De La Salle University

Accountancy Department

ACCTBA1 - QUIZ #5

Name:______________________________ Section:_____ Date:_______________ Score:___________

General Instruction: Answer the theory questions on the questionnaire provided and show on a 10 column
worksheet all computations in problem solving in good accounting format. NO CHEATING!!!

Part I. Encircle letter T if the statement is correct or F if the statement is incorrect. (1 pt each)

T F 1. Adjusting entries for accrued expense requires the recognition of expense and the
related liability.
T F 2. Every adjusting entry affects one statement of financial position account and one
income statement account.
T F 3. Revenue received before it is earned and expenses paid before being used or consumed
are both initially recorded as liabilities.
T F 4. Revenue earned but not yet received is a prepayment type of adjusting entry.
T F 5. Accumulated Depreciation is a liability account and has a credit normal balance.
T F 6. If prepaid insurance is initially recorded as an asset, no adjusting entry will be required
in the future.
T F 7. The adjusting entry at the end of the period to record an expired cost may be different
depending on whether the cost was initially recorded as an asset or an expense.
T F 8. An adjusting entry requiring a credit to Insurance Expense indicates that the initial
payment was debited to an asset account.
T F 9. A company purchases an insurance policy for the whole year starting January 1 of
the current year; initially they recognized the whole payment as an expense. At year end,
the company will be required to have adjusting entry related to the insurance.
T F 10. Depreciation is the allocation of the cost of an asset as expense over the period of
benefits in a systematic and rational manner.
T F 11. The carrying amount of a depreciable asset is always equal to its market value.
T F 12. Rent was received in advance and was credited to a rent revenue account. The
rent is still unearned at the end of the period and therefore will require an adjusting entry
crediting a liability account for the amount still unearned.
T F 13. Omitting adjusting entry for unearned revenue under revenue method will make total
income understated and liabilities overstated.
T F 14. A subscription received in advance from a customer for a 5 month subscription is
reported as part of accrued expenses in the income statement.
T F 15. Adjusting entry is done only at the end of accounting period to update the balances of
the accounts.

Part II. Encircle the letter of the correct answer.

1. Adjusting entries are:
a. not necessary if the accounting system is operating properly
b. usually required before financial statements are prepared
c. made whenever management desires to change an account balance
d. made when the company's profits are below its budget

2. The purpose of the ledger is to:

a. record chronologically the day’s transactions 1
b. keep a record of documentation to support each transaction
c. keep in one place all information about changes in specific account balances
d. make sure that all assets and liability accounts have normal balances at all times
3. The principle purpose of posting is to:
a. help identify errors made in the journal
b. accumulate the effects of journalised transactions in the individual accounts
c. enter transactions directly into the ledger
d. help determine if the financial statements are ready to be prepared

4. If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates
a. no errors have been made
b. no errors can be discovered
c. that all accounts reflect correct balances
d. the mathematical equality of the accounting equation

5. The primary difference between prepaid and accrued expenses is that prepaid expenses have:
a. been incurred and accrued expenses have not
b. not been paid and accrued expenses have
c. been recorded and accrued expenses have not
d. not been recorded and accrued expenses have

6. A dress shop makes a sale for P1,000 on November 30. The customer is sent a statement on
December 5 and a cheque is received on January 10. The dress shop uses accrual accounting.
When is the P1,000 considered to be earned?
a. December 5 c. November 30
b. January 10 d. December 1

7. Which one of the following is not a justification for adjusting entries?

a. Adjusting entries are necessary to ensure that the revenue recognition principle is followed.
b. Adjusting entries are necessary to ensure that the expense recognition principle is followed.
c. Adjusting entries are necessary to enable financial statements to be prepared on an accrual
basis.
d. Adjusting entries are necessary to adjust the bank balance.

8. If a resource has been consumed but the invoice has not yet been received so the account is
unpaid at the end of the accounting period, then
a. an expense should be recorded when the invoice is received.
b. an expense should be recorded when the cash is paid out.
c. an adjusting entry should be made to recognise the expense.
d. it is optional whether to record the expense before or after the invoice is received.

9. Which of these reflects the situation if a prepayments account is not adjusted for the amount of
the expense consumed?
a. The statement of financial position prepayments account is understated and the profit is
understated.
b. The statement of financial position prepayments account is overstated and the profit is overstated.
c. The statement of financial position prepayments account is overstated and the profit is
understated.
d. The statement of financial position prepayments account is understated and the profit is
overstated.

10. Prepayments are initially debited to an asset account. As the prepaid expense expires with the
passage of time, the correct adjusting entry will be a
a. debit to an asset account and a credit to an expense account.
b. debit to an expense account and a credit to an asset account.
c. debit to an asset account and a credit to an asset account.
d. debit to an expense account and a credit to an expense account.

2
Part III. Show your computation on a separate 10-column worksheet. No computation, No credit points.
Observe the proper use of worksheet. Write your final answer on the space provided. (2 pts each)

1. Neptune Inc. fiscal year ended on November 30, 2012. The balance in the prepaid insurance
account as of November 30 was P35,200 (before adjustment) and consisted of the following
policies:
Policy
Number Date of purchase Expiration date Balances
12134 July 1, 2012 June 30, 2014 P14,400
21458 October 1, 2012 November 30, 2013 9,600
25480 April 1, 2012 March 31, 2013 11,200
Total P35,200

The adjusting entry required on November 30, 2012 would be:

_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________

2. XYZ Co. purchased an equipment on May 2, 2012 for P980,000. The asset can be sold for
P40,000 after the estimated life of 8 years. How much should the company recognized as
depreciation expense as of December 31, 2020? P____________________.

3. ABC Co. has the following assets as of December 31, 2012:

Est. useful life

Asset Cost (in years) Salvage Value Year acquired
1 1,500,000 6 100,000 March 2, 2010
2 800,000 7 15,000 April 30, 2011
3 350,000 3 36,000 January 1, 2012

How much should ABC Co. recognize as total depreciation expense for the year ended December
31, 2012? P_____________.

4. On March 1, 2013, Mabuhay received P140,500 from Maligaya representing payment of rent in
advance covering 12-month period starting that day, the cash received was recorded as liability
upon receipt. The adjusting entry on December 31 is:
_________________________________________________
_________________________________________________
_________________________________________________

5. Wrecking received cash for a monthly subscription of magazine from Ball amounting to
P390,000 covering 14-months starting June 30, 2013. During the year, P165,320 worth of
magazine was delivered by Wrecking to Ball. On December 31, amount of liability to be
recognized as an adjustment is: P________________.

Part IV. On a 10-column worksheet prepare the Income Statement (Functional form) of Rizal General
Merchandise, a merchandising business for the fiscal year ended June 30, 2013. 3
The following ledger balances were taken from the books of Rizal General Merchandise as of June 30,
2013, the end of fiscal period. (see next page)
 CODE DESCRIPTION AMOUNT
AE Rent expenses 47,475.00
SFP Cash 123,450.00
AE Depreciation expense – Furniture and fixtures 13,800.00
AE Depreciation expense – Equipment 35,317.50
SFP Accounts payable 23,450.00
AE Bad Debts expense 43,125.00
COS Freight in 15,735.00
SE Freight out 12,060.00
SFP Accounts receivable 35,400.00
FC Interest expense 16,845.00
SFP Salaries payable 22,220.00
OI Interest income 13,050.00
COS Merchandise inventory - July 1, 2012 155,250.00
AE Salaries 116,625.00
AE Supplies expense 26,550.00
COS Purchases 909,067.50
COS Purchase discount 10,200.00
SFP Notes payable 75,500.00
COS Purchase returns 17,190.00
NS Sales 1,536,625.00
NS Sales returns 18,750.00
NS Sales discount 13,305.00
SE Advertising expense 76,305.00
AE Utilities expense 11,835.00
SE Store supplies used 12,620.00
SE Depreciation expense – store equipment 30,000.00

Additional information:
1. The merchandise inventory at the end of the fiscal year by physical count is P150,150.

**** END OF EXAMINATION****

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