Wages Payable 900
Unearned Revenue 6,700 6,500
John Brown, Capital 24,000 24,000
John Brown, Drawing 4,800 4,800
Service Revenue 25,000 25,500
Wages Expense 14,000 14,900
Insurance Expense 400
Supplies Expense 800
Depreciation Expenses 5,500
67,700 67,700 74,400 74,400
12-15. Reconstruct the adjusting entries and give a brief explanation of each.
16. What is the amount of net income?
F. Presented below is unadjusted trial balance of Perhel Company for the year ended
December 31, 2016:
Perhel Company
Unadjusted trial balance
December 31, 2016
Cash P 94,500
Accounts receivable 483,750
Office supplies 47,250
Prepaid rent 270,000
Furniture & Fixture 1,631,250
Accumulated depreciation P 326,250
Accounts payable 213,750
24% Note payable 675,000
Aura, Capital 1,421,250
Aura, Drawing 900,000
Service income 3,849,750
Salaries expense 2,828,250
Utilities expense 161,250
Taxes & licenses expense 69,750
Total P12,972,000 P12,972,000
Additional information:
1. Depreciation expense for furniture & fixture is 10% per annum.
2. Office supplies on hand at December 31, 2016 amounted to P21,250.
3. On October 31, 2016. Perhel paid lessor for one year worth of rent on the office building, commencing
on November 1, 2016.
4. As of December 31, 2016, the following expenses were still unrecorded and unpaid:
a. Salaries of employees for the second half of December, P78,750.
b. Telephone, heat, light, and power for the December P21,500.

17. Adjusted trial balance.
18. Net income.
19. Ending capital.
20. Total assets
21. Total liabilities
G. Nit - Nit Company acquired an equipment costing P960,000 on July 1, 2016. The
equipment is being depreciated using straight line method. It is estimated to have a useful life of 10 years
and residual value of P60,000.
22. What is the accumulated depreciation balance that would be shown on December 31, 2016?
23. What is the carrying value of equipment January 1, 2017?
24. Assuming the equipment will be sold on April 1, 2017 at P500,000, How much is the gain or loss on
sale of equipment
H. Aldrin Co. prepared an aging of its accounts receivable indicated that P40,000 allowance
for bad debts was required at December 31, 2016. Additional information is available:
Accounts receivable, 12/31/15 P480,000

Accounts receivable, 12/31/16 540,000
Allowance for bad debts - 12/31/15 60,000
Account written off as uncollectible 50,000
Account recovery 5,000

25. Bad debts expense.
26. Allowance for bad debts 12/31/16.
27. Net realizable value.
I. CBA receives a 90 day, 12% note receivable from a client for repair of Car for P40,000.
The repair was done on November 1. CBA’s accounting period ends November 30.
28. How much is the accrued interest income?

MOCK QUIZ - BASIC PART 1
Answer Section
TRUE/FALSE
1. ANS: T PTS: 1 DIF: Moderate OBJ: 03-01

NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-04-Cash vs. Accrual
2. ANS: F
it must be a nominal or temporary account
PTS: 1 DIF: Moderate OBJ: 03-01

NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-07-Adjusting Entries
3. ANS: T PTS: 1 DIF: Easy OBJ: 03-01
4. ANS: F
also income statement

5. ANS: F
also income & liability

9. ANS: F
accrued revenue has never been recorded and needs adjusting and deferred revenue has been recorded.

10. ANS: T PTS: 1 DIF: Easy OBJ: 03-02
MULTIPLE CHOICE
11. ANS: A PTS: 1 DIF: Moderate OBJ: 03-01

12. ANS: C PTS: 1 DIF: Easy OBJ: 03-01
14. ANS: D PTS: 1 DIF: Difficult OBJ: 03-01
15. ANS: B PTS: 1 DIF: Moderate OBJ: 03-01
18. ANS: C PTS: 1 DIF: Moderate OBJ: 03-02
19. ANS: B PTS: 1 DIF: Moderate OBJ: 03-02
PROBLEM
21. ANS:
(a) (1) Salary Expense (P22,000/5 x 2) 8,800
Salaries Payable 8,800
(2) Salary Expense (P22,000/5 x 3) 13,200

Salaries Payable 13,200
(b) (1) Insurance Expense 5,300

Prepaid Insurance 5,300
(2) Insurance Expense (P18,000 - P2,700) 15,300

Prepaid Insurance 15,300
(c) (1) Taxes Expense (P54,000/12) 4,500

Prepaid License Taxes 4,500
Taxes Expense 4,800

Property Taxes Payable 4,800
(2) P9,300 (P4,500 + P4,800)
(d) Depreciation Expense 32,000

Accumulated Depreciation - Equipment 32,000
PTS: 1 DIF: Difficult OBJ: 03-02

22. ANS:
(a) Nov 1 Cash 2,800
Unearned Service Fees 2,800
(b) Nov 30 Unearned Service Fees (P70 x 16) 1,120

Service Fees 1,120
(c) The original prepaid fees - P2,800 / P70 per hour = 40 hours
November service fees earned 1,120 16 hours
Balance of unearned service fees P1,680 24 hours

NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-06-Recording Transactions | ACBSP-
APC-07-Adjusting Entries
23. ANS:
(a) Supplies Expense (P245 + P735 - P343) 637
Supplies 637
(b) Interest Expense (P17,000 x 12%/12) 170

Interest Payable 170
(c) Wages and Salary Expense 3,270

Wages and Salary Payable 3,270
((P5,500 /2) + (P650/5 x 4))
(d) Unearned Revenues 27,600

Fees Earned 27,600
(P46,000 x 60%)
(e) Accounts Receivable 5,700

Fees Earned 5,700

24. ANS:
(a)

Supplies 500

Consulting Revenue 850
Rent Expense 2,000

Prepaid Rent 2,000
Depreciation Expense 150

Accumulated Depreciation - Equipment 150
(b)
JVL Consulting
Adjusted Trial Balance
January 31, 2011
Accounts Debit Balances Credit Balances

Cash $ 4,325
Accounts Receivable 1,600
Supplies 300
Prepaid Rent 4,000
Equipment 7,000
Accumulated Depreciation- Equipment $ 150
Accounts Payable 350
Jacki Lopez, Capital 15,000
Jacki Lopez, Drawing 1,400
Consulting Revenue 5,775
Depreciation Expense 150
Rent Expense 2,000
Totals $21,275 $21,275
PTS: 1 DIF: Difficult OBJ: 03-03 | 03-04

25. ANS:
A.

Service Revenue 300
Accrued Fees.
Insurance Expense 400

Prepaid Insurance 400
Expired Insurance.

Supplies 800
Supplies used ($3,800 - 3,000).
Depreciation Expense 5,500

Accumulated Depreciation 5,500
Depreciation expense.
Wages Expense 900

Wages Payable 900
Accrued Wages.
Unearned Revenue 200

Service Revenue 200
Revenue earned (P6,700 - 6,500).
B. P25,500 - 14,900 - 400 - 800 - 5,500 = P3,900
PTS: 1
26. ANS:
1
PTS: 1
27. ANS:
1
PTS: 1
28. ANS:
1
PTS: 1
29. ANS:
1
PTS: 1

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UNIVERSITY OF SANTO TOMAS

AMV – COLLEGE OF ACCOUNTANCY

QUIZ – 3 ADJUSTING ENTRIES

____ 3. The updating of accounts is called the adjusting process.

____ 5. Adjusting entries affect only expense and asset accounts.

____ 11. Adjusting entries affect at least one

Accounts Payable P350

Compute the following:

(9) Net income

(10) Ending capital

(11) Total assets

Accounts Unadjusted Trial Balance Adjusted Trial Balance

Compute the following:

Accounts receivable, 12/31/15 P480,000

Compute the following:

28. How much is the accrued interest income?

1. ANS: T PTS: 1 DIF: Moderate OBJ: 03-01

PTS: 1 DIF: Moderate OBJ: 03-01

PTS: 1 DIF: Moderate OBJ: 03-02

PTS: 1 DIF: Moderate OBJ: 03-02

PTS: 1 DIF: Moderate OBJ: 03-02

11. ANS: A PTS: 1 DIF: Moderate OBJ: 03-01

(2) Salary Expense (P22,000/5 x 3) 13,200

(b) (1) Insurance Expense 5,300

(2) Insurance Expense (P18,000 - P2,700) 15,300

(c) (1) Taxes Expense (P54,000/12) 4,500

Taxes Expense 4,800

(2) P9,300 (P4,500 + P4,800)

(d) Depreciation Expense 32,000

PTS: 1 DIF: Difficult OBJ: 03-02

(b) Nov 30 Unearned Service Fees (P70 x 16) 1,120

PTS: 1 DIF: Difficult OBJ: 03-02

(b) Interest Expense (P17,000 x 12%/12) 170

(c) Wages and Salary Expense 3,270

(d) Unearned Revenues 27,600

(e) Accounts Receivable 5,700

PTS: 1 DIF: Difficult OBJ: 03-02

Supplies Expense 500

Accounts Receivable 850

Rent Expense 2,000

Depreciation Expense 150

Accounts Debit Balances Credit Balances

PTS: 1 DIF: Difficult OBJ: 03-03 | 03-04

Accounts Receivable 300

Insurance Expense 400

Supplies Expense 800

Depreciation Expense 5,500

Wages Expense 900

Unearned Revenue 200

B. P25,500 - 14,900 - 400 - 800 - 5,500 = P3,900

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