1.

AN EXCERPT FROM THE TRIAL BALANCE OF ABC COMPANY SHOWS THE FOLLOWING:
A/R 1MILLION
ALLOWANCE FOR BAD DEBTS 10,000
SALES 5MILLION
SALES DISCOUNT 3,000
SALES RETURNS AND ALLOWANCES 30,000

IT IS THE COMPANY’S POLICY TO PROVIDE 1% OF NET CREDIT SALES AS BAD DEBTS. CASH SALES
AMOUNTED TO 2MILLION.

CHOOSE FROM THE CHOICES BELOW THE ANSWER TO THE FOLLOWING QUESTIONS:
1. ADJUSTUNG ENTRIES ON DECEMBER 31
DR. BAD DEBT EXPENSE 29,670
CR. ALLOWANCE FOR BAD DEBTS 29,670
2. BALANCE OF BAD DEBT EXPENSE AS OF DECEMBER 31
BAD DEBT EXPENSE 29,670
3. BALANCE OF ALLOWANCE FOR BAD DEBTS AS OF DECEMBER 31
ALLOWANCE FOR BAD DEBTS 39,670
4. SHOULD THE ADJUSTMENT WAS NOT MADE, WHAT WOULD BE THE EFFECT ON
CURRENT ASSETS?
CURRENT ASSETS OVERSTATED BY 29,670

2. ON JULY 1, 2020, ABC COMPANY ACQUIRED VEHICLE COSTING 750,000. THE MANAGEMENT
EXTIMATES THAT THEY CAN USE IT FOR 10 YEARS AND WILL BE ABLE TO SELL IT AT 75,000 AT
THE END OF ITS USEFUL LIFE.

CHOOSE FROM THE CHOICES BELOW THE ANSWER TO THE FOLLOWING QUESTIONS:

1. DEPRECIATION EXPENSE FOR 2020

DEPRECIATION EXPENSE 2020: P 33,750
2. ACCUMULATED DEPRECIATION DECEMBER 31, 2021
ACCUMULATED DEPRECIATION 2021: P 101,250
3. ADJUSTING JOURNAL ENTRY ON DECEMBER 31, 2020
DR. DEPRECIATION EXPENSE P 33,750
CR. ACCUMULATED DEPRECIATION P 33,750
4. BOOK VALUE DECEMBER 31, 2021
BOOK VALUE DECEMBER 31, 2021 P 648,750
3. AT THE BEGINNING OF THE CURRENT YEAR, ABC COMPANY REPORTED THAT THE ALLOWANCE
FOR DOUBTFUL ACCOUNTS HAS A CREDIT BALANCE OF 170,000. THE COMPANY USES THE
AGING OF ACCOUNTS RECEIVABLE AS A WAY TO ESTIMATE THE ALLOWANCE.
THE FOLLOWING SCHEDULE WAS PREPARED:
NOT YET DUE 1,700,000 NIL UNCOLLECTIBLE
1-30 DAYS PAST DUE 1,200,000 5% UNCOLLECTIBLE
31-60 DAYS PAST DUE 100,000 25% UNCOLLECTIBLE
61-90 DAYS PAST DUE 150,000 50% UNCOLLECTIBLE
OVER 90 DAYS PAST DUE 120,000 100% UNCOLLECTIBLE

CHOOSE FROM THE CHOICES BELOW THE ANSWER TO THE FOLLOWING:

1. WHAT IS THE REQUIRED AFDA AT YEAR-END?

ALLOWANCE FOR BAD DEBT P280,000
2. HOW MUCH WOULD BE THE DOUBTFUL ACCOUNTS EXPENSE FOR THE CURRENT
YEAR?
BAD DEBTS EXPENSE P110,000
3. WHAT IS THE ADJUSTING ENTRY FOR THE DOUBTFUL ACCOUNTS EXPENSE FOR THE
CURRENT YEAR?
DR. BAD DEBT EXPENSE P110,000
CR. ALLOWANCE FOR BAD DEBT 110,000
4. WHAT IS THE NET REALIZABLE VALUE OF ACCOUNTS RECEIVABLE AT YEAR-END?
NET REALIZABLE VALUE P2,990,000
5. WHAT IS THE EFFECT ON CURRENT ASSETS SHOULD THE ADJUSTMENT WAS NOT
MADE?
CURRENT ASSETS OVERSTATED BY 110,000

4. ABC COMPANY PURCHASED STORE SUPPLIES ON NOVEMBER 9, 2020 AMOUNTING TO 20,000.

THE ACCOUNTANT MADE A DEBIT TO STORE SUPPLIES ON THE DATE OF THE TRANSACTION. ON
DECEMBER 31, WHEN THE COMPANY WAS PREPARING ITS YEAR-END FINANCIAL STATEMENTS,
THE STORE SUPPLIES ON HAND IS 4,500.

CHOOSE FROM THE CHOICES BELOW THE ANSWER TO THE FOLLOWING:

1. TYPE OF ADJUSTMENT
DEFERRAL- ASSET METHOD
2. ADJUSTING JOURNAL ENTRY ON DECEMBER 31
DR. STORE SUPPLIES EXPENSE P 15,500
CR. STORE SUPPLIE P 15,500
3. SHOULD THE ADJUSTMENT WAS NOT MADE, WHAT WOULD BE THE EFFECT
ON NET INCOME?
NET INCOME IS OVERSTATED BY P 15,500

5. ABC COMPANY COLLECTED 30,000 ON AUGUST 15 REPRESENTING 6 MONTHS RENT. ON THIS

DATE, THE ACCOUNTANT RECORDED THE TRANSACTION AS FOLLOWS:
DR. CASH 30K
 CR. UNEARNED RENT 30K

CHOOSE FROM THE CHOICES BELOW TO ANSWER:

1. TYPE OF ADJUSTMENT
DEFERRAL- LIABILITY METHOD
2. ADJUSTING JOURNAL ENTRIES ON DECEMBER 31.
DR. UNEARNED RENT 22,500
CR. RENT INCOME 22,500
3. SHOULD THE ADJUSTMENT WAS NOT MADE, WHAT WOULD BE THE EFFECT
ON CURRENT LIABILITIES?
CURRENT LIABILITIES OVERSTATED BY 22,500

6. ABC COMPANY PAID 1 YEAR INSURANCE PREMIUM ON APRIL 1 AMOUNTING TO 24,000 TO

WHICH THE COMPANY MADE A DEBIT TO INSURANCE EXPENSE.

CHOOSE FROM THE CHOICES BELOW TO ANSWER:

1. TYPE OF ADJUSTMENT
DEFERRAL – EXPENSE METHOD
2. ADJUSTING JOURNAL ENTRIES ON DECEMBER 31.
DR. PREPAID INSURANCE 6,000
CR. INSURANCE EXPENSE 6,000
3. SHOULD THE ADJUSTMENT WAS NOT MADE, WHAT WOULD BE THE EFFECT ON
CURRENT ASSETS?
CURRENT ASSETS UNDERSTATED BY P6,000

7. ABC COMPANY ISSUED A PROMISSORY NOTE TO DEF BANK. DETAILS FROM THE PROMISSORY
NOTE WERE AS FOLLOWS:
DATE OF NOTE: NOVEMBER 15, 2020
TERM OF NOTE: 6 MONTHS
PRINCIPAL: P120,000
INTEREST RATE: 12%
INTEREST WAS NOT DISCOUNTED ON THE DATE OF NOTE ISSUANCE.

ON THE BOOKS OF DEF BANK, CHOOSE FROM THE CHOICES BELOW THE ANSWER TO THE
FOLLOWING EQUATIONS:
1. TYPE OF ADJUSTMENT
ACCRUAL OF INCOME
2. ADJUSTING ENTRY ON DECEMBER 31
DR. INTEREST RECEIVABLE 1,800
CR. INTEREST INCOME 1,800
3. SHOULD THE ADJUSMENT WAS NOT MADE, WHAT WOULD BE THE EFFECT ON
CURRENT ASSETS?
CURRENT ASSETS UNDERSTATED BY 1,800
8. AN EXCERT FROM THE TRIAL BALANCE OF ABC COMPANY SHOWS THE FOLLOWING
ACCOUNTS RECEIVABLE P100,000
ALLOWANCE FOR BAD DEBTS P10,000
SALES P5,000,000
SALES DISCOUNT P3,000
SALES RETURNS AND ALLOWANCES P 30,000

IT IS THE COMPANY’S POLICY TO PROVIDE 1% OF GROSS CREDIT SALES AS BAD DEBTS. CASH
SALES AMOUNTED TO P2,000,000

CHOOSE FROM THE CHOISE BELOW THE ANSWER TO THE FOLLOWING QUESTIONS:
1. ADJUSTING ENTRIES ON DECEMBER 31
DR. BAD DEBT EXPENSE 30,000
CR. ALLOWANCE FOR BAD DEBTS 30,000
2. BALANCE OF BAD DEBT EPENSE AS OF DECEMBER 31
BAD DEBTS EXPENSE 30,000
3. BALANCE OF ALLOWANCE FOR BAD DEBTS AS OF DECEMBER 31
ALLOWANCE FOR BAD DEBTS P40,000
4. SHOULD THE ADJUSTMENT WAS NOT MADE, WHAT IS THE EFFECT ON NET INCOME?
NET INCOME OVERSTATED BY 30,000

9. ABC COMPANY STARTED A MAGAZINE PUBLICATION CALLED TODDLER. A SUBSCRIBER PAYS FOR
P100 PER ISSUE. FIFTY SUBSCRIBERS MADE A ONE YEAR SUBSCRIPTION PAYMENT ON MARCH 1
AND ANOTHER 100 SUBSCRIBER ON AUGUST 1, TO WHICH ABC CREDITED TO SUBSRIPTION
REVENUE.

CHOOSE FROM THE CHOICES BELOW TO ANSWER:

1. TYPE OF ADJUSMENT
DEFERRAL – REVENUE METHOD
2. ADJUSTING ENTRY ON DECEMBER 31
DR. SUBSCRIPTION REVENUE 80,000
CR. ADVANCES FROM SUBSCRIBER 80,000
3. SHOULD THE ADJUSMENT WAS NOT MADE, WHAT WOULD BE THE EFFECT ON CURRENT
LIABILITIES?
CURRENT LIABILITIES UNDERSTATED BY 80,000
10. AN EXCERPT FROM THE TRIAL BALANCE OF ABC COMPANY SHOWS THE FOLLOWING:
A/R 1MILLION
ALLOWANCE FOR BAD DEBTS 10,000
SALES 5MILLION
SALES DISCOUNT 3,000
SALES RETURNS AND ALLOWANCES 30,000

IT IS THE COMPANY’S POLICY TO PROVIDE 10% OF ACCOUNTS RECEIVABLE IS DOUBTFUL OF

COLLECTION. CASH SALES AMOUNTED TO 2MILLION.

CHOOSE FROM THE CHOICES BELOW THE ANSWER TO THE FOLLOWING QUESTIONS:
1. ADJUSTUNG ENTRIES ON DECEMBER 31
DR. BAD DEBT EXPENSE 90,000
CR. ALLOWANCE FOR BAD DEBTS 90,000
2. BALANCE OF BAD DEBT EXPENSE AS OF DECEMBER 31
BAD DEBT EXPENSE 90,000
3. BALANCE OF ALLOWANCE FOR BAD DEBTS AS OF DECEMBER 31
ALLOWANCE FOR BAD DEBTS 100,000
4. SHOULD THE ADJUSTMENT WAS NOT MADE, WHAT WOULD BE THE EFFECT ON
CURRENT ASSETS?
OWNER’S EQUITY IS OVERSTATED BY 90,000

11. ABC COMPANY ISSUED A PROMISSORY NOTE TO DEF BANK. DETAILS FROM THE PROMISSORY
NOTE WERE AS FOLLOWS:
DATE OF NOTE: NOVEMBER 15, 2020
TERM OF NOTE: 6 MONTHS
PRINCIPAL: P120,000
INTEREST RATE: 12%
INTEREST WAS NOT DISCOUNTED ON THE DATE OF NOTE ISSUANCE.

ON THE BOOKS OF ABC COMPANY, CHOOSE FROM THE CHOICES BELOW THE ANSWER TO THE
FOLLOWING EQUATIONS:

1. TYPE OF ADJUSTMENT
ACCRUAL OF EXPENSE
2. ADJUSTING ENTRY ON DECEMBER 31
DR. INTEREST EXPENSE 1,800
CR. INTEREST PAYABLE 1,800
3. SHOULD THE ADJUSMENT WAS NOT MADE, WHAT WOULD BE THE EFFECT ON
NET INCOME?
NET INCOME OVERSTATED BY 1,800