DISCUSSION EXERCISES

STRAIGHT PROBLEMS
1. The following trial balance was taken from the books of VIRGO CORP. on December 31,
2020
Account Debit Credit
Cash 24,000
Accounts Receivable 80,000
Note Receivable 14,000
Allowance for Doubtful Accounts 3,600
Merchandise Inventory 108,000
Unexpired Insurance 9,600
Furniture and Equipment 250,000
Accumulated Depreciation of F. & E. 30,000
Accounts Payable 21,600
Common Stock 88,000
Retained Earnings 110,000
Sales 620,000
Cost of Goods Sold 262,000
Salaries Expense 100,000
Rent Expense 25,600
Totals 873,200 873,200
At year end, the following items have not yet been recorded.
a) Insurance expired during the year, P4,000.
b) Estimated bad debts, 1 % of gross sales.
c) Depreciation on furniture and equipment, 12% per year.
d) Interest at 8% is receivable on the note for one full year.
e) Rent paid in advance at December 31, P10,800 (originally charged to expense).
f) Accrued salaries at December 31, P11,600.
REQUIREMENTS: (1) Prepare the necessary adjusting entries; (2) Prepare the necessary
closing entries.
2. The trial balance of ARIES CORP. has total debits of P1,185,903 and total credits of
P883,469. The following are the possible adjustments to make the totals equal:
a) The credit posting for a purchase of inventory on account amounting to P135,616
was omitted.
b) The balance of office supplies amounting to P56,788 was listed on the trial balance
as of P65,788.
c) A debit posting to accounts payable of P155,987 was debited to accounts
receivable instead.
d) The accumulated depreciation of P78,909 was listed in the debit column of the trial
balance.
e) A debit posting to salaries expense amounting to P32,513 was debited to
transportation expense.
REQUIREMENT: Compute for the correct balance of the trial balance.
3. The September 30 trial balance of CANCER CORP. shows the following information:
Accounts receivable 4,030 Equipment 21,060
Accounts payable 3,185 Other expense 2,470
Accumulated depreciation 10,530 Owner's drawings 2,730
Advertising expense 195 Owner's equity 14,300
Cash 3,770 Sales 6,240
Depreciation expense of P351 is not yet recorded.
 REQUIREMENT: In an after-closing trial balance prepared on September 30, the total of
the credit column will be
MULTIPLE CHOICE (THEORIES)
1. What is the proper arrangement of the following steps in the accounting cycle?
I. Preparing the adjusting entries
II. Closing the books
III. Posting
IV. Preparing the reversing entries
V. Preparing the financial statements (worksheet preparation)
A. I, II, III, IV, V C. III, I, V, II, IV
B. I, III, V, II, IV D. III, I, II, V, II, IV
2. Which of the following is NOT an optional step in the accounting cycle?
(1) Preparation of post-closing trial balance.
(2) Posting to ledgers.
(3) Closing entries
(4) Reversing entries
A. 1 and 4 D. 4 only
B. 2 and 4 E. 3 and 4
C. 1, 3 and 4
3. In relation to accounting cycle and accounting documents, which of the following is
correct?
A. A general journal chronologically lists transactions and other events expressed in
terms of debit and credit.
B. All purchases, whether cash or on account, are recorded on the purchases journal.
C. Sales journal records the sale or disposal of land on cash basis.
D. Adjusting entries, closing entries and reversing entries are recorded in the general
ledger.
4. The normal balance of an account is on the
A. Debit side of the account
B. Credit side of the account
C. Side represented by increases in the account balance
D. Side represented by decreases in the account balance
5. This concept views each transaction as having a two-fold effect on values - a value
received and a value parted with, and each transaction is recorded using at least two
accounts.
A. Equilibrium C. Double-entry.
B. Duality D. Twins concept
6. Which of the following is a real account?
(1) Depreciation expense (3) Sales
(2) Unearned income (4) Accrued expense
A. 1 and 4 D. 4 only
B. 2 and 4 E. 3 and 4
C. 1, 3 and 4
7. Which of the following errors may be revealed by a trial balance?
A. A debit to salaries expense was posted in the ledger as debit to insurance expense.
B. Expense already incurred was not recorded
C. The debit and credit posting of a credit sale were omitted
D. The credit posting of a payment of account payable was omitted
8. Which of the following errors will cause an imbalance in the trial balance?
 A. Omission of a transaction in the journal.
B. Posting an entire journal entry twice to the ledger.
C. Posting a credit to accounts payable as a credit to accounts receivable.
D. Listing the balance of an account with a debit balance in the credit column of the
trial balance.
9. Which of the following statements is false regarding adjusting entries?
A. Adjusting entries involve accruals or deferrals.
B. Cash is neither debited nor credited as a result of adjusting entries.
C. Each adjusting entry affects one revenue account and one expense account
D. Each adjusting entry affects one statement of financial position account and one
income statement account.
10. If an entity uses the income method of initial recording of income, the year-end
adjusting entry involves
A. crediting an income account for the earned portion of the advance payment
received
B. debiting a liability account for the earned portion of the advance payment received
C. debiting an income account for the earned portion of the advance payment
received
D. crediting a liability account for the unearned portion of the advance payment
received
11. Which of the following may be reversed in the next financial reporting period?
A. An adjusting entry to adjust the unearned income account for the earned portion
of advance collections during the year.
B. An adjusting entry to record bad debts expense on trade receivables.
C. An adjusting entry to record depreciation expense,
D. An adjusting entry to take up the unexpired portion of prepayments during the
year
12. An accrued revenue can best be described as an amount
A. collected and currently matched with expenses.
B. collected and not currently matched with expenses.
C. not collected and currently matched with expenses.
D. not collected and not currently matched with expenses.
13. The balancing figure in the worksheet is net loss if
A. The total of the credits exceeds the total of the debits in the income statement
columns.
B. The total of the credits is the same as the total of the debits in the income
statement columns.
C. In the statement of financial position columns, the total of the debits exceeds the
total of the credits.
D. In the statement of financial position columns, the total of the credits exceeds the
total of the debits.