FAR-Questionnaire 1

Adjusting Entries
Final Battle
Ricalyn E. Sumpay, CPA
Instructor
Adjusting Entries - Exercises
Which of the following is an example of an

adjusting entry?
a. Recording the purchase of supplies on
account.
b. Recording depreciation expense on truck.
c. Recording the receipt of payment from
customers for services rendered.
d. Recording the payment of wages to
employees.
Which of the following is an example of an
adjusting entry?
a. Recording the purchase of supplies on
account.
b. Recording depreciation expense on
truck.
c. Recording the billing of customers for
services rendered.
d. Recording the payment of wages to
employees.
2. An adjusting entry to record utilities used during the
month for which no bill has yet been received is an example
of
a. Allocating assets to expense to reflect the actual
operating expenses incurred during the accounting
period.
b. Allocating revenues received in advance to reflect the
actual revenues earned during the accounting period.
c. Accruing expenses to reflect expenses incurred during
the accounting period that are not yet paid or recorded.
d. Accruing revenues to reflect revenues earned during the
accounting period that are not yet received or recorded.
2. An adjusting entry to record utilities used during the
month for which no bill has yet been received is an example
of
a. Allocating assets to expense to reflect the actual
operating expenses incurred during the accounting
period.
b. Allocating revenues received in advance to reflect the
actual revenues earned during the accounting period.
c. Accruing expenses to reflect expenses incurred during
the accounting period that are not yet paid or recorded.
d. Accruing revenues to reflect revenues earned during the
accounting period that are not yet received or recorded.
3. The ending balance of the Accounts Receivable
account was P120, 000. Services billed to customers
for the period were P215, 000 and collections on
account from customers were P236, 000. What was
the beginning balance of Accounts Receivable?
a. P335, 000
b. P141, 000
c. P99, 000
d. P331,000
a. P335, 000
b. P141, 000
c. P99, 000
d. P331,000
a. P335, 000
b. P141, 000
c. P99, 000
d. P331,000
4. On January 2019, a P140, 000 check was paid
for rental expense of fourteen months. The amount
was recorded in the rent expense account. How
much is the rent expense incurred for the year
ended December 31, 2019?
a. P10, 000
b. P20, 000
c. P120, 000
d. P140, 000
4. On January 2019, a P140, 000 check was paid
for rental expense of fourteen months. The amount
was recorded in the rent expense account. How
much is the rent expense incurred for the year
ended December 31, 2019?
a. P10, 000
b. P20, 000
c. P120, 000
d. P140, 000
5. On November 2018, five months of insurance amounting
to P125, 000 were paid for the period from November 1,
2018 to Mar 31, 2019. The amount was debited to the
insurance expense account. How much was the insurance
expense incurred for the year ended December 31, 2018 if
there was no balance in the insurance expense account?
a. P25,000
b. P50,000
c. P75, 000
d. P125, 000
5. On November 2018, five months of insurance amounting
to P125, 000 were paid for the period from November 1,
2018 to Mar 31, 2019. The amount was debited to the
insurance expense account. How much was the insurance
expense incurred for the year ended December 31, 2018 if
there was no balance in the insurance expense account?
a. P25,000
b. P50,000
c. P75, 000
d. P125, 000
6. For the year ended Mar. 31, 2019, a business that offers
yoga lessons received P14, 000 in yoga fees, which was
recorded in the yoga fee revenue account. The amount
included P3, 500 for Apr 2019 lesson. Assuming there are no
other transactions relating to yoga fee revenue during the
financial year, how much is the yoga fee earned for the year
ended Mar. 31, 2019?
a. P3, 500
b. P10, 500
c. P14, 000
d. P17, 500
7. An amount of P235, 000 was received in 2019 and
recorded in the commission income account. It was
discovered that an additional commission income of P47,
000 was not received yet as at Dec. 31, 2019. How much is
the commission earned for the year ended Dec. 31, 2019?
a. P47, 000
b. P188, 000
c. P235, 000
d. 282, 000
7. An amount of P235, 000 was received in 2019 and
recorded in the commission income account. It was
discovered that an additional commission income of P47,
000 was not received yet as at Dec. 31, 2019. How much is
the commission earned for the year ended Dec. 31, 2019?
a. P47, 000
b. P188, 000
c. P235, 000
d. 282, 000
8. Suppose the beginning balance of machinery account is a
debit balance of P100, 000. Within this month, there is an
acquisition of machinery by an equivalent settlement of
P400, 000 debt amount. Also, there is a sale of machinery to
the sole proprietor at the cost price of P20, 000. What is the
opening balance of the machinery account the next month?
a. Debit balance of P480, 000
b. Debit balance of P500, 000
c. Credit balance of P480, 000
d. Credit balance of P500, 000
8. Suppose the beginning balance of machinery account is a
debit balance of P100, 000. Within this month, there is an
acquisition of machinery by an equivalent settlement of
P400, 000 debt amount. Also, there is a sale of machinery to
the sole proprietor at the cost price of P20, 000. What is the
opening balance of the machinery account the next month?
a. Debit balance of P480, 000
b. Debit balance of P500, 000
c. Credit balance of P480, 000
d. Credit balance of P500, 000
9. Accrual concept states that revenues and expenses of the
firm should be recorded on ____________ instead of
___________.
a. Accrual basis Cash basis
b. Accrual basis Credit basis
c. Cash basis Accrual basis
d. Credit basis Cash basis
9. Accrual concept states that revenues and expenses of the
firm should be recorded on ____________ instead of
___________.
a. Accrual basis Cash basis
b. Accrual basis Credit basis
c. Cash basis Accrual basis
d. Credit basis Cash basis
10. Lorelei Cruz entered into a one-year tenancy contract
from Mar 1, 2018 to Feb. 28, 2019. The monthly rental was
P90, 000.For the year ended December 31, 2018, Lorelei
Corpuz paid of P1,080, 000 for the contract and recorded it
as rental expenses. The profit for the year ended Dec. 31,
2018 was ___________________.
a. Overestimated by P900, 000
b. Overestimated by P180, 000
c. Underestimated by P900,000
d. Underestimated byP180, 000
10. Lorelei Cruz entered into a one-year tenancy contract
from Mar 1, 2018 to Feb. 28, 2019. The monthly rental was
P90, 000.For the year ended December 31, 2018, Lorelei
Corpuz paid of P1,080, 000 for the contract and recorded it
as rental expenses. The profit for the year ended Dec. 31,
2018 was ___________________.
a. Overestimated by P900, 000
b. Overestimated by P180, 000
c. Underestimated by P900,000
d. Underestimated byP180, 000
11. Suppose an entity recorded an expense when it was
paid, but the expense was incurred one year before the
payment date. Which of the following accounting principles
has been violated?
a. Consistency concept
b. Historical cost concept
c. Accrual concept
d. Entity concept
11. Suppose an entity recorded an expense when it was
paid, but the expense was incurred one year before the
payment date. Which of the following accounting principles
has been violated?
a. Consistency concept
b. Historical cost concept
c. Accrual concept
d. Entity concept
12. The financial year of Divina Cayabyab ends on
December 31 each year. On May 30, 2019, Divina Cayabyab
received an annual service fee of P600, 000 from a customer
for a service commencing on June 1. On Dec. 31, 2019,
________.
a. P250, 000 should be treated as unearned revenues.
b. P300, 000 should be treated as unearned revenues.
c. P600, 000 should be treated as unearned revenues.
d. P600, 000 should be treated as revenues for the current
financial year.
12. The financial year of Divina Cayabyab ends on
December 31 each year. On May 30, 2019, Divina Cayabyab
received an annual service fee of P600, 000 from a customer
for a service commencing on June 1. On Dec. 31, 2019,
________.
a. P250, 000 should be treated as unearned revenues.
b. P300, 000 should be treated as unearned revenues.
c. P600, 000 should be treated as unearned revenues.
d. P600, 000 should be treated as revenues for the current
financial year.
13. At the beginning of the financial year, Edzel Singian
paid a 3-year insurance premium of P720, 000. At the end of
the financial year, __________.
a. P720, 000 should be treated as expenses

b. P720,000 should be treated as prepaid expenses.
c. P240, 000 should be treated as expenses.
d. P240, 000 should be treated as prepaid expenses.
13. At the beginning of the financial year, Edzel Singian
paid a 3-year insurance premium of P720, 000. At the end of
the financial year, __________.
a. P720, 000 should be treated as expenses

b. P720,000 should be treated as prepaid expenses.
c. P240, 000 should be treated as expenses.
d. P240, 000 should be treated as prepaid expenses.
14. Elvira Dacayo rents a new office and the lease term is
from January 1, 2019 to Dec. 31, 2019. For the year ended
Dec. 31, 2018, Elvira Dacayo pays rent for three months.
Based on the _____________, Elvira Dacayo should record
this transaction as expenses for the year ______________.
a. Consistency principle 2019
b. Consistency principle 2018
c. Accrual concept 2019
d. Accrual concept 2018
14. Elvira Dacayo rents a new office and the lease term is
from January 1, 2019 to Dec. 31, 2019. For the year ended
Dec. 31, 2018, Elvira Dacayo pays rent for three months.
Based on the _____________, Elvira Dacayo should record
this transaction as expenses for the year ______________.
a. Consistency principle 2019
b. Consistency principle 2018
c. Accrual concept 2019
d. Accrual concept 2018
15. Which of the following accounts could not be credited in
an adjusting entry?
a. Interest receivable
b. Office Supplies
c. Prepaid Rent
d. Service Revenues
15. Which of the following accounts
could not be credited in an adjusting
entry?
a. Interest receivable
b. Office Supplies
c. Prepaid Rent
d. Service Revenues
16. Which of the following is not an application of accrual
accounting?
a. Adjusting the accounts
b. Applying the cash basis of accounting
c. Applying the matching rule
d. Recognizing revenues when earned and expenses when
incurred.
16. Which of the following is not an application of accrual
accounting?
a. Adjusting the accounts
b. Applying the cash basis of accounting
c. Applying the matching rule
d. Recognizing revenues when earned and expenses when
incurred.
17. The matching rule is applied
a. Because it is required by the Tax Code
b. By expensing certain items immediately and in
their entirety.
c. To help make the bookkeeper’s job easier.
d. To help produce a more accurate measurement
of an entity’s performance.
17. The matching rule is applied
a. Because it is required by the Tax Code
b. By expensing certain items immediately and in their
entirety.
c. To help make the bookkeeper’s job easier.
d. To help produce a more accurate measurement of an
entity’s performance.
18. The going concern assumption is not
applied to
a. Entities about to file for bankruptcy.
b. Entities that have been in existence
for less than a year.
c. Entities that have sustained losses
for the previous two years.
d. The partnership form of business.
18. The going concern assumption is not
applied to
a. Entities about to file for bankruptcy.
b. Entities that have been in existence
for less than a year.
c. Entities that have sustained losses
for the previous two years.
d. The partnership form of business.
19. A service vehicle might be
depreciated over 5 years because
a. Income tax provision require
depreciation over the next 5 years.
b. It will be paid for in 5 years.
c. It will help generate revenue for the
company over the next 5 years.
d. It will lose its market value in 5
years.
19. A service vehicle might be
depreciated over 5 years because
a. Income tax provision require
depreciation over the next 5 years.
b. It will be paid for in 5 years.
c. It will help generate revenue for the
company over the next 5 years.
d. It will lose its market value in 5
years.
20. The journal entry to record an
accrued expense results in which of the
following types of accounts being
debited and credited?
A. Asset and income
B. Asset and liability
C. Expense and asset
D. Expense and liability
20. The journal entry to record an
accrued expense results in which of the
following types of accounts being
debited and credited?
A. Asset and income
B. Asset and liability
C. Expense and asset
D. Expense and liability
21. If a P2, 500 adjustment for
depreciation is omitted, which of the
following financial statement errors will
occur?
a. Assets will be understated
b. Expenses will be overstated
c. Owner’s equity will be overstated
d. Profit will be understated.
21. If a P2, 500 adjustment for
depreciation is omitted, which of the
following financial statement errors will
occur?
a. Assets will be understated
b. Expenses will be overstated
c. Owner’s equity will be overstated
d. Profit will be understated.
22. The amount of accrued but unpaid
expenses at the end of reporting period
is both an expense and
a. A deferral
b. A liability
c. An asset
d. An income
22. The amount of accrued but unpaid
expenses at the end of reporting period
is both an expense and
a. A deferral
b. A liability
c. An asset
d. An income
23. Accrued revenues
A. Decrease assets
B. Decrease liabilities
C. Increase assets
D. Increase liabilities
23. Accrued revenues
A. Decrease assets
B. Decrease liabilities
C. Increase assets
D. Increase liabilities
24. Accrued expenses
a. Decrease assets
b. Decrease liabilities
c. Increase assets
d. Increase liabilities
24. Accrued expenses
a. Decrease assets
b. Decrease liabilities
c. Increase assets
d. Increase liabilities
25. The word “accrued” implies which of the
following?
a. Money has been paid and the service has
been provided.
b. Money has been paid but no services has
been provided.
c. Money has been paid for a service to be
performed
d. Money has not been paid/received but the
service has already been provided.
25. The word “accrued” implies which of the
following?
a. Money has been paid and the service has
been provided.
b. Money has been paid but no services has
been provided.
c. Money has been paid for a service to be
performed
d. Money has not been paid/received but the
service has already been provided.
26. The cost of doing business is also
known as
a. A liability
b. An asset
c. An expense
d. Revenue
26. The cost of doing business is also
known as
a. A liability
b. An asset
c. An expense
d. Revenue
27. If an adjusting entry were not made
at the end of a period to remove the
earned revenue from the Unearned
Revenues account,
a. Assets would be understated
b. Liabilities would be overstated
c. Liabilities would be understated
d. Owner’s equity would be overstated
28. Salaries payable were P3, 500 at the
end of September and P2, 800 at the
end of October. Salaries Expense for
October was P18, 000. How much
cash was paid for salaries during
October?
a. P18, 700 c. P17, 300
b. P24, 100 d. P11, 700
28. Salaries payable were P3, 500 at the
end of September and P2, 800 at the
end of October. Salaries Expense for
October was P18, 000. How much
cash was paid for salaries during
October?
a. P18, 700 c. P17, 300
b. P24, 100 d. P11, 700
29. An adjusting entry can include a
debit to a(n)
a. Asset and a credit to a liability
b. Expense and a credit to a revenue
c. Liability and a credit to revenue
d. Revenue and a credit to an asset
30. An adjusting entry made to record accrued
interest on a note payable due next year consists of
a debit to
a. Interest expense and a credit to cash
b. Interest expense and a credit to Interest
Payable
c. Interest expense and a credit to notes payable
d. Interest receivable and a credit to interest
earned.
30. An adjusting entry made to record accrued
interest on a note payable due next year consists of
a debit to
a. Interest expense and a credit to cash
b. Interest expense and a credit to Interest
Payable
c. Interest expense and a credit to notes payable
d. Interest receivable and a credit to interest
earned.
31. Daisy Dangayo will rent a warehouse from 3J Realty
from May 1, 2018 to Apr. 30, 2020. On Apr 1, 2018, Daisy
Dangayo paid P360, 000. It included a cleaning fee of
P10, 000, two months’ rent, and a rental deposit
amounting to three months’ rent. What should be the
related rental expense recorded on the income statement
for the year ended Mar. 31, 2019?
a. P770, 000
b. P792, 000
c. P840, 000
d. P980, 000
32. Which of the following transactions results in an increase
in revenues?
a. Collection of cash on account.
b. Receipt of cash from bank loan
c. Sale of land at cost for cash
d. Services rendered on credit
33. An item that represents services received by the firm for
which it will pay for in the future is called
a. An accrued expense
b. An accrued revenue
c. An unearned revenue
d. A prepaid expense
34. An item that represents services provided by a firm for
which it will receive payment in the future is called
a. A prepaid expense
b. An accrued expense
c. An accrued revenue
d. An unearned revenue
35. Which of the following transactions
results in an increase in expenses?
a. Cost of employee salaries
b. Payment on accounts payable
c. Purchase of office equipment on credit
d. Repayment of principal of bank loan.
35. Which of the following transactions
results in an increase in expenses?
a. Cost of employee salaries
b. Payment on accounts payable
c. Purchase of office equipment on credit
d. Repayment of principal of bank loan.
36. The Supplies account had a P2, 800 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 the required adjusting entry?
a. Debit Supplies expense P600 and credit supplies P600
b. Debit Supplies P600 and credit Supplies Expense P600
c. Debit Supplies P2, 200 and credit Supplies Expense P2,
200
d. Debit Supplies Expense P2,200 and credit Supplies P2,
200
37. A law firm began November with office supplies of P16,
000. During the month, the firm purchased supplies of P29,
000. On November 30, supplies on hand totaled P21, 000.
Supplies expense for the period is
a. P24, 000
b. P29, 000
c. P45, 000
d. P21, 000
38. Adjusting entries involve
a. At least one real and one
nominal account
b. Only capital accounts
c. Only nominal accounts
d. Only real accounts
39. The decrease in usefulness of
an asset is known as
___________________________
40. Accumulated depreciation is
reported in the
a. Balance sheet
b. Income statement
c. Statement of owner’s equity
d. Both A and B
41. An analysis of A Company’s unadjusted prepaid expense account at
Dec. 31, 2019 revealed the following:
An opening balance at P15, 000 for A’s comprehensive insurance policy.
Angelina Tagay paid an annual premium of P30, 000 on July 1, 2018.
A P32, 000 annual insurance premium payment made on July 1, 2019.
A P20, 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 A’s report as
prepaid expenses?
a.P52, 000
b. P36, 000
c. P20, 000
d. P16, 000

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Adjusting Entries

Which of the following is an example of an

a. P720, 000 should be treated as expenses

a. P720, 000 should be treated as expenses

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