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Assignment Intermediate Accounting

Accountancy (STI College)

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PROBLEMS

PROBLEM 1: TRUE OR FALSE

1. A chart of accounts is a list of all accounts used by an entity together with their
balances.
2. An entity uses the liability method of initial recording of advanced collections of
income. The year-end adjustment for the earned portion of an advance collection
during the year will most likely involve a debit to a liability account.
3. Entity A uses the income method of initial recording of advanced collections of
income. During the period, Entity A collects ₱10 for an item of income. By the end
of the period, ₱3 of the collection is earned. The year-end adjusting entry
involves a debit to a liability account for ₱7.
4. Entity B uses the liability method of initial recording of advanced collections of
income. During the period, Entity B collects ₱15 for an item of income. By the
end of the period, ₱12 of the collection is earned. The year-end adjusting entry
involves a debit toa liability account for ₱12.
5. An entity’s adjusting entry related to a prepayment of expenses during the period
involves a debit to an expense amount. The entity must be using the expense
method of initial recording of prepayments.
6. Entity C uses the expense method of initial recording of prepayments of expense.
During the period, Entity C prepays ₱10 for an item of expense. At the end of the
period, Entity C makes an adjusting entry that involves a debit to a prepaid asset
account for ₱3. The expired portion of the prepayment must be ₱7.
7. The total debits and total credits in the income statement columns of a worksheet
are normally equal.
8. If there is profit, the total amount of credits in the balance sheet columns of the
work sheet exceeds the total debits.
9. There is a profit if the income summary account is debited when closing to an
equity account.
10. The accrual for depreciation expense can be reversed in the next financial
reporting period.

PROBLEM 2: FOR CLASSROOM DISCUSSION

The Accounting Cycle

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)

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Systems of recording transactions

2. 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. Twins concept
b. Duality d. No I.D, No entry concept

Account
3. Which of the following is a real account?
a. Cash shortage or overage account
b. Freight-in
c. Unearned Income
d. Depreciation expense

Adjusting Entries
4. Entity X uses the liability method of initial recording of advance collections of
items of income. During the year, Entity X receives ₱100,000 advance
collections. The unearned income account has beginning and ending balances of
₱40,000 and ₱30,000, respectively.

Requirement: Provide the entries during the year including the year-end adjusting entry.

5. At the beginning of the year, Entity A has a balance of ₱20,000 in its prepaid
asset account. Entity A does not use reversing entries. Entity A uses the expense
method of recording prepayments. During the year, Entity A made total
prepayments of ₱80,000. The adjusted expenses during the year under the
accrual basis accounting are ₱45,000.

Requirement: Provide the year-end adjusting entry.

Reversing Entries
6. 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.

PROBLEM 3: CLASSROOM ACTIVITY

ACTIVITY #1: ACCOUNTING CYCLE

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Enumerate the ten (10) steps in the accounting cycle. Provide a brief description for
each step. PLS. DON’T CHEAT!

PROBLEM 4: MULTIPLE CHOICE-THEORY

1. Which of the following statements is true?
a. Journals are used under both the double-entry system and single-entry
system.
b. The accrual basis of accounting cannot be applied under the single-entry
system.
c. Both the cash basis and accrual basis of accounting can be used under a
double-entry system but not under a single-entry system.
d. Subsidiary ledgers are used under both double and simple entry systems.

2. The purpose of preparing a trial balance is

a. To ensure that there were no errors committed.
b. To prove that all journal entries were posted correctly.
c. To prove the equality of the monetary totals of debits and credits.
d. All of these.

3. 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.

4. Which of the following is incorrect regarding adjusting entries?

a. All adjusting entries involve at least one statement of financial position
account and one statement of profit or loss and other comprehensive income
account.
b. Adjusting entries are uses to update the balances of accounts prior to the
preparation of the financial statements.
c. Adjusting entries always affect the comprehensive income for the year.
d. Adjusting entries always affect the profit or loss for the year but not the
comprehensive income.

5. 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.

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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.

6. If an entity uses the expense method of initial recording of expenses, the year-
end adjusting entry involves.
a. Debiting a prepaid asset account for the expired portion of the advance
payment made.
b. Debiting an expense account for the expired portion of the advance payment
made.
c. Crediting an expense account for the unexpired portion of the advance
payment made.
d. Crediting a prepaid asset account for the unexpired portion of the advance
payment made.

7. An accrued expense can best be described as an amount.

a. Paid and currently matched with earnings.
b. Paid and not currently matched with earnings.
c. Not paid and not currently matched with earnings.
d. Not paid and currently matched with earnings.

8. A prepaid expense can best be described as an amount

a. Paid and currently matched with revenues
b. Paid and not currently matched with revenues.
c. Not paid and currently matched with revenues.
d. Not paid and not currently matched with revenues.

9. Reversing entries may not be made on adjusting entries for

a. The accrual of income or expense.
b. The unexpired portion of prepayments.
c. The unearned portion of advances received.
d. The expired portion of prepayments.

10. Adjusting entries that may be reversed include those for prepaid or unearned
items that
a. Create an asset or liability account.
b. Were originally entered in a revenue or expense account.
c. Were originally entered in an asset or liability account.
d. Create an asset or liability account and were originally entered in a revenue
or expense account.

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PROBLEM 5: COMPUTATIONAL: MULTIPLE CHOICE

1. The September 30 trial balance of ABC Co. shows the following information:
Accounts Receivable 8,060 Equipment 42,120
Accounts Payable 6,370 Other Expense 4,940
Accumulated Depreciation 21,060 Owner’s Drawing 5,460
Advertising Expense 390 Owner’s Equity 28,600
Cash 7,540 Sales 12,480

Depreciation expense of ₱702 is not yet recorded. In an after-closing trial balance

prepared on September 30, the total of the credit column will be
a. 57,270 c. 57,720
b. 62,660 d. 57,018

2. Roberto Co. recorded accrued salaries of ₱2,500 at Dec. 31, 20x1 During 20x2,
Robert paid salaries of ₱87,200. Unpaid salaries at Dec. 31, 20x2 amounted to
₱3,400. Robert prepared adjustments only at Dec. 31 and reversing entries on
Jan. 1. The balance of the salaries expense account that would appear in the
post-closing trial balance at Dec. 31, 20x2 is
a. 88,100 c. 86,300
b. 87,200 d. 0

3. What is the net effect of the under mentioned errors on the trial balance of a
firm?
1. Total of sales was taken as ₱58,726 instead of ₱58,762
2. A discount of ₱52 allowed Mr. X was not posted in the discount account.
3. Sale of old furniture of ₱130 was credited to Machinery account.
4. A credit sale of ₱250 to Mr. Y was posted twice in his account.
a. Credit total of trial balance will be more than that of debit total by ₱234
b. Debit total of trial balance will be more than that of credit total by ₱234
c. Credit total of trial balance will be more than that of debit total by ₱104
d. Debit total of trial balance will be more than that of credit total by ₱264
e. Debit total of trial balance will be more than that of credit total by ₱286

4 The trial balance of Silver Clouds Co. has total debits of ₱1,185,903 and total
credits of ₱883,469. The following are the possible adjustments to make the totals
equal:
1) The credit posting for a purchase of inventory on account amounting to ₱135,
616 was omitted.
2) The balance of office supplies amounting to ₱56,788 was listed on the trial
balance as ₱65,788.
3) A debit posting to accounts payable of ₱155,987 was debited to accounts
receivable instead.

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4) The accumulated depreciation of ₱78,909 was listed in the debit column of the
trial balance.
5) A debit posting to Salaries expense amounting to ₱32,513 was debited to
Transportation expense.

How much is the correct balance of the trial balance?

a. 942,007 c. 890,898
b. 1,006,347 d. 989,706

5 On March 1, a company received ₱3,000 cash from client as an advance for 12

months’ worth of delivery services. The company initially recorded this receipt as
a debit to cash and a credit to delivery service revenue. The adjusting entry
made on December 31 would include a:
a. Debit to delivery service revenue, ₱2,500.
b. Credit to unearned delivery service revenue, ₱500.
c. Credit to delivery service revenue, ₱500
d. No adjusting entry was required because the delivery service was for one-
year period exactly.

ANSWERS:
PROBLEM 1: TRUE OR FALSE
1. FALSE
2. TRUE
3. FALSE
4. TRUE
5. FALSE
6. TRUE
7. FALSE
8. FALSE
9. TRUE
10. FALSE

PROBLEM 2: FOR CLASSROOM DISCUSSION

1. C. III, I, V, II, IV
2. B. Duality
3. C. Unearned Income
4. Entries During the Year
Cash- ₱100,000
Unearned Income- ₱100,000
Year-End Adjusting Entry

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Unearned Income- ₱110,000

Income- ₱110,000
5. Year-End Adjusting Entry
Prepaid Asset- ₱55,000
Expense- ₱55,000
6. B. An adjusting entry to record bad debts expense on trade receivables.

PROBLEM 3: CLASSROOM ACTIVITY

Accounting Cycle
1. Identifying and Analyzing business documents or transaction
The accountant identifies and examine the transaction from the supply
report and decide the consequences of every transaction inside the accounts.
2. Journalizing
Is the method of recording transaction inside the journal by using journal
entry.
3. Posting
The information from journal are transferred to the ledger.
4. Preparing the unadjusted trial balance
This proved the equality of debit and credit primarily based totally at the
balances of preferred ledger accounts.
5. Preparing the Adjusting Entries
Accounts are up to date as of the reporting date on an accrual basis with
the aid of using recording accruals.
6. Preparing the Adjusted Trial Balance
The total debit and credit ought to be identical and rechecked after the
adjustments.
7. Preparing the Financial Statements
The information is processed and communicated to users.
8. Closing the Books
It involves journalizing and posting closing entries and ruling the ledger.
9. Preparing the Post-Closing Trial Balance
The total debit and credit are rechecked again after closing.
10. Recording Reversing Entries
This is normally made at the beginning of the following accounting
duration to simplify the recording of sure transactions inside the subsequent
accounting duration.

PROBLEM 4: MULTIPLE CHOICE-THEORY

1. D
2. D

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3. D
4. D
5. D
6. C
7. D
8. B
9. D
10. D

PROBLEM 5: COMPUTATIONAL: MULTIPLE CHOICE

1. C
2. A
3. B
4. A
5. B

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