ACCOUNTING 1&2

QUIZ ON ADJUSTING ENTRIES

MULTIPLE CHOICE
By Prof RDBugtong

Use the following choices for Nos. 1 – 15 in determining the method used in each of
the statements:

a. Asset method c. Income method

b. Expense method d. Liability method

1. Commission income account which is shown in the books is already 2/3 earned C
2. Advance rental for 2 years was charged to Rent Expense B
3. Insurance premiums for 2 years was debited to a prepaid account A
4. Supplies on hand was shown in the books with a balance of P450 A
5. Discounted our own promissory note. Interest was debited to Prepaid Interest A
6. Year-end adjusting entry shows a debit to Commission income and a credit to
Deferred Commission Income C
7. Adjustment was made debiting Rent Expense and crediting Prepaid Rent A
8. Lent a client the amount of P15,000, for which we discounted a 90-15% promissory
note and credited a Deferred account for the interest D
9. Year-end adjusting entry includes a debit to Deferred Commission Income and credit
to Commission Income D
10. Adjusting entry made shows a debit to Prepaid Interest and Credit to Interest
Expense B
11. In the adjusting entry made at year end, Prepaid Advertising was reduced A
12. A 2-year rent received was credited to Rent Income C
13. During the end of the year, adjusting entry was made by recognizing an interest
expense A
14. Prepaid Insurance was shown in the books with a balance of P15,000 A
15. Adjusting entry was made to recognize an income D

Use the following choices for items 16 – 25:

a. Both statements are true
b. Both statements are false
c. Only the first statement is true
d. Only the second statement is true

16. Accrued Income is a liability F

Accrued interest expense is the same as interest receivable F

17. Depreciation is the systematic allocation of the life of the property over its
cost. F
Doubtful accounts refers to that portion of the receivable that is doubtful as to
collection T

18. Prepaid Expense refers to expenses paid in advance and is shown in the income
statement as an asset F

Prepaid Expense refers to expenses paid in advance and is shown in the balance
sheet as an asset T

19. Accumulated depreciation is shown in the balance sheet as a reduction to the cost
of the property being depreciated to get the net book value T

Accumulated depreciation is shown in the balance sheet as a reduction to the cost

of the property being depreciated to get the net realizable value F

20. Deferred income is a current liability T

Deferred income is a current asset F

21. Accrued expenses are expenses incurred but not yet paid and is therefore a current
liability T

Accrued income are income earned but not yet collected and is therefore a current
asset T

22. Depreciation is computed by dividing the cost, if there is no salvage value by the
estimated useful life T

Net book value of the property should be equal to the salvage value at the end of
its estimated useful life T
23. When doubtful accounts is estimated as a percentage of accounts receivable, we
have to consider the beginning balance of the allowance for doubtful accounts to
arrive at the doubtful accounts expense T

When doubtful accounts is estimated as a percentage of sales, we have to consider

the beginning balance of the allowance for doubtful accounts to arrive at the
doubtful accounts expense T

24. The unexpired portion of a prepaid expense is reported in the income statement F
The unexpired portion of a prepaid expense is reported in the balance sheet T

25. The unearned portion of a deferred income is reported in the balance sheet. T
The unearned portion of a deferred income is reported in the income statement. F

26. Salary already due but not yet paid as of December 31 is 15 days at P160 per day.
How much is the accrued salary as of December 31?
a. P160 b. P2,400 c. P4,960 d. P2,560

27. Interest accrued and not yet paid on note of P10,000 for 60 days at 12% starting
December 1. how much is the interest payable as of December 31
a. P1,200 b. P200 c. P100 d. P1,100

28. Interest collected, credited to interest revenue account for a period of 45 days
from December 16 is P1,200. How much is the unearned interest as of December 31?
a. P1,200 b. P400 c. P800 d. P18,000

29. Of the balance of the unexpired insurance account of P2,400, P600 has expired as
of December 31. How much is the adjusted balance of the unexpired insurance as of
December 31?
a. P2,400 b. P600 c. P1,800 d. P3,000

30. Of the balance of the interest revenue account of P10,200, P9,200 is earned. What
is the unearned portion as of December 31?
a. P10,200 b. P9,200 c. P1,000 d. P19,400

31. Of the balance of the unearned interest revenue account of P10,200, P9,200 is
earned. What is the interest income as of December 31?
a. P10,200 b. P9,200 c. P1,000 d. P19,400

32. Bad debts is estimated at 2.5% of net sales of P5,000,000. How much is the bad
debts expense as of December 31 if there is a beginning balance of P15,000 in the
allowance for bad debts?
a. P125,000 b. P110,000 c. P140,000 d. P15,000

33. Furniture costing P2,600 was acquired on April 1, 2000. It has an estimated
useful life of 5 years and a scrap value of P200. How much is the depreciation
expense as of December 31, 2001?
a. P520 b. P480 c. P360 d. 320

34. Office equipment costing P4,750 was acquired on January 1 of the current year. It
has an estimated useful life of 7 years and a scrap value of 550. assuming the
asset was sold on December 31 for P4,000, how much is the gain or loss on sale?
a. P150 gain b. P150 loss c. P400 gain d. P400 loss

35. Bad debts is estimated at 1.5% of the sales balance of P130,000. Beginning
balance of the allowance for bad debts is P1,000. How much is the bad debts
expense as of December 31?
a. P1,950 b. P950 c. P2,950 d. P1,000

36. Rent for six months from October 31 was paid and recorded in the rent expense
account for P18,000. What is the correct rent expense as of December 31?
a. P6,000 b. P12,000 c. P18,000 d. P24,000

37. A 60 day 12% note for P15,000 dated November 21 is outstanding. Interest payable
upon maturity. What is the interest payable as of December 31?
a. P1,8000 b. P300 c. P200 d. P100

38. The company’s net sales amounted to P320,000. cost of sales is 40% of net sales.
Operating expense is P75,000. How much is the net income (loss) for the period?
a. P53,000 income b. P53,000 loss c. P117,000 income d. P117,000 loss

39. Assuming beginning inventory of P110,000, purchases of P500,000 and cost of sales
of P400,000, How much is the ending inventory?
a. P400,000 b. P210,000 c. P100,000 d. P510,000
 40. Assuming beginning capital of P260,000; additional investments of P10,000;
withdrawal of P50,000 and ending capital of P200,000. How much is the net income
or net loss?
a. P20,000 loss b. P20,000 income c. P40,000 loss d. P40,000 income

41. The firm has used P170 of the supplies and P430 remains on hand. The amount of
supplies expense is
a. P170 b. P430 c. P260 d. P600

42. Based on no. 41, the asset portion is

a. P170 b. P430 c. P260 d. P600

43. Based on no. 41, the amount to be reflected in the income statement is
a. P170 b. P430 c. P260 d. P600

Nos 44 to 46 is based on the following:

The trial balance showed a balance of P1,340 in store supplies account. As of

December 31, it is determined that only P600 is left on hand

44. The amount of supplies charged to operation is

a. P1,340 b. P600 c. P740 d. P1,940

45. the amount that will appear in the balance sheet is

a. P1,340 b. P600 c. P740 d. P1,940

46. the amount that will appear in the income statement is

a. P1,340 b. P600 c. P740 d. P1,940

Nos. 47 to 50 is based on the following:

Equipment, with a useful life of 10 years, was purchased on January 1., 1999 at a
cost of P100,000.

47. the depreciation expense for 2001 is

a. P10,000 b. P20,000 c. P30,000 d. P40,000

48. the accumulated depreciation of the equipment as of December 31, 2002 is

a. P10,000 b. P20,000 c. P30,000 d. P40,000

49. the net book value of the equipment as of January 1, 2001 is

a. P90,000 b. P80,000 c. P70,000 d. P60,000

50. if the equipment was sold for P68,000 on December 31, 2002, the gain (loss) on
sale is
a. P(8,000) b. P8,000 c. P18,000 d. P(18,000 )

Nos. 51 to 54 is based on the following:

The firm borrowed P20,000 from the bank on December 1, 2002 by signing a 90-day 12%
note

51. the accrued interest on December 31 is

a. P2,400 b. P200 c. P600 d. P400

52. the maturity value of the note is

a. P22,400 b. P20,200 c. P20,600 d. 20,400

53. the amount to be charged as interest expense for 2002 is

a. P2,400 b. P200 c. P600 d. P400

54. the firm should recognize a liability for interest on December 31, 2002 for
a. P2,400 b. P200 c. P600 d. P400

Nos 55 to 57 is based on the following

Three months taxes in the amount of P685 have accrued at the end of the accounting
period

55. The amount of accrued taxes is

a. P685 b. P2,055 c. P228.33 d. P 0

56. the amount of taxes expense is

a. P685 b. P2,055 c. P228.33 d. P 0

57. the amount of liabilities for taxes is

a. P685 b. P2,055 c. P228.33 d. P 0
nos. 58 to 60 is based on the following:

On December 31, 1995, the unadjusted trial balance showed a balance of P18,000 in the
prepaid insurance account. This was purchased on November 1, 1995 representing a one year
insurance policy.

58. The insurance expense at December 31 should be

a. P1,500 b. P3,000 c. P15,000 d. P18,000

59. Adjusting entry should show a credit to prepaid insurance of

a. P1,500 b. P3,000 c. P15,000 d. P18,000

60. The adjusted balance of prepaid insurance account should be

a. P1,500 b. P3,000 c. P15,000 d. P18,000

nos. 61 to 62 is based on the following:

the accounts receivable balance is P25,000 and the balance of the allowance for bad debts
is P2,000. it is estimated that the bad debts should be increased to 10% of the accounts
receivable

61. the amount to be charged to bad debts expense is

a. P2,500 b. P500 c. P2,000 d. P4,500

62. the allowance for bad debts should be

a. P2,500 b. P500 c. P2,000 d. P4,500

63. A customer paid his account by issuing a P16,000 60 day 8% promissory note on
December 16, 2002. How much is the accrued interest on December 31, 2002?
a. P213.33 b. P53.33 c. P1,280 d. P56.88

64. A tenant who is using a part of the store gave an advance payment of P30,000 for 5
months on November 1, 2002. The amount of rent income on December 31, 2002 should be
a. P30,000 b. P18,000 c. P12,000 d. P6,000

65. The store equipment, depreciated at 10% per annum has a balance of P50,000, P15,000
of which was purchased on July 1, 2000. The amount of depreciation expense on
December 31, 2002 is
a. P5,000 b. P3,500 c. P5,750 d. P4,250