Financial Accounting and Reporting Reviewer

Adjusting Entries – Reversing Entries

I. Multiple Choice
1. Adjusting Entries must contain
a. a balance sheet account and an income statement account
b. two balance sheet account
c. two income statement account
d. an asset and an income account
2. An accounting method in which revenues are reported in the period in which they are earned, and
expenses are reported in the period in which they are incurred.
a. Cash Basis
b. Accrual Basis
c. Expense Method
d. Revenue Method
3. The entry to record expired insurance is omitted. This error causes
a. Assets to be overstated
b. Expenses to be overstated
c. Liabilities to be understated
d. No effect
4. Depreciation is
a. A method of saving cash to replace an assets
b. Shown in the balance sheet as a liability
c. A decrease in the fair market value of an asset
d. D ko alam
5. Accrued salaries are
a. Salaries that are incurred but not yet paid
b. Salaries that are not yet incurred nor paid
c. Salaries that were earned by an employees and have been paid
d. None of these
6. Accumulated Depreciation Equipment is shown as
a. An expense in the income statement
b. A contra account on the balance sheet
c. A liability on the balance sheet
d. An increase on debit
7. The adjusting entry to record depreciation of equipment is
a. Debit accumulated depreciation, credit accounts payable
b. Debit accumulated depression, credit depreciation expense
c. Debit equipment, credit cash
d. Debit depreciation expense, credit accumulated depreciation
8. Which of the following account is not adjusted?
a. Salaries Payable
b. Accumulated Depreciation
c. Owner’s Capital
d. Supplies
9. Which of the following pairs of account could not be included in the same adjusting entry?
a. Salaries Expense and Salaries Payable
b. Depreciation Expense and Accumulated Depreciation
c. Supplies Expense and Supplies
d. Interest Expense and Interest Receivable
10. Which of the following accounts could not be credited in an adjusting entry?
a. Prepaid Rent
b. Salaries Payable
c. Supplies
d. Interest Receivable

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 11. An adjusted trial balance is prepared to
a. Test that the ledger is still in balance after the accounts have been adjusted
b. Facilitate preparation of the financial statements
c. Both a and b
d. I don’t know
12. Failure to adjust for accrued salaries at the end of the period will result in an
a. Overstatement of an asset
b. Overstatement of an liability
c. Overstatement of Equity
d. Understatement of Equity
13. What principles are used on adjusting
a. Cost Principle
b. Going Concern Principle
c. Revenue and Expense Recognition Principle
d. Mema Principle
14. The supplies account had a P2,800 debit balance at the end of the accounting period before
adjustment for supplies used, and an inventory of P600 worth of unused supplies was on hand.
Which of the following is required adjusting entry?
a. Debit supplies expense 600, credit supplies 600
b. Debit supplies 600, credit supplies expense 600
c. Debit supplies expense 1,200, credit supplies 1,200
d. Debit supplies expense 1,200, credit supplies expense 1,200
15. A company’s payroll of P5,000 is paid on Fridays. Assume that the last day of the month falls on
Wednesday. Which of the following is the required adjusting entry
a. Debit Salaries Expense 3,000, credit salaries payable 3,000
b. Debit Salaries Expense 5,000, credit salaries payable 5,000
c. Debit Salaries Expense 2,000, credit salaries payable 2,000
d. No entry
16. A customer promise to pay for goods or services
a. Increases asset
b. Decreases liabilities
c. Decreases Equity
d. Increases the Cash account
17. A business received cash of 30,000 in advance for revenue that will be earned later. The cash
receipt entry debited cash and credited unearned revenue for 30,000. At the end of the period,
11,000 is still unearned. The adjusting entry for this situation will
a. Debit unearned revenue and credit revenue 19,000
b. Debit unearned revenue and credit revenue 11,000
c. Debit revenue and credit unearned revenue 19,000
d. Debit revenue and credit unearned revenue 11,000
18. Failure to record depreciation at year-end will result in an
a. Overstatement of total liabilities
b. Overstatement of total assets
c. Understatement of profit
d. Understatement of total liabilities
19. Failure to adjust for accrued wages at year-end will result in an
a. Overstatement of total liabilities
b. Understatement of owner’s equity
c. Overstatement of profit
d. Understatement of assets
20. Failure to record the adjusting entry for accrued salaries results in the current year’s profit being
a. overstated
b. understated
c. Neither
d. Ewan

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 21. The owner’s personal withdrawal for the year causes a decrease in profit
a. True
b. False
c. Neither
d. Ewan
22. If the income statement debit and credit columns are not equal after adding the respective
columns,
a. An error has been made
b. The company generated a profit
c. The company incurred a loss
d. The company either generated a profit or incurred a loss
23. The amount of profit will appear on the debit side of the income statement column on a
worksheet if
a. A total revenue exceeded total expenses for the period
b. If withdrawals have been made during the period
c. If total assets exceeded total liabilities for the period
d. If total expenses exceeded total revenue for the period
24. If total credits exceed total debits in the balance sheet columns of a worksheet
a. A mistake has been made
b. A profit has occurred
c. A loss has occurred
d. Asset exceed liabilities
25. Which of the following is a cash outflow from operating activities
a. Payment to acquire property and equipment
b. Payment to settle notes payable
c. Payment for interest expense
d. Withdrawal of owner
26. The trial balance debit or credit amount of each account is combined with the amount of any debit
or credit adjustment to that account to determine the new balance of the account. This process is
known as
a. Hit the woah
b. Cross-Footing
c. Totaling
d. Balancing
27. The only step in the accounting cycle that is optional
a. Closing Entries
b. Posting
c. Preparation of worksheet
d. Reversing Entries
28. Which of the following is an example of financing activity
a. Employing workers
b. Selling of equipment
c. Paying off a loan
d. None of the above
29. Which of the following is an example of investing activity
a. Obtaining a bank loan
b. Purchasing of equipment on account
c. Producing goods and services
d. None of the above
30. If a cost of equipment worth 50,000 was sold, then the capital account would
a. Increased by 50,000
b. Decreased by 50,000
c. Stay the same
d. I don’t know
31. Failure to prepare closing entries will produce a misstated
a. Income summary account balance
b. Total asset figure on the financial position
c. Owner’s Capital account balance
d. Total liabilities figure on the financial position

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 32. A reversing entry is acceptable for which of the following?
a. Accrual of interest
b. Depreciation of building
c. Allocation of prepaid rent to the current period
d. Correction of an error
33. Which of the following types of entries is made primarily to help conform to the matching
principle
a. Closing entries
b. Correcting entries
c. Reversing entries
d. Adjusting entries

II. Straight Problem

34. The supplies expense in the trial balance showed a balance 13,500. On December 31 of the
current year 5,555 worth of supplies remain unused. What is the adjusting entry?
Supplies 5,555
Supplies Expense 5,555

35. The Prepaid Rent of 12,000 reported in the trial balance was paid on November 1 of the current
year. The amount represents a 4-month rent. The adjusting entry on December 31 will include the
amount of
Rent Expense 6,000
Prepaid Rent 6,000
36. McDollibee purchased 50,000 worth of advertising supplies on March 10. Mcdollibee debited a
real account. This account shows a balance of 50,000 in September 30 trial balance. A physical
count at the close of business on September 30 reveals that 21,000 of supplies are still on hand.
What would be the adjusting entry on September 30 to reflect the supplies used?
Advertising Supplies Expense 29,000
Advertising Supplies 29,000

37. On June 7, 2018 Barbero Co. received 100,000 from its client to provide haircut service in the
future. By the end of June, 25% of the required work has been fulfilled by the barbers. What is
the adjusting entry at June 30 to recognize the fees unearned?
Haircut Revenue 75,000
Unearned Revenue 75,000

38. Unearned Rent account on December 31 has a credit balance of 52,000 composed of 10,000
representing rent prepaid for two months January to February and 42,000 representing advance
payment for 12 months of rent, beginning March 1. The adjusting entry on December 31 will
include the amount of
Unearned Rent Revenue 45,000
Rent Revenue 45,000

39. Rent Revenue on December 31 has a credit balance of 52,000 composed of 10,000 representing
rent prepaid for two months January to February and 42,000 representing advance payment for 12
months of rent, beginning March 1. The adjusting entry on December 31 will include the amount
of
Rent Revenue 7,000
Unearned Rent Revenue 7,000

40. Cooking ng ina Co. has 5 workers with daily rate of 1,000 each. Cooking ng ina Co. has a 5-day
workweek and pays its workers every Wednesday of the week. In September 2019, the last
Wednesday pay day fell on 28th and Cooking ng ina Co. prepared its financial statements on
September 30 which is a Friday. What is the adjusting entry on September 30, 2019?
Salaries Expense 10,000
Salaries Payable 10,000

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 41. Ikaw parin ang BB Co. issued a 4-year notes on May 31, 2019 with a face value of 500,000. The
note is due on May 31, 2023 and bearing 12% interest per annum, which is payable every May
31. What is the adjusting entry on December 31, 2019 to reflect the incurred interest expense?
Interest Expense 35,000
Interest Payable 35,000

42. On March 1 2018, Awit firm started rendering rent services to a client for a monthly fee of
30,000. At year end, Havana firm has not yet billed its client since it started the business. What is
the adjusting entry on December 31, 2018?
Rent Receivable 300,000
Rent Revenue 300,000

43. On September 1, Kyle loaned 500 at 12% annual interest to a customer. Interest and principal will
be collected when the loan matures one year from the issue date. Assuming adjustment are only
made at year-end, what is the adjusting entry for accruing interest that Kyle would need to make
on December 31, 2019?
Interest Receivable 20
Interest Revenue 20

44. On January 1, 2019 Miggy purchased a sports car that has an accumulated depreciation of
150,000 annually, it has a useful life of 10 years and can be sold as scrap for 500,000 at the end
of its useful life. What is the cost of the car? 2,000,000

45. Refer to No. 31. Assuming on April 1, 2024, the car has been sold for 950,000? What would be
the journal entry at the time of sale?
Cash 950,000
Accumulated Depreciation 787,500
Loss on Sale 262,500
Ford Mustang 2,000,000

46. Louise recognized 500,000 revenue which composed 250,000 cash revenue and 250,000 credit
revenue. At the year-end which is December 31, 2019, Louise is doubtful to collect the 250,000
under direct write off method. In the following year, Morla paid 100,000 and submitted
documents that he is incapacity to pay the remaining balance. What is the entry on December 31,
2019 (year Louise is doubtful to collect the credit revenue)? No entry

47. Refer to No. 33. What is the entry at the time Morla paid Louise?
Cash 100,000
Bad Debts Expense 150,000
Accounts Receivable 250,000

48. Wages Payable were 2,500 at the end of the September and 1800 at the end of October. Wages
Expense for October was 18,000. How much cash was paid for wages during October? 18700

49. Unearned Revenues was 6,000 at the end of February and 7,500 at the end of March. Service
Revenues was 42,000 for the month of March. How much cash was received for services
provided during March? 28500

50. Office Supplies were 9,000 at the end of January and 11,400 at the end of February. During
February, Office Supplies Expense equaled 3,000. How much cash was paid for office supplies
during February? 5400

51. Tiya Dolor Karinderya’s salaries expense for 2017 was 165,500. Accrued salaries payable on
December 31, 2016 was 16,650 and 14,845 on December 31, 2017. How much salaries paid
during 2017? 167,305

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 52. GnatupAniOm Co. has 2,000 of supplies on hand at the end of 2019. During 2020, 3,250 of
supplies were purchased. A count of supplies on hand at the end of 2020 found an inventory of
785. What was the amount of supplies expense for 2020? 4465

53. Liwanag Sa Dilim Company that pays employees every two weeks has paid workers 375,000 in
wages and salaries for work completed during 2019. In addition, the employees earned one
week’s salary of 7,200 at the end of December that will be paid as part of the 14,400 payroll at
the end of the first week of January in 2020. How much should the company report for salaries
and wages expense for 2019? 382,200

54. Lexi Enterprise pays its weekly salary of 50,400 for a six day workweek ending on Saturday. The
company follows the calendar year ending December 31. Assuming that December 31 falls on
Monday, how much is accrued salaries to be reported in December 31 Statement of Financial
Position? 8400

55. An analysis of Sana Sinabi Mo Company’s unadjusted prepaid expense account at Dec. 31, 2019
revealed the following

- An opening balance at 15,000 for Sana Sinabi Mo’s comprehensive insurance policy.
Sana Sinabi Mo paid an annual premium of 30,000 on July 1, 2018.
- A 32,000 annual insurance premium payment made July 1, 2019
- A 20,000 advance rental payment for a warehouse leased for one year beginning Jan 1,
2020

In its Dec. 31 2019 balance sheet, what amount should Sana Sinabi Mo report as prepaid
expenses? 31,000 or 16,000

56. Zebbiana owns an office building and leases the office under a variety of rental agreements
involving rent paid in advance monthly or annually. Not all tenants make timely payments of
their rent. Zebbiana’s balance sheets contained the following data:
2018 2019
Rent Receivable 192,000 248,000
Unearned Revenue 640,000 480,000

During 2019, Zebbiana received 1,600,000 from tenants. What amount of rental revenues should
Zebbiana record for 2019? 1,816,000

57. Meron na Syang Iba borrowed 600,000 from the bank on July 1, 2019. The note carried an 8%
annual rate of interest and was set to mature on February 28, 2020. Interest and principal were
paid in cash on the maturity date
a. What was the amount of interest expense paid in cash in 2019? 0
b. What was the amount of interest expense recognized on the 2019 income statement?
24,000
c. What was the amount of total liability shown on the 2010 balance sheet? 624,000
d. What was the total amount of cash that was paid to the bank on February 28, 2020 for
principal and interest? 632,000
e. What was the amount of interest expense shown on the 2020 income statement?
8,000

58. For every peso of the ending liabilities, there are 7 pesos of ending equity. If total assets at the
end of the year amounted to 1,325,000, assuming net income is 20% of the ending capital, how
much is the beginning capital? 927,500

59. Assets at the beginning of the year amounted to 2,800,000. For every peso of equity, there are
four pesos of liability. Additional Investment by the owner during the year was equal to 20% of
the liability at the beginning of the year. The withdrawal made by the owner was ¾ of the total
additional investment. At the end of the year, asset increased by 15% and liabilities increased to
2,500,000. How much is the profit or loss? Net Loss: 48,000

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 60. On January 31, 2018 a company prepaid the 72,000 rental fee for a parking lot it leases. The
rental fee covered a 3-year period beginning February 1, 2018. What is the effect of this
transaction to December 31, 2018 financial position and income statement?

Prepaid Expenses: 50,000

Current Expense: 22,000

61. Al James sells major household appliance service contracts for cash. The service contracts are for
a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned
Service Revenues. This account had a balance of 900,000 at December 31, 2019 before year end
adjustment. Service contract costs are charged as incurred to the Service Contract Expense
account, which had a balance of 225,000 at December 31, 2019. Service contracts still
outstanding at December 31, 2019 expire as follows:
During 2020 190,000
During 2021 285,000
During 2022 125,000
What amount should be reported as Unearned Service Revenue in Al James’ December 31, 2019
balance sheet? 675,000

62. At the end of the year, Jullian B’s accounts receivable is 100,000 before allowance for bad debts.
Jullian B maintain an allowance for bad debts based at 1% of her accounts receivable. The
following data are summarized in aging the account receivable at the end of the period.
Not Due 40,000 1%
1-30 days past due 30,000 7%
31-60 days past due 15,000 10%
61-90 days past due 10,000 30%
91 and up past due 5,000 40%
What would be the adjusting entry for allowance for bad debts assuming it has a beginning
balance of 2,500?
Bad Debts Expense 6,500
Allowance for Bad Debts 6,500

63. The trial balance for Oks Lang Company at the end of December is as follows:
Oks Lang Company
Trial Balance
December 31, 2019 Correct Trial Balance
Cash 38,400 40,600
Accounts Receivable 56,600 57,800
Supplies 1,200 2,400
Prepaid Insurance 1,800 3,600
Equipment 84,000 84,000
Accounts Payable 45,500 38,600
Notes Payable 0 24,000
Jroa, Capital 115,600 115,600
Jroa, Drawings 7,000 11,000
Revenues 59,200 59,200
Salaries Expense 26,000 26,000
Rent Expense 6,000 6,000
Advertising Expense 3,400 3,400
Utilities Expense 260 2,600
Total 217,600 227,200 237,400 237,400

The trial balance was not balance because of errors. Correct the balance given the following
information:

a. The cash balance was understated by 4,000

b. A cash payment of 2,400 was credited to Cash for 2,400
c. A debit of 1,200 of Accounts Receivable was not posted
d. Supplies purchased for 600 were posted as a credit to supplies
e. A debit of 1,800 to prepaid insurance was not posted
f. The accounts payable had debits of 53,200 and credits of 91,800

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 g. The notes payable of 2,400 was not posted
h. The debit balance of Jroa, Drawings listed in the trial balance as credit
i. A 2,000 debit to Jroa, Drawings was posted as credit
j. The actual balance of Utilities Expense was 2,600

64. Listed below are the accounts taken from the December 31, 2019 adjusted trial balance of Neneng
B’s Magazine Publisher

Accounts Receivable 260,000 Interest Payable 40,000

Supplies Expense 710,000 Cash 160,000
Salaries Expense 2,270,000 Repairs Expense 10,000
Printing Revenues 8,130,000 Accounts Payable 190,000
Prepaid Insurance 320,000 Telephone Expense 20,000
Depreciation Expense 250,000 Utilities Expense 80,000
Supplies 160,000 Unearned Printing Revenues 210,000
Salaries Payable 310,000 Interest Expense 300,000
Printing Equipment 5,520,000 Nik, Capital 340,000
Prepaid Advertising 70,000 Note Payable 2,500,000
Nik, Withdrawals 1,500,000 Miscellaneous Expense 90,000

a. Without performing the financial statements, determine the financial performance and
financial position by preparing the closing entries as of December 31, 2019.

Printing Revenue 8,130,000

Income Summary 8,130,000

Income Summary 3,730,000

Supplies Expense 710,000
Salaries Expense 2,270,000
Depreciation Expense 250,000
Repair Expense 10,000
Telephone Expense 20,000
Utilities Expense 80,000
Interest Expense 300,000
Miscellaneous Expense 90,000

Income Summary 4,400,000

Nik, Capital 4,400,000

Nik, Capital 1,500,000

Nik, Withdrawals 1,500,000

65. Identify the missing item(s) in each of the following:

A B C
Net Sales 175,000
Gross Profit 150,000 184,000 1,200,000
Operating Expenses 35,000 53,000 382,293
Net Income 115,000 131,000 817,707
Cost of Goods Sold 25,000
Withdrawals 25,000 84,065
Beginning Assets 1,250,000 645,780
Beginning Liability 750,000 394,885
Beginning Capital 500,000 250,895
Ending Capital 606,000 984,537

66. Computation of Accumulated Depreciation for December 31, 2019 adjustment.

A B C

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 Date of Acquisition January 1, 2019 November 1, 2019 July 1, 2018
Cost of Equipment 3,750,000 5,500,000 185,000
Salvage Value 150,000 250,000 5,000
Useful Life 12 8 5
Accumulated Depreciation 300,000 109,375 54,000

67. Walang Gana Inc. at the end of the year of operations in 2019 revealed the following balances:

Cash 222,050 K. Badger, Capital 300,000

Accounts Receivable 35,000 Service Revenue 185,000
Accumulated Depreciation 2,500 Supplies 2,750
Furniture and Fixtures 250,000 Rent Expense 22,000
Accounts Payable – Equipment 35,000 Advertising Expense 15,000
Notes Payable to BDO 80,000 Utilities Expense 14,400
Wages Payable 5,000 Wages Expense 45,000
Taxes Payable 2,700 Unearned Revenue 15,500
K. Badger, Withdrawals 5,000 Taxes Expense 8,750
Supplies Expense 3,250 Depreciation Expense 2,500

a. How much cash was received from customers? 165,500

b. How much cash was paid for expenses? 103,450
c. How much cash was paid for furniture and equipment? 215,000
d. How much cash was borrowed from the bank? 80,000
e. How much cash was invested by the owner? 300,000

68. The unadjusted trial balance of Maikee’s Letter Partnership shows the following balance at the
end of the year. Prepare the required adjusting entries.

Cash 1,000

Merchandise Inventory 15,600

Supplies 7,500
Prepaid Insurance 8,300
Office Equipment 42,900
Accumulated Depreciation – Office Equipment 6,000
Accounts Payable 23,950
J. Hush, Capital 40,000
J. Hush, Withdrawals 2,200
Sales 126,950
Sales Discount 2,000
Sales Returns and Allowances 2,200
Cost of Goods Sold 39,400
Salaries Expense 40,000
Rent Expense 27,000
Advertising Expense 8,800
196,900 196,900

Additional Information on December 31, 2019 are as follows

a. Unexpired supplies shows 1,250
b. Expired insurance amounted to 4,000
c. Office Equipment has an estimated useful life of 5 years, 2,900 scrap value that was
acquired March 31, 2018
d. A physical count shows 9,500 of merchandise inventory is still on hand

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