Prepare the adjusting entry on December 31, 2023 for the following transactions:

1. The company pays its employees weekly for a 6-days work. Wages per day totaled to P64,200. No wages
have been paid or recorded from December 29-January 3.

Salaries Expense 192,600

Salaries Payable 192,600
(64,200 x 3 days)

2. A client issued a promissory note of P30,000 with an interest of 8% on July 1, 2023. Accrued interest was not
yet recorded at year end.

Interest Expense 1,200

Interest Payable 1,200
(30,000 x 0.08 x 6/12)

3. Office Supplies has a beginning balance of P12,300. During the year, P44,800 was purchased and P35,450
were used.

Office Supplies Expense 35,450

Office Supplies 35,450

4. Insurance Expense was debited when the company paid an 18-month insurance policy for P81,000 on May
1, 2023.

Prepaid Insurance 45,000

Insurance Expense 45,000
(81,000 x 10/18)

5. The accumulated depreciation in the Unadjusted Trial Balance amounted to P300,000. The related equipment
for this accumulated depreciation was purchased on January 1, 2019.

Depreciation Expense 75,000

Accumulated Depreciation 75,000
(300,000/4 years. Accumulated depreciation recorded was from 2019-2022. Depreciation is
not yet recorded for 2023)

6. Machineries of P150,000 was purchased April 31,2023 with a salvage value of a P30,000 and a useful life of
8 years.
Depreciation Expense 10,000
Accumulated Depreciation 10,000
((150,000 – 30,000)/8) x 8/12

7. The Consulting Revenue recorded in the Unadjusted Trial Balance includes an advance payment of P45,000
from a customer. Of this amount, only P30,000 has been earned during the period.

Consulting Revenues 15,000

Unearned Consulting Revenues 15,000
(45,000 – 30,000)

8. The company uses a real account method when recording deferrals. On November 1, 2023, it received an
advance payment from a client amounting to P48,000 for a one-year service contract.

Unearned Service Revenues 8,000

Service Revenues 8,000
(48,000 x 2/12)
9. The company estimated that 5% of its revenue is uncollectible. The unadjusted trial balance showed a debit
balance for accounts receivable of P300,000, a credit balance for allowance for doubtful accounts of P10,000
and a credit balance for Revenue of P500,000.

Doubtful Accounts Expense 25,000

Allowance for Doubtful Accounts 25,000
(500,000 x 0.05)

10. Using the same information in number 9, what will be the adjusting entry if the company uses the percentage
of receivable, and assuming that uncollectible accounts are 6% of Accounts Receivable.

Doubtful Accounts Expense 8,000

Allowance for Doubtful Accounts 8,000
(300,000 x 0.06) – 10,000

1. Adjusting entries are required

a. because some costs expire with the passage of time and have not yet been journalized.
b. when the company's profits are below the budget.
c. when expenses are recorded in the period in which they are incurred.
d. when revenues are recorded in the period in which they are earned.

2. A law firm received P2,000 cash for legal services to be rendered in the future. The full amount was
credited to the liability account Unearned Legal Fees. If the legal services have been rendered at the end of
the accounting period and no adjusting entry is made, this would cause
a. expenses to be overstated.
b. net income to be overstated.
c. liabilities to be understated.
d. revenues to be understated.

3. Prepaid expenses are

a. paid and recorded in an asset account before they are used or consumed.
b. paid and recorded in an asset account after they are used or consumed.
c. incurred but not yet paid or recorded.
d. incurred and already paid or recorded.

4. Which of the following reflect the balances of prepayment accounts prior to adjustment?
a. Balance sheet accounts are understated and income statement accounts are understated.
b. Balance sheet accounts are overstated and income statement accounts are overstated.
c. Balance sheet accounts are overstated and income statement accounts are understated.
d. Balance sheet accounts are understated and income statement accounts are overstated.

5. At December 31, 2023, before any year-end adjustments, Karr Company's Insurance Expense account had
a balance of P400 and its Prepaid Insurance account had a balance of P1,900. It was determined that P1,500
of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be
a. P1,500. c. P1,900.
b. P400. d. P2,300.

6. From an accounting standpoint, the acquisition of productive facilities can be thought of as a long-term
a. accrual of expense. c. accrual of unearned revenue.
b. accrual of revenue. d. prepayment for services.

7. If a business has received cash in advance of services performed and credits a liability account, the
adjusting entry needed after the services are performed will be
a. debit Unearned Revenue and credit Cash.
b. debit Unearned Revenue and credit Service Revenue.
c. debit Unearned Revenue and credit Prepaid Expense.
d. debit Unearned Revenue and credit Accounts Receivable.

8. Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause
a. net income to be understated.
b. an overstatement of assets and an overstatement of liabilities.
c. an understatement of expenses and an understatement of liabilities.
d. an overstatement of expenses and an overstatement of liabilities.

9. How much will be the net realizable value of accounts receivable amounting to P150,000, the allowance for
doubtful accounts has a balance of P2,500 before adjustment and credit revenue amounted to P280,000.
Uncollectible accounts is estimated to be 3% of accounts receivables.
a. P148,000 c. P145,500
b. P147,500 d. P139,100

10. An asset—expense relationship exists with

a. liability accounts.
b. revenue accounts.
c. prepaid expense adjusting entries.
d. accrued expense adjusting entries.