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 !siness recei"ed cas# o$ P3%%,%%% in ad"ance $or ser"ice t#at &ill e 'ro"ided later. (#e cas# recei't entry de ited Cas# and credited )nearned *e"en!e $or P3%%,%%%. At t#e end t#e 'eriod, P11%,%%% is still !nearned. (#e ad+!sting entry $or t#is sit!ation &ill a. ,e it )nearned re"en!e and Credit *e"en!e $or P19%,%%% . ,e it )nearned re"en!e and Credit *e"en!e $or P11%,%%% c. ,e it *e"en!e and Credit )nearned *e"en!e $or P19%,%%% d. ,e it *e"en!e and Credit )nearned *e"en!e $or P11%,%%%

2.

Pre'aid -ns!rance #as an ending alance o$ P23,%%%. ,!ring t#e 'eriod, ins!rance in t#e a.o!nt o$ P12,%%% e/'ired. (#e ad+!sting entry &o!ld contain a de it to a. Pre'aid ins!rance $or P12,%%% c. Pre'aid ins!rance $or P11,%%% . -ns!rance e/'ense $or P12,%%% d. -ns!rance e/'ense $or P11,%%% 0n ,ece. er 31, Prints#o' Pro'erty .anage.ent .ade an ad+!sting entry to record P3%,%%% .anage.ent $ees earned !t not yet illed to a client. (#is entry &as re"ersed on 1an!ary 1. 0n 1an!ary 12, t#e client 'aid P12%,%%%, o$ &#ic# P9%,%%% &as a''lica le to t#e 'eriod 1an!ary 1 t#ro!g# 1an!ary 12. (#e +o!rnal entry .ade y Prints#o' to record recei't o$ t#e P12%,%%% on 1an!ary 12 incl!des a. A credit to Manage.ent Fees 3arned o$ P12%,%%% . A credit to Acco!nts *ecei"a le o$ P3%,%%% c. A de it to Manage.ent Fees 3arned o$ P3%,%%% d. A credit to Manage.ent Fees 3arned o$ P9%,%%%

3.

4.

0n ,ece. er 31, 5ot!s .ade an ad+!sting entry to record P11,%%% accr!ed interest 'aya le on its note. (#is entry &as re"ersed on 1an!ary 1. 0n 1an!ary 12, t#e note &as 'aid. (#e 'ay.ent incl!ded interest o$ P22,%%%. (#e entry to record t#e 'ay.ent o$ 1an!ary 12 s#o!ld a. ,e it -nterest 3/'ense o$ P22,%%% . ,e it Accr!ed -nterest Paya le o$ P22,%%% c. ,e it -nterest 3/'ense o$ P14,%%% and accr!ed -nterest Paya le o$ P11,%%% d. ,e it -nterest 3/'ense o$ P14,%%% and credit accr!ed -nterest Paya le o$ P11,%%%. 6indo&s Co.'any s! let a 'ortion o$ its o$$ice s'ace $or ten years at an ann!al rental o$ P37%,%%%, eginning on May 1. (#e tenant is re8!ired to 'ay one year9s rent in ad"ance, &#ic# 6indo&s recorded as a credit to *ental -nco.e. 6indo&s re'orts on a calendar:year asis. (#e ad+!st.ent on ,ece. er 31 o$ t#e $irst year s#o!ld e a. *ental -nco.e 12%,%%% )nearned *ental -nco.e 12%,%%% . *ental -nco.e 24%,%%% )nearned *ental -nco.e 24%,%%% c. )nearned *ental -nco.e 12%,%%% *ental -nco.e 12%,%%% d. )nearned *ental -nco.e 24%,%%% *ental -nco.e 24%,%%%

2.

7.

, ase Co.'any 'aid P1;%,4%% on 1!ne 1, 2%%2, $or a t&o:year ins!rance 'olicy and recorded

Practical Accounting 1 Review of the Accounting Process page 2

t#e entire a.o!nt as -ns!rance 3/'ense. (#e ,ece. er 31, 2%%2, ad+!sting entry is a. de it Pre'aid -ns!rance and credit -ns!rance 3/'ense, P49,;%% . de it -ns!rance 3/'ense and credit Pre'aid -ns!rance, P49,;%% c. de it -ns!rance 3/'ense and credit Pre'aid -ns!rance, P12%,;%% d. de it Pre'aid -ns!rance and credit -ns!rance 3/'ense, P12%,;%% ;. (#e S!''lies on Hand acco!nt alance at t#e eginning o$ t#e 'eriod &as P77,%%%. S!''lies totaling P12<,22% &ere '!rc#ased d!ring t#e 'eriod and de ited to S!''lies on Hand. A '#ysical co!nt s#o&s P3<,22% o$ S!''lies on Hand at t#e end o$ t#e 'eriod. (#e 'ro'er +o!rnal entry at t#e end o$ t#e 'eriod. a. de its s!''lies on Hand and credits S!''lies 3/'ense $or P9%,%%%. . de its s!''lies 3/'ense and credits S!''lies on Hand $or P12<,22%. c. de its S!''lies on Hand and credits S!''lies 3/'ense $or P127,%%%. d. de its S!''lies 3/'ense and credits S!''lies on Hand $or P127,%%%. Moon Co.'any '!rc#ased e8!i'.ent on =o"e. er 1, 2%%1, y gi"ing t#eir s!''lier a 12: .ont#, 9 'ercent note &it# a $ace "al!e o$ P4<%,%%%. (#e ,ece. er 31, 2%%1, ad+!sting entry is a. de it -nterest 3/'ense and credit Cas#, P;,2%%. . de it -nterest 3/'ense and credit -nterest Paya le, P;,2%%. c. de it -nterest 3/'ense and credit -nterest Paya le, P1%,<%%. d. de it -nterest 3/'ense and credit -nterest Paya le, P43,2%%. 0n ,ece. er 31 o$ t#e c!rrent year, Hol.gren Co.'any9s ookkee'er .ade an entry de iting S!''lies 3/'ense and crediting S!''lies on Hand $or P127,%%%. (#e S!''lies on Hand acco!nt #ad a P123,%%% de it alance on 1an!ary 1. (#e ,ece. er 31, alance s#eet s#o&ed S!''lies on Hand o$ P114,%%%. 0nly one '!rc#ase o$ s!''lies &as .ade d!ring t#e .ont#, on acco!nt. (#e entry $or t#at '!rc#ase &as a. de it S!''lies on Hand, P<;,%%% and credit Cas#, P<;,%%%. . de it S!''lies 3/'ense, P<;,%%% and credit Acco!nts Paya le, P<;,%%%. c. de it S!''lies on Hand, P<;,%%% and credit Acco!nts Paya le, P<;,%%%. d. de it S!''lies on Hand, P172,%%% and credit Acco!nts Paya le, P172,%%%. (#e alance in t#e ca'ital acco!nt o$ 6ordstar Co. at t#e eginning o$ t#e year &as P72%,%%%. ,!ring t#e year, t#e co.'any earned re"en!e o$ P4,3%%,%%%, inc!rred e/'enses o$ P3,7%%,%%%, t#e o&ner &it#dre& P2%%,%%% in assets, and t#e alance in t#e cas# acco!nt increased y P1%%,%%%. At year:end, t#e co.'any9s net inco.e and t#e year:end alance in t#e ca'ital acco!nt &ere, res'ecti"ely> a. P2%%,%%% and P92%,%%% c. P7%%,%%% and P;2%,%%% . P;%%,%%% and P92%,%%% d. P;%%,%%% and P<2%,%%% A la& $ir. egan =o"e. er &it# o$$ice s!''lies o$ P17,%%%. ,!ring t#e .ont#, t#e $ir. '!rc#ased s!''lies o$ P29,%%%. At =o"e. er 3% s!''lies on #and total P21,%%%. (#e ad+!sting entry at =o"e. er 3% &ill res!lt in s!''lies e/'ense o$ a. P21,%%% . P24,%%% c. P29,%%% d. P42,%%% At t#e end o$ t#e $irst .ont# o$ o'erations, 6ord Co.9s ookkee'er 're'ared $inancial state.ents &#ic# s#o&ed assets o$ P4,%%%,%%% lia ilities o$ P1,2%%,%%% and net inco.e o$ P2%%,%%%. -n 're'aring t#e state.ents, t#e ookkee'er o"erlooked t#e accr!ed &ages at .ont#: end o$ P3%,%%%. (#e correct o&ner9s e8!ity at .ont#:end is a. P2,9;%,%%% . P2,23%,%%% c. P2,4;%,%%% d. P1,9;%,%%% Be$ore any year:end ad+!st.ents &ere .ade, t#e net inco.e o$ Po&er Point Co. &as P4,%%%,%%%. Ho&e"er, t#e $ollo&ing ad+!st.ents &ere necessary> o$$ice s!''lies !sed, P7%,%%%? ser"ices 'er$or.ed $or clients !t not yet collected, P13%,%%%? interest accr!ed on note 'aya le, P3%,%%%. A$ter recording t#ese ad+!st.ents, t#e net inco.e &o!ld e> a. P3,;<%,%%% . P3,<4%,%%% c. P4,%4%,%%% d. P4,1%%,%%% At ,ece. er 31, 2%%2, t#e !nad+!sted trial alance s#o&s o$$ice s!''lies o$ P7%,%%% and 0$$ice S!''lies 3/'ense o$ P1%1,%%%. (#e ,ece. er 31, ad+!sting entry recorded o$$ice s!''lies e/'ense o$ P1;,%%%. A$ter t#e ,ece. er ad+!sting entries #a"e een 'osted, &#at is t#e 'ro'er alance in t#e 0$$ice S!''lies acco!nt on ,ece. er 31, 2%%2@

<.

9.

1%.

11.

12.

13.

14.

Practical Accounting 1 Review of the Accounting Process page 3

a. P11<,%%% 12.

. P<4,%%%

c. P;;,%%%

d. P43,%%%

6in&ord Co. recorded accr!ed salaries o$ P22,%%% at ,ece. er 31, 2%%1. ,!ring 2%%2, 6in&ord 'aid salaries o$ P<;2,%%%. )n'aid salaries at ,ece. er 31, 2%%2 a.o!nted to P34,%%%. 6in&ord 're'ares ad+!st.ents only at ,ece. er 31, and also re"ersing entries on 1an!ary 1. (#e alance o$ t#e salaries e/'ense acco!nt t#at &o!ld a''ear in t#e 'ost:closing trial alance at ,ece. er 31, 2%%2 is a. P% . P<<1,%%% c. P<;2,%%% d. P<4;,%%% Be$ore t#e .ont#:end ad+!st.ents are .ade, t#e 1an!ary 31, trial alance o$ Acad 3/'ress contains re"en!es o$ P2<%,%%% and e/'enses o$ P1;<,%%%. Ad+!st.ents are necessary $or t#e $ollo&ing ite.s> AaB ,e'reciation $or 1an!ary, P4<,%%%? A B Portion o$ $ees collected in ad"ance earned in 1an!ary, P11%,%%%? AcB Fees earned in 1an!ary, not yet illed to c!sto.ers, P72,%%%? AdB Portion o$ 're'aid rent a''lica le to 1an!ary, P9%,%%%. =et inco.e o$ Acad 3/'ress in 1an!ary is a. P279,%%% . P439,%%% c. P322,%%% d. P229,%%% Paint r!s# Co. 'aid P;2,%%% to rene& its only ins!rance 'olicy $or 3 years on Marc# 1, 2%%2, t#e e$$ecti"e date o$ t#e 'olicy. At Marc# 31, 2%%2, Paint r!s# !nad+!sted trial alance s#o&ed a alance o$ P3,%%% $or 're'aid ins!rance and P;2,%%% $or ins!rance e/'ense. 6#at a.o!nts s#o!ld e re'orted $or 're'aid ins!rance and ins!rance e/'ense in Paint r!s#9s $inancial state.ents $or t#e t#ree .ont#s ended Marc# 31, 2%%2@ Pre'aid -ns!rance -ns!rance 3/'ense Pre'aid -ns!rance -ns!rance 3/'ense a. P;2,%%% P3,%%% c. P;2,%%% P3,%%% . P;%,%%% P2,%%% d. P;3,%%% P2,%%% 0n Se'te. er 1, 2%%1, Cli''er Cor'oration iss!ed a note 'aya le to Federal Bank in t#e a.o!nt o$ P42%,%%%. (#e note #ad an interest rate o$ 12 'ercent and called $or t#ree e8!al ann!al 'rinci'al 'ay.ents o$ P12%,%%%. (#e $irst 'ay.ent $or interest and 'rinci'al &as .ade on Se'te. er 1, 2%%2. At ,ece. er 31, 2%%2, Cli''er s#o!ld record accr!ed interest 'aya le o$C a. P11,%%% . P12,%%% c. P17,2%% d. P1<,%%% -n =o"e. er and ,ece. er 2%%2, Bee Co.'any, a ne&ly organiDed ne&s'a'er '! lis#er, recei"ed P;2%,%%% $or 1,%%% t#ree:year s! scri'tions at P24% 'er year, starting &it# t#e 1an!ary 2, 2%%3, iss!e o$ t#e ne&s'a'er. Ho& .!c# s#o!ld Bee re'ort in its 2%%2 inco.e state.ent $or s! scri'tion re"en!e@ a. P% . P12%,%%% c. P24%,%%% d. P;2%,%%% (#e $ollo&ing errors &ere .ade in 're'aring a trial alance> t#e P132,%%% alance o$ -n"entory &as o.itted? t#e P42,%%% alance o$ Pre'aid -ns!rance &as listed as a credit? and t#e P3%,%%% alance o$ Salaries 3/'ense &as listed as )tilities 3/'ense. (#e de it and credit totals o$ t#e trial alance &o!ld di$$er y a. P132,%%% . P1<%,%%% c. P21%,%%% d. P222,%%% (#e trial alance 're'ared at ,ece. er 31, did not alance. ,e it total &as P1,292,2%% and credit total &as P1,232,%%%. -n deter.ining t#e ca!se o$ t#e di$$erence, yo! disco"ered t#e $ollo&ing errors> a credit to Cas# o$ P7,2%% &as not 'osted? a P2%,%%% credit to e .ade to Sales acco!nt &as credited to t#e Acco!nts *ecei"a le acco!nt instead? t#e &ages 'aya le acco!nt alance o$ P93,%%% &as listed in t#e trial alance as P39,%%%. 6#at is t#e correct trial alance total@ a. P1,292,2%% . P1,7%7,%%% c. P1,712,2%% d. P1,2<7,%%%

17.

1;.

1<.

19.

2%.

21.

22.

Eo! are gi"en t#e $ollo&ing closing entries o$ PASS =06, -=C.> 3ntry 1 -nterest *e"en!e Acco!nts Paya le Ca'ital Stock Sales

4,;%% 1,9%% 1%,%%% 42,%%%

Practical Accounting 1 Review of the Accounting Process page 4

3ntry 2

-nco.e S!..ary -nco.e S!..ary Gain on Sale o$ 5and Cost o$ Goods Sold Acco!nts *ecei"a le 0'erating 3/'ense 0t#er Assets

71,7%% 4<,;%% 3,%%% 32,%%% 12,%%% 4,2%% 3,2%% 12,9%% 12,9%% c. FP12,9%% d. P17,2%%

3ntry 3

-nco.e S!..ary *etained 3arnings (#e 'ro'erly co.'!ted net inco.e is : a. P11,<%% . P<,<%% 23.

Col!. !s Co.9s ad"ertising e/'ense acco!nt #ad a alance o$ P147,%%% at ,ece. er 31, 2%%3, e$ore 're'aring t#e year:end ad+!sting entries relating to t#e $ollo&ing> -ncl!ded in t#e P147,%%% is t#e P12,%%% cost o$ 'rinting catalogs $or a sales 'ro.otional ca.'aign in 1an!ary 2%%4. *adio ad"ertise.ents roadcast d!ring ,ece. er 2%%3 &ere illed to Col!. !s on 1an!ary 2, 2%%4. Col!. !s 'aid t#e P9,%%% in"oice on 1an!ary 11, 2%%4. A$ter 'osting t#e ad+!sting entries at ,ece. er 31, 2%%3, Col!. !s ad+!sted ad"ertising e/'ense $or year 2%%3 s#o!ld e a. P122,%%% . P14%,%%% c. P131,%%% d. P122,%%% (#e acco!nt alances $or Villas# Cor'. as o$ ,ece. er 31, 2%%3 $ollo&> Acco!nts 'aya le : P1%%,%%%? Acco!nts recei"a le : P12%,%%%? B!ilding : P4%%,%%%? Ca'ital stock : P;7%,%%%? Cas# : P7%,%%%? 38!i'.ent : P17%,%%%? 5and : P2%,%%%? =otes 'aya le : P2<%,%%%? *etained earnings : P1%%,%%% -n a trial alance 're'ared on ,ece. er 31, 2%%3, t#e s!. o$ t#e de it col!.n is> a. P<7%,%%% . P1,44%,%%% c. P;9%,%%% d. P1,24%,%%%

24.

22.

0n =o"e. er 1, 2%%3, Georgeto&n Co. 'aid P37%,%%% to rene& its ins!rance 'olicy $or t#ree years. At ,ece. er 31, 2%%3, Georgeto&n9s ad+!sted trial alance s#o&ed a alance o$ P9,%%% $or 're'aid ins!rance and P441,%%% $or ins!rance e/'ense. 6#at a.o!nts s#o!ld e re'orted $or 're'aid ins!rance and ins!rance e/'ense in Georgeto&n9s ,ece. er 31, 2%%3 $inancial state.ents@ a. P349,%%% and P1%1,%%% c. P33%,%%% and P12%,%%% . P34%,%%% and P12%,%%% d. P34%,%%% and P11%,%%%