Professional Documents
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NAME:_____________________________________ GRADE/SECTION_______
ACCOUNTING PROCESS
Adjusting entries.
Data relating to the balances of various accounts affected by adjusting or closing entries appear
below. (The entries which caused the changes in the balances are not given.) You are asked to
supply the missing journal entries which would logically account for the changes in the account
balances.
1. Interest receivable at 1/1/18 was P1,000. During 2018 cash received from debtors for
interest on outstanding notes receivable amounted to P5,000. The 2018 income statement
showed interest revenue in the amount of P4,900. You are to provide the missing adjusting
entry that must have been made, assuming reversing entries are not made.
2.
Unearned rent at 1/1/18 was P5,300 and at 12/31/18 was P6,000. The records indicate
cash receipts from rental sources during 2018 amounted to P40,000, all of which was
credited to the Unearned
Rent Account. You are to prepare the missing adjusting entry.
4.
Allowance for doubtful accounts on 1/1/18 was P50,000. The balance in the allowance
account on 12/31/18 after making the annual adjusting entry was P60,000 and during 2018
bad debts written off amounted to P30,000. You are to provide the missing adjusting entry.
5. Prepaid rent at 1/1/18 was P9,000. During 2018 rent payments of P110,000 were made
and charged to "rent expense." The 2018 income statement shows as a general expense
the item "rent expense" in the amount of P125,000. You are to prepare the missing adjusting
entry that must have been made, assuming reversing entries are not made.
8. The business has Accounts Receivable of P14,500 as at the end of 2013. It is estimated
that only 90% of this is collectible. Allowance for Doubtful Accounts has a balance of
P750.
9. A six month advertising contract was entered to by the business which required an
advance payment on P2,400 on November 2, 2013 and was debited to Advertising
Expense.
10. Rent income was credited for P18,000 represent 3 months rent received from lesee on
October 15, 2013.
11. Office equipment costing P75,000 was purchased on October 1, 2013 and estimated to
have a useful life of five years which a scrap value of P5,000.
12. Supplies Expense has balance of P9,500 representing supplies purchased during the
year of which only P4,500 has been taken out from the stockroom.
LONG PROBLEM:
The Righter Shoe Store Company prepares monthly financial statements for its bank. The
November 30 and December 31, 2018, trial balances contained the following information:
Nov. 30 Dec. 31
Dr. Cr. Dr. Cr.
Supplies 1,000 3,000
Prepaid insurance 6,000 4,250
Wages payable 10,000 15,000
Unearned rent revenue 2,000 1,000
a. The December income statement (accrual basis) reported P2,000 in supplies expense.
b. No insurance payments were made in December.
c. P10,000 was paid to employees during December for wages.
d. On November 1, 2018, a tenant paid Righter P3,000 in advance rent for the period November
through January. Unearned revenue was credited.
Questions
1. What was the cost of supplies purchased during December?
3. What was the adjusting entry recorded at the end of December for accrued wages?
5. What adjusting entry was recorded at the end of December for unearned rent?
7. The Supplies on Hand account balance at the beginning of the period was P6,600.
Supplies totaling P12,825 were purchased during the period and debited to Supplies
on Hand. A physical count shows P3,825 of Supplies on Hand at the end of the period.
The proper journal entry at the end of the period
a. debits Supplies on Hand and credits Supplies Expense for P9,000.
b. debits Supplies Expense and credits Supplies on Hand for P12,825.
c. debits Supplies on Hand and credits Supplies Expense for P15,600.
d. debits Supplies Expense and credits Supplies on Hand for P15,600.
8. Arid Company paid P1,718 on June 1, 2018, for a two-year insurance policy
and recorded the entire amount as Insurance Expense. The December 31, 2018, adjusting entry
is
a. debit Prepaid Insurance and credit Insurance Expense, P497.
b. debit Insurance Expense and credit Prepaid Insurance, P497.
c. debit Insurance Expense and credit Prepaid Insurance, P1,207.
d. debit Prepaid Insurance and credit Insurance Expense, P1,207.
10.
In November and December 2018, Bee Company, a newly organized
newspaper publisher, received P72,000 for 1,000 three-year subscriptions at P24 per year,
starting with the January 2, 2019, issue of the newspaper. How much should Bee report in its
2018 income statement for subscription revenue?
a. P0
b. P12,000
c. P24,000
11.
The following errors were made in preparing a trial balance: the P1,350
balance of Inventory was omitted; the P450 balance of Prepaid Insurance was listed as a credit;
and the P300 balance of Salaries Expense was listed as Utilities Expense. The debit and credit
totals of the trial balance would differ by
a. P1,350.
b. P1,800.
c. P2,100.
d. P2,250.
12.
Crescent Company's interest revenue for 2018 was P13,100. Accrued
interest receivable on December 31, 2018, was P2,275 and P1,875 on December 31, 2017. The
cash received for interest during 2018 was
a. P1,350.
b. P10,825.
c. P12,700.
d. P13,100.
13.
Sky Company's salaries expense for 2018 was P136,000. Accrued salaries
payable on December 31, 2018, was P17,800 and P8,400 on December 31, 2017. The cash
paid for salaries during 2018 was
a. P126,600.
b. P127,600.
c. P145,400.
d. P153,800.
14.
Gomez Company received P9,600 on April 1, 2018 for one year's rent in advance and
recorded the transaction with a credit to a nominal account. The December 31, 2018
adjusting entry is
a. debit Rent Revenue and credit Unearned Rent, P2,400.
b. debit Rent Revenue and credit Unearned Rent, P7,200.
c. debit Unearned Rent and credit Rent Revenue, P2,400.
d. debit Unearned Rent and credit Rent Revenue, P7,200.
15.
Forbes Company paid P7,200 on June 1, 2018 for a two-year insurance policy
and recorded the entire amount as Insurance Expense. The December 31, 2018
adjusting entry is
a. debit Insurance Expense and credit Prepaid Insurance, P2,100.
b. debit Insurance Expense and credit Prepaid Insurance, P5,100.
c. debit Prepaid Insurance and credit Insurance Expense, P2,100
d. debit Prepaid Insurance and credit Insurance Expense, P5,100.
16.
Lane Company purchased equipment on November 1, 2018 and gave a 3-
month, 9% note with a face value of P50,000. The December 31, 2018 adjusting entry is
a. debit Interest Expense and credit Interest Payable, P4,500.
b. debit Interest Expense and credit Interest Payable, P1,125.
17.
Green Company's account balances at December 31, 2018 for Accounts
Receivable and the related Allowance for Doubtful Accounts are P460,000 debit and
P700 credit, respectively. From an aging of accounts receivable, it is estimated that
P18,000 of the December 31 receivables will be uncollectible. The necessary adjusting
entry would include a credit to the allowance account for
a. P18,000.
b. P18,700.
c. P17,300.
d. P700.
18.
Chen Company's account balances at December 31, 2018 for Accounts
Receivable and the Allowance for Doubtful Accounts are P640,000 debit and P1,200
credit. Sales during 2018 were P1,800,000. It is estimated that 1% of sales will be
uncollectible. The adjusting entry would include a credit to the allowance account for
a. P19,200.
b. P18,000.
c. P16,800.
d. P6,400.
19.
Perez Corporation received cash of P9,000 on August 1, 2018 for one year's
rent in advance and recorded the transaction with a credit to Rent Revenue. The
December 31, 2018 adjusting entry is
a. debit Rent Revenue and credit Unearned Rent, P3,750.
b. debit Rent Revenue and credit Unearned Rent, P5,250.
c. debit Unearned Rent and credit Rent Revenue, P3,750.
d. debit Cash and credit Unearned Rent, P5,250.
20.
Lane Corporation has an incentive commission plan for its salesmen, entitling
them to an additional sales commission when actual quarterly sales exceed budgeted
estimates. An analysis of the account "incentive commission expense" for the year
ended December 31, 2018, follows:
21.
On September 1, 2017, Kile Co. issued a note payable to National
Bank in the amount of P900,000, bearing interest at 12%, and payable in three equal
annual principal payments of P300,000. On this date, the bank's prime rate was 11%.
The first payment for interest and principal was made on September 1, 2018. At
December 31, 2018, Kile should record accrued interest payable of
a. P36,000.
b. P33,000.
c. P24,000.
d. P22,000.
22.
Eaton Co. sells major household appliance service contracts for cash. The
service contracts are for a one-year, two-year, or three-year period. Cash receipts from
contracts are credited to Unearned Service Revenues. This account had a balance of
P900,000 at December 31, 2018 before year-end adjustment. Service contract costs are
charged as incurred to the Service Contract Expense account, which had a balance of
P225,000 at December 31, 2018.
Service contracts still outstanding at December 31, 2018 expire as follows:
uring 2019
D 190,000
P
uring 2020
D 85,000
2
uring 2021
D 75,000
1
What amount should be reported as Unearned Service Revenues in Eaton's
December 31, 2018 balance sheet?
a. P675,000.
b. P650,000.
c. P425,000.
d. P250,000.
23.
In November and December 2018, Mann Co., a newly organized magazine
publisher, received P75,000 for 1,000 three-year subscriptions at P25 per year, starting
with the January 2019 issue. Mann included the entire P75,000 in its 2018 income tax
return. What amount should Mann report in its 2018 income statement for subscriptions
revenue?
a. P0.
b. P4,167.
c. P25,000.
d. P75,000.
24.
On June 1, 2018, Nott Corp. loaned Gore P600,000 on a 12% note, payable in
five annual installments of P120,000 beginning January 2, 2019. In connection with this
loan, Gore was required to deposit P6,000 in a noninterest-bearing escrow account. The
amount held in escrow is to be returned to Gore after all principal and interest payments
have been made. Interest on the note is payable on the first day of each month
beginning July 1, 2018. Gore made timely payments through November 1, 2018. On
January 2, 2019, Nott received payment of the first principal installment plus all interest
26.
Dolan Co. pays all salaried employees on a biweekly basis. Overtime pay,
however, is paid in the next biweekly period. Dolan accrues salaries expense only at its
December 31 year end. Data relating to salaries earned in December 2018 are as
follows:
Last payroll was paid on 12/26/18, for the 2-week period ended 12/26/18.
Overtime pay earned in the 2-week period ended 12/26/18 was P5,000.
Remaining work days in 2018 were December 29, 30, 31, on which days there
was no overtime.
The recurring biweekly salaries total P90,000.
Assuming a five-day work week, Dolan should record a liability at December 31,
2018 for accrued salaries of
a. P27,000.
b. P32,000.
c. P54,000.
d. P59,000.
27.
Unruh Corp.'s trademark was licensed to Eddy Co. for royalties of 15% of
sales of the trademarked items. Royalties are payable semiannually on March 15 for
sales in July through December of the prior year, and on September 15 for sales in
January through June of the same year. Unruh received the following royalties from
Eddy:
March 15 September 15
2017 P5,000 P7,500
2018 6,000 8,500
Eddy estimated that sales of the trademarked items would total P80,000 for July
through December 2018. In Unruh's 2018 income statement, the royalty revenue should
be
28.
Winston Company sells magazine subscriptions for one- to three-year
subscription periods. Cash receipts from subscribers are credited to Magazine Subscriptions
Collected in Advance, and this account had a balance of P9,600,000 at December 31, 2018,
before year-end adjustment. Outstanding subscriptions at December 31, 2018, expire as
follows:
30.
Ingle Company paid P12,960 for a four-year insurance policy on September
1 and recorded the P12,960 as a debit to Prepaid Insurance and a credit to Cash. What
adjusting entry should Ingle make on December 31, the end of the accounting period?
a. Prepaid Insurance .................. 810
Insurance Expense ................ 810
b. Insurance Expense .................. 1,080
Prepaid Insurance ................ 1,080
c. Insurance Expense .................. 3,240
Prepaid Insurance ................ 3,240
d. Prepaid Insurance .................. 11,880
Insurance Expense ................ 11,880
31. Bannister Inc.'s fiscal year ended on November 30, 2018. The balance in
the prepaid insurance account as of November 30, 2018, was P35,200 (before adjustment) and
consisted of the following policies:
32.
Kite Company paid P24,900 in insurance premiums during 2018. Kite
showed P3,600 in prepaid insurance on its December 31, 2018, balance sheet and P4,500 on
December 31, 2017. The insurance expense on the income statement for 2018 was
a. P16,800.
b. P24,000.
c. P25,800.
d. P33,000.
33. The work sheet of PSI Company shows Income Tax Expense of P9,000 and
Income Tax Payable of P9,000 in the Adjustments columns. What will be the ultimate disposition
of these items on the work sheet?
a. Income Tax Expense will appear as a debit of P9,000 and Income Tax Payable as
credit in the Balance Sheet columns.
b. Income Tax Expense will appear as a debit of P9,000 and Income Tax Payable as
credit in the Income Statement columns.
c. Income Tax Expense will appear as a debit of P9,000 in the Balance Sheet
columns and Income Tax Payable as credit in the Income Statement columns.
d. Income Tax Expense will appear as a debit of P9,000 in the Income Statement
columns and Income Tax Payable as credit in the Balance Sheet columns.
34. Teller Inc. reported an allowance for doubtful accounts of P30,000 (credit) at
December 31, 2018, before performing an aging of accounts receivable. As a result of the
aging, Teller Inc. determined that an estimated P52,000 of the December 31, 2018, accounts
receivable would prove uncollectible. The adjusting entry required at December 31, 2018, would
be
a. Doubtful Accounts Expense ........... 22,000
Allowance for Doubtful Accounts ... 22,000
b. Allowance for Doubtful Accounts ..... 22,000
Accounts Receivable ............... 22,000
c. Doubtful Accounts Expense ........... 52,000
Allowance for Doubtful Accounts ... 52,000
d. Allowance for Doubtful Accounts ..... 52,000
Doubtful Accounts Expense ......... 52,000
35. Comet Corporation's liability account balances at June 30, 2018, included a
10 percent note payable. The note is dated October 1, 2016, and carried an original principal
amount of P600,000. The note is payable in three equal annual payments of P200,000 plus
interest. The first interest and principal payment was made on October 1, 2017. In Comet's June