1.

Correcting Trial l Balance

The October 2020 trial balance for MARGE Consultancy, owned by Marge Orie is presented
below. The regular bookkeeper has resigned and left the following trial balance.

Upon reviewing the trial balance and the process of transferring the amounts in the ledger
accounts to the trial balance, two errors were discovered:
a. The debit column in the trial balance was footed incorrectly.
b. The balance in the accounts payable ledger account of P62,700 was transferred as P72,600.

When the balances of the ledger accounts were recomputed, two more errors were discovered:
c. The Utilities Expense account balance was overstated by P1,800.
d. The total debits in the Cash account amounted to P184,600and the credits totaled P149,800.

Discovered four more errors when postings were retraced from the journal to the ledger:
e. A debit posting to Accounts Receivable in the amount of P52,000 should have been P5,200
f. A debit posting to Accounts Payable for P46,000 was missing.
g. A credit posting to Revenues in the amount of P7,600 was missing.
h. A credit of P31,000 was posted to Accounts Payable rather than P30,100
REQUIRED: Prepare a corrected trial balance

2. State what element is affected and if Overstated or Understated

Type of Adjustment Account Balances before Adj.

B/S
Accounts I/S Accounts
Prepaid/Deferred Expenses
Asset - Expense -
Example Asset Method Overstated Understated
Expense Method a.1 a.2

Depreciation b.1 b.2

Unearned Revenues
Liability Method c.1 c.2
Income Method d.1 d.2

Accrued Expenses e.1 e.2

Accrued Revenues f.1 f.2

3. The accounting records of Nettle Distribution show the following assets and
liabilities as of December 31, 2016 and 2017.

Compute net income for 2017 by comparing total equity amounts for these two years and using
the following information: During 2017, the owner invested $35,000 additional cash in the
business and withdrew $44,400 cash for personal use.
4. On November 30, Janina Clothing Line’s general ledger resulted the following totals:
Assets = P517,600 Liabilities = P323,400 Equity= P200,500

The accounting equation was not balanced due to the following:

a. Supplies of P500 were on hand but were not included in assets because all
purchases are debited to Supplies Expense
b. Credit services revenue of P15,700 was posted to the Service Revenue account as
P17,500. The Accounts Receivable account was posted correctly
c. Equipment purchased on credit for P51,600 was incorrectly posted to Notes Payable
as P56,100. No error was made in the Equipment account.
What is the correct balance of Equity?

5. Zia Laundry Shop has a general ledger (control account) of Accounts Receivable
amounting to P450,000. On the other hand, subsidiary ledgers of the customers have a
total of P480,000. The variance pertains to the service revenue to a customer, Kris
wherein the transaction was entered twice in the subsidiary ledger.

What should be the journal entry to correct the variance?

6. A listing of the entity’s general ledger accounts in a systematic form is:

a. Subsidiary Ledger
b. Chart of Accounts
c. General Ledger
d. General Journal

7. Double entry system means

a. The use of journal and ledger
b. Use of two journals
c. Use of real and nominal
d. Recording if each transaction in two parts

8. Determine the journal entry for this transaction:

Zoe Graphics agreed to purchase an office equipment of P60,000 payable at the end of
the following month.

9. Zoe Lardero deposited P100,000 on the bank account under the name of the business
Zoe Graphics

10. Zoe Graphics purchased office equipment amounting to P500,000 payable 20% on cash
and the remaining to be payable in the future. The equipment is expected to be used for
5 years and after which has a salvage value of P50,000
11. Using the above information, what is the adjusting entry at the end of the year assuming
one year depreciation?

12. Zeke Lundas Car Shop has a trade accounts receivable at the beginning of the period
amounting to P28,000 and P24,000 at the end of the period. Collections during the
period amounted to P80,000.

How much is the total amount of services rendered on account during the period?

13. Zia Grocery Store has the following details:

Accounts Receivable, beg P230,000

Accounts Receivable, end P318,000
Accounts Payable, beg P119,000
Accounts Payable, end P60,400
Collections during the period amounted to P491,600 and payment to suppliers from
account purchases amounted to P297,400.

How much is the total amount of services rendered on account and purchases on
account during the period?

14. Mary Coffee Shop has total sales of P3 million wherein 20% is cash sales. Beginning
accounts receivable is P125,000 and ending accounts receivable is P280,000. How
much is the collection during the period?

15. If a business has total resources of P2,000,000 and total claims of the creditors is
P800,000, how much is the owner’s claim?

16. If a business has total resources of P1,200,000 and 30% of it was borrowed from a
Bank. If the equity increased during the period by net amount of P200,000 and half of
the total debt was already paid by the end of the period, how much is the total resources
at the end of the period?

17. Lisa Flower Shop purchased supplies costing P2,500 on January 1, 2019 and recorded
it as assets. Year-end supplies on hand amounted to P1,300. If adjusting entry was not
made, the impact in the financial position (balance sheet) by year-end is:

a. Assets overstated by P1,200

b. Equity understated by P1,200
c. Equity overstated by P1,300
d. Assets overstated by P1,300
18. What are the effects of an adjusting entry used to accrue revenue from credit sales?

A B C D
Assets Decrease Increase No Effect No Effect
No Effect No Decrease Increase
Liabilities
Effect
Equity Decrease Increase Increase Decrease

19. Ceam Company has P90,000 in revenues, P198,000 in expenses, P13,500 in owner’s
investment, P54,000 in owner’s withdrawal and P67,500 in liabilities paid off. Owner’s
equity changes by:
a. (P67,500)
b. (P81,000)
c. (P148,500)
d. (P216,000)

20. The balance of the commissions income account includes a P25,500 commissions
received in advance for selling 10 cars. As of December 31, 2019, only 4 cars were sold.
Of the P25,500, how much will be shown as liability as of December 31, 2019?
a. P0
b. P10,200
c. P15,300
d. P25,500
 The trial balance of Allison Company appear as follows: For Questions 21-25
Allison Company
Unadjusted Trial Balance
December 31, 2019

Cash P 80,000
Accounts Receivable 50,000
Prepaid Insurance 10,000
Supplies 10,000
Office Equipment 30,000
Accumulated Depreciation P10,000
Accounts Payable 30,000
Cinderella Capital 120,000
Service Revenue Earned 60,000
Salaries Expense 20,000
Rent Expense 20,000

21. If on December 31, 2019, supplies on hand were P1,000, the adjusting entry would
contain a
a. Debit to supplies expense for P1,000
b. Credit to supplies expense for P1,000
c. Debit to supplies expense for P9,000
d. Credit to supplies expense for P9,000
22. If on December 31, 2019, the trial balance showed insurance still unexpired amounting
to P2,000, the adjusting entry would contain
a. Debit to prepaid insurance for P8,000
b. Credit to prepaid insurance for P8,000
c. Debit to prepaid insurance for P2,000
d. Credit to prepaid insurance for P2,000
23. If the estimated depreciation for office equipment were P10,000, the adjusting entry
would contain
a. A credit to accumulated depreciation for P10,000
b. A credit to depreciation expenses for P10,000
c. A debit to accumulated depreciation for P10,000
d. A credit to office equipment for P10,000

24. If as of December 31, the rent of P5,500 for December had not been recorded and still
unpaid, the adjusting entry would include
a. A credit to accumulated rent for P5,500
b. A debit to rent payable for P5,500
c. A debit to rent expense for P5,500
d. A credit to cash for P5,500
25. If services totaling P15,000 had been performed but not billed, the adjusting entry to
record this would include a
a. Debit to service revenue earned for P15,000
b. Credit to unearned service revenue for P15,000
c. Credit to service revenue earned for P15,000
d. Credit to service revenue earned for P85,000
26. Elay Co. bought P52,500 of furniture. Accumulated depreciation has a balance of P15,000
prior to recording of current year’s depreciation. Depreciation expense at the end of the
year is P3,500. What is the book value of the furniture at the end of the year?
a. P49,000
b. P41,000
c. P37,500
d. P34,000

27. There is an P81,000 insurance policy good for 3 years beginning July 1, 2021 recorded
as an asset. If the adjustment is made at year-end, what will be the adjusting entry?

28. All insurance premiums paid are debited to Prepaid Insurance. The business has the
following details:

Prepaid Insurance, beg. P110,000

Charges to Insurance expense (including year-end adjustment of P10,500) P437,500
Prepaid Insurance, end P120,500

How much is the total insurance premium paid by Bessy during 2019?

29. The business has the following details:

A/R, beg. P48,400

ADA, beg, P940

The business wrote-off P820 in Accounts Receivable and determined that ending
balance of ADA should be P1,140. How much is the bad debt expense recognized
during the period?

30. Prepaid Insurance, beg P11,200

Prepaid Insurance, end P12,800

Purchase of premium insurance during the year is P5,000 and was paid and charged to
Insurance Expense.
What is the adjusting entry made at year-end?

31. Zoe Café’ received P9,600 on April 1, 2019 representing one year advance rental
payment and credited the transaction to a nominal account (income statement account).
What is the adjusting entry at year-end?
Analysis of Errors
(a) Did the error cause the trial balance totals to be unequal?
(b) What is the amount of the difference between the trial balance totals (where
applicable)?
(c) Which of the trial balance totals, debit or credit, is the larger (where
applicable)?

a. A withdrawal of P1,000 cash by the owner was recorded by a debit of P1,000 to

Salary Expense and a credit of P1,000 to Cash.
b. A P950 purchase of supplies on account was recorded as a debit of P1,950 to
Equipment and a credit of P1,950 to Accounts Payable.
c. A P630 receipt on account was recorded as a P630 debit to Cash and a P360 credit
to Accounts Receivable.
d. The advance payment of P120,000 for rent recorded using a real account was
recorded as P210,000.
e. A payment of P1,030 cash on account was recorded only as a credit to Cash.
f. The credit to record a P800 cash payment on account was posted twice; the debit
was posted once.