2nd Flr, GF Partners Bldg, 139 H.V.

dela Costa, Salcedo Village, Makati City

Practical Accounting 1
Review of the Accounting Process 1.

Prof. R. M. Valdez

A business received cash of P300,000 in advance for service that will be provided later. The cash receipt entry debited Cash and credited Unearned Revenue for P300,000. At the end the period, P110,000 is still unearned. The adjusting entry for this situation will a. Debit Unearned revenue and Credit Revenue for P190,000 b. Debit Unearned revenue and Credit Revenue for P110,000 c. Debit Revenue and Credit Unearned Revenue for P190,000 d. Debit Revenue and Credit Unearned Revenue for P110,000

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Prepaid Insurance has an ending balance of P23,000. During the period, insurance in the amount of P12,000 expired. The adjusting entry would contain a debit to a. Prepaid insurance for P12,000 c. Prepaid insurance for P11,000 b. Insurance expense for P12,000 d. Insurance expense for P11,000 On December 31, Printshop Property management made an adjusting entry to record P30,000 management fees earned but not yet billed to a client. This entry was reversed on January 1. On January 15, the client paid P120,000, of which P90,000 was applicable to the period January 1 through January 15. The journal entry made by Printshop to record receipt of the P120,000 on January 15 includes a. A credit to Management Fees Earned of P120,000 b. A credit to Accounts Receivable of P30,000 c. A debit to Management Fees Earned of P30,000 d. A credit to Management Fees Earned of P90,000

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On December 31, Lotus made an adjusting entry to record P11,000 accrued interest payable on its note. This entry was reversed on January 1. On January 15, the note was paid. The payment included interest of P25,000. The entry to record the payment of January 15 should a. Debit Interest Expense of P25,000 b. Debit Accrued Interest Payable of P25,000 c. Debit Interest Expense of P14,000 and accrued Interest Payable of P11,000 d. Debit Interest Expense of P14,000 and credit accrued Interest Payable of P11,000. Windows Company sublet a portion of its office space for ten years at an annual rental of P360,000, beginning on May 1. The tenant is required to pay one years rent in advance, which Windows recorded as a credit to Rental Income. Windows reports on a calendar-year basis. The adjustment on December 31 of the first year should be a. Rental Income 120,000 Unearned Rental Income 120,000 b. Rental Income 240,000 Unearned Rental Income 240,000 c. Unearned Rental Income 120,000 Rental Income 120,000 d. Unearned Rental Income 240,000 Rental Income 240,000

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Dbase Company paid P170,400 on June 1, 2002, for a two-year insurance policy and recorded

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the entire amount as Insurance Expense. The December 31, 2002, adjusting entry is a. debit Prepaid Insurance and credit Insurance Expense, P49,700 b. debit Insurance Expense and credit Prepaid Insurance, P49,700 c. debit Insurance Expense and credit Prepaid Insurance, P120,700 d. debit Prepaid Insurance and credit Insurance Expense, P120,700 7. The Supplies on Hand account balance at the beginning of the period was P66,000. Supplies totaling P128,250 were purchased during the period and debited to Supplies on Hand. A physical count shows P38,250 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 P90,000. b. debits supplies Expense and credits Supplies on Hand for P128,250. c. debits Supplies on Hand and credits Supplies Expense for P156,000. d. debits Supplies Expense and credits Supplies on Hand for P156,000. Moon Company purchased equipment on November 1, 2001, by giving their supplier a 12month, 9 percent note with a face value of P480,000. The December 31, 2001, adjusting entry is a. debit Interest Expense and credit Cash, P7,200. b. debit Interest Expense and credit Interest Payable, P7,200. c. debit Interest Expense and credit Interest Payable, P10,800. d. debit Interest Expense and credit Interest Payable, P43,200. On December 31 of the current year, Holmgren Companys bookkeeper made an entry debiting Supplies Expense and crediting Supplies on Hand for P126,000. The Supplies on Hand account had a P153,000 debit balance on January 1. The December 31, balance sheet showed Supplies on Hand of P114,000. Only one purchase of supplies was made during the month, on account. The entry for that purchase was a. debit Supplies on Hand, P87,000 and credit Cash, P87,000. b. debit Supplies Expense, P87,000 and credit Accounts Payable, P87,000. c. debit Supplies on Hand, P87,000 and credit Accounts Payable, P87,000. d. debit Supplies on Hand, P165,000 and credit Accounts Payable, P165,000. The balance in the capital account of Wordstar Co. at the beginning of the year was P650,000. During the year, the company earned revenue of P4,300,000, incurred expenses of P3,600,000, the owner withdrew P500,000 in assets, and the balance in the cash account increased by P100,000. At year-end, the companys net income and the year-end balance in the capital account were, respectively: a. P200,000 and P950,000 c. P600,000 and P750,000 b. P700,000 and P950,000 d. P700,000 and P850,000 A law firm began November with office supplies of P16,000. During the month, the firm purchased supplies of P29,000. At November 30 supplies on hand total P21,000. The adjusting entry at November 30 will result in supplies expense of a. P21,000 b. P24,000 c. P29,000 d. P45,000 At the end of the first month of operations, Word Co.s bookkeeper prepared financial statements which showed assets of P4,000,000 liabilities of P1,500,000 and net income of P500,000. In preparing the statements, the bookkeeper overlooked the accrued wages at month-end of P30,000. The correct owners equity at month-end is a. P2,970,000 b. P2,530,000 c. P2,470,000 d. P1,970,000 Before any year-end adjustments were made, the net income of Power Point Co. was P4,000,000. However, the following adjustments were necessary: office supplies used, P60,000; services performed for clients but not yet collected, P130,000; interest accrued on note payable, P30,000. After recording these adjustments, the net income would be: a. P3,780,000 b. P3,840,000 c. P4,040,000 d. P4,100,000 At December 31, 2002, the unadjusted trial balance shows office supplies of P60,000 and Office Supplies Expense of P101,000. The December 31, adjusting entry recorded office supplies expense of P17,000. After the December adjusting entries have been posted, what is the proper balance in the Office Supplies account on December 31, 2002?

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a. P118,000 15.

b. P84,000

c. P77,000

d. P43,000

Winword Co. recorded accrued salaries of P25,000 at December 31, 2001. During 2002, Winword paid salaries of P872,000. Unpaid salaries at December 31, 2002 amounted to P34,000. Winword prepares adjustments only at December 31, and also reversing entries on January 1. The balance of the salaries expense account that would appear in the post-closing trial balance at December 31, 2002 is a. P0 b. P881,000 c. P872,000 d. P847,000 Before the month-end adjustments are made, the January 31, trial balance of Acad Express contains revenues of P580,000 and expenses of P178,000. Adjustments are necessary for the following items: (a) Depreciation for January, P48,000; (b) Portion of fees collected in advance earned in January, P110,000; (c) Fees earned in January, not yet billed to customers, P65,000; (d) Portion of prepaid rent applicable to January, P90,000. Net income of Acad Express in January is a. P569,000 b. P439,000 c. P352,000 d. P259,000 Paintbrush Co. paid P72,000 to renew its only insurance policy for 3 years on March 1, 2002, the effective date of the policy. At March 31, 2002, Paintbrush unadjusted trial balance showed a balance of P3,000 for prepaid insurance and P72,000 for insurance expense. What amounts should be reported for prepaid insurance and insurance expense in Paintbrushs financial statements for the three months ended March 31, 2002? Prepaid Insurance Insurance Expense Prepaid Insurance Insurance Expense a. P72,000 P3,000 c. P72,000 P3,000 b. P70,000 P5,000 d. P73,000 P2,000 On September 1, 2001, Clipper Corporation issued a note payable to Federal Bank in the amount of P450,000. The note had an interest rate of 12 percent and called for three equal annual principal payments of P150,000. The first payment for interest and principal was made on September 1, 2002. At December 31, 2002, Clipper should record accrued interest payable of` a. P11,000 b. P12,000 c. P16,500 d. P18,000 In November and December 2002, Bee Company, a newly organized newspaper publisher, received P720,000 for 1,000 three-year subscriptions at P240 per year, starting with the January 2, 2003, issue of the newspaper. How much should Bee report in its 2002 income statement for subscription revenue? a. P0 b. P120,000 c. P240,000 d. P720,000 The following errors were made in preparing a trial balance: the P135,000 balance of Inventory was omitted; the P45,000 balance of Prepaid Insurance was listed as a credit; and the P30,000 balance of Salaries Expense was listed as Utilities Expense. The debit and credit totals of the trial balance would differ by a. P135,000 b. P180,000 c. P210,000 d. P225,000 The trial balance prepared at December 31, did not balance. Debit total was P1,592,500 and credit total was P1,532,000. In determining the cause of the difference, you discovered the following errors: a credit to Cash of P6,500 was not posted; a P20,000 credit to be made to Sales account was credited to the Accounts Receivable account instead; the wages payable account balance of P93,000 was listed in the trial balance as P39,000. What is the correct trial balance total? a. P1,592,500 b. P1,606,000 c. P1,612,500 d. P1,586,000

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You are given the following closing entries of PASS NOW, INC.: Entry 1 Interest Revenue Accounts Payable Capital Stock Sales

4,700 1,900 10,000 45,000

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Entry 2

Income Summary Income Summary Gain on Sale of Land Cost of Goods Sold Accounts Receivable Operating Expense Other Assets

61,600 48,700 3,000 32,000 12,000 4,200 3,500 12,900 12,900 c. _P12,900 d. P16,500

Entry 3

Income Summary Retained Earnings The properly computed net income is a. P11,800 b. P8,800 23.

Columbus Co.s advertising expense account had a balance of P146,000 at December 31, 2003, before preparing the year-end adjusting entries relating to the following: Included in the P146,000 is the P15,000 cost of printing catalogs for a sales promotional campaign in January 2004. Radio advertisements broadcast during December 2003 were billed to Columbus on January 2, 2004. Columbus paid the P9,000 invoice on January 11, 2004. After posting the adjusting entries at December 31, 2003, Columbus adjusted advertising expense for year 2003 should be a. P155,000 b. P140,000 c. P131,000 d. P122,000 The account balances for Villash Corp. as of December 31, 2003 follow: Accounts payable - P100,000; Accounts receivable - P120,000; Building - P400,000; Capital stock - P760,000; Cash - P60,000; Equipment - P160,000; Land - P50,000; Notes payable - P280,000; Retained earnings - P100,000 In a trial balance prepared on December 31, 2003, the sum of the debit column is: a. P860,000 b. P1,440,000 c. P790,000 d. P1,240,000

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On November 1, 2003, Georgetown Co. paid P360,000 to renew its insurance policy for three years. At December 31, 2003, Georgetowns adjusted trial balance showed a balance of P9,000 for prepaid insurance and P441,000 for insurance expense. What amounts should be reported for prepaid insurance and insurance expense in Georgetowns December 31, 2003 financial statements? a. P349,000 and P101,000 c. P330,000 and P120,000 b. P340,000 and P120,000 d. P340,000 and P110,000