PRACTICE QUIZ [FDNACCT]
Accumulated depreciation and allowance for doubtful accounts have credit normal balances and are presented as part of total liabilities.
False
Expenses paid before being consumed are initially recorded as liabilities.
False
The adjusting entry to set up the ending inventory at the end of the accounting period applies only to an entity using a periodic inventory system, hence, physical count of the inventory is not required under a perpetual inventory system. (True or False)
False
Under the allowance method, the net realizable value of accounts receivable is obtained by deducting the Doubtful Accounts Expense from the balance of accounts receivable.
False
When a portion of the unearned income has already been earned, the adjusting entry will include a credit to unearned income account.
False
On June 1, 2022, JOY Trading acquired an office equipment for P120,000 less 5% trade discount. Upon inquiry with the seller, the asset is expected to last for 5 years and can be sold for P9,000 at the end of its estimated useful life. How much is the net carrying amount of the office equipment as of December 31, 2022?
101,750
Beginning Inventory of FAITH Trading has a balance of P100,000. Physical count of the ending inventory at period end amounted to P120,000. Under the periodic inventory system, adjusting entry related to the inventory includes a credit to Income Summary for?
120,000
At the beginning of the accounting period, the accounts payable balance of RIGHT Company was P75,000 and the unused store supplies has a balance of P5,000. Total purchases on account amounted to P180,000 during the period including the store supplies purchased for P15,000. At the end of the year, the unused store supplies balance is P4,500, and the accounts payable balance is P45,000. How much is the store supplies expense for the period?
15,500
On October 1, 2020, ADMIRABLE Company acquired air conditioning unit for store use costing P100,000. The estimated useful life is 5 years and estimated residual value is P10,000. How much is the accumulated depreciation as of December 31, 2021?
22,500
EXCELLENT Company reported before adjustments on December 31, 2021 Accounts Receivable of P350,000 and a debit balance of P7,000 for the Allowance for Doubtful Accounts. The entity estimated that 5% of accounts receivable may prove uncollectible. How much should be reported as doubtful accounts expense for the year ended December 31, 2021?
24,500
TRUE Company is in the business of renting several apartment buildings and prepares monthly financial statements. It has been determined that 3 tenants in P70,000 per month apartments and one tenant in the P30,000 per month apartment had not paid their August rent as of August 31st. How much is the rent revenue that should be accrued on August 31?
240,000
PRAISEWORTHY Company reported Accounts Receivable of P400,000 and Allowance for Doubtful Accounts of P9,000 on December 31, 2021. Aging analysis of Accounts Receivable is shown below. Time outstanding Accounts Receivable Percent uncollectible Under 30 days P200,000 2% 31 - 180 days 100,000 10% 181 - 360 days 80,000 30% More than one year 20,000 50% How much should be reported as doubtful accounts expense for the year ended December 31, 2021?
39,000
On October 1, 2020, LOVELY Company acquired air conditioning unit for store use costing P100,000. The estimated useful life is 5 years and estimated residual value is P10,000. How much is the depreciation expense for the accounting period ended December 31, 2020?
4,500
PEACE Trading sells goods on account. As of the end of 2022, before adjustment, the entity has an outstanding Accounts Receivable balance amounting to P450,000 and a credit balance in the Allowance for Doubtful Accounts of P15,000. The entity determined that 10% allowance is a reasonable estimate for the doubtful accounts. How much is the net realizable value of the Accounts Receivable as December 31, 2022?
405,000
At the end of the year, the unadjusted trial balance of PERSEVERANCE Trading reflected a profit of P300,000. The following items remain unrecorded and require adjustments to provide fairly presented financial statements: Accrued Expenses P20,000 Accrued Income 60,000 Amount used from Prepaid Insurance Expense 30,000 Amount earned from Unearned Commissions Income 25,000 Doubtful Accounts Expense 15,000 Depreciation Expense 45,000 Merchandise Inventory, End 150,000 How much is the net income of the company after effecting all the adjustments?
425,000
On November 15, PURE Company received P120,000 for advertising services to be performed over the next three months. Cash was debited for P120,000 and Unearned Advertising Revenue was credited. None of the services were provided in November. One-third of the advertising activities were completed in December 31. How much is the balance of Unearned Advertising Revenue at the end of the accounting period, December 31?
80,000
During October 31, 20xx, LOVE Trading paid its utility bills from the previous month amounting to P70,000. The company received utility bills for the month amounting to P120,000. Due to liquidity concerns, the entity was able to pay only P30,000 with the balance settled the following period. How much should be reported as utilities expenses for the period ended October 31, 20xx?
90,000
GOOD Services is engaged in advertisements for various clients. The following information pertains to the clients who made advanced payments: Client Amount Received Date Received Duration of Contract Effectivity of Contract A P300,000 January 1, 2022 6 months March 1, 2022 B P500,000 March 31, 2022 10 months May 1, 2022 C P250,000 July 15, 2022 8 months August 1, 2022 D P800,000 October 31, 2022 20 months November 1, 2022 How much is the total amount of advertising revenue to be recognized for 2022 from the contracts with amounts received in advance?
936,250
Adjusting entries are made because some business events are not recorded as they occur or to apportion revenues and expenses properly between accounting periods affected. (True or False)
True
Adjusting entry for salaries expense incurred but still unpaid includes a debit to an expense account and a credit to a liability account.
True
Adjustments for accruals are prepared when recognition precedes cash flow while cash flow precedes adjustments for deferrals.
True
Allowance for Doubtful Accounts represents portion of the receivables that are estimated to be uncollectible by the entity.
True
Net income will be understated if adjusting entry for accrued revenue will not be made.
True
All of the following describe adjusting entries, except: a: Adjusting entries are optional in the accounting cycle. b: Adjusting entries will affect the net income of the entity. c: Adjusting entries affect at least one nominal (temporary) account and one real (permanent) account. d: Adjusting entries precede the preparation of financial statements.
answer: A
In recording the periodic depreciation of a plant asset, it is an accepted practice to credit accumulated depreciation account instead of making direct credit to the asset account. Which of the following is not a reason for not crediting the asset account directly? a: It is the easier way in recording depreciation. b: The Statement of Financial Position would continue to show the full cost of the asset. c: The Statement of Financial Position would show the aggregate depreciation recorded over the past years. d: The amount of depreciation taken up is only an estimate.
answer: A
FDN Trading rented a small portion of its store to a small business owner amounting to P5,000 but remains to be unpaid to FDN Trading as of the end of the accounting period. What entry must FDN Trading make? a: Debit Accounts Receivable and credit Rent Revenue b: Debit Accrued Rent Revenue and credit Rent Revenue c: Debit Accrued Rent Revenue and credit Unearned Rent Revenue d: Debit Cash and credit Rent Revenue
answer: B
If an adjustment for the earned portion of an Unearned Revenue is not made, a: Net income, owner's equity, and liability will be understated b: Net income and owner's equity will be understated while liability will be overstated. c: Net income and owner's equity will be overstated while liability will be understated. d: Net income, owner's equity, and liability will be overstated.
answer: B
Which of the following errors would understate the assets of the business? a: Doubtful accounts were not taken up b: Accrued rent income at the end of the period was not recorded. c: Expired portion of the prepaid insurance was not recognized. d: Depreciation of the newly acquired equipment was not taken up.
answer: B
Which of the following types of adjusting entries will increase both net income and total assets? a: Unearned income b: accrued income c: prepaid expense d: accrued expense
answer: B
An understatement of ending inventory will cause: a: An understatement of assets and an overstatement of equity on the Statement of Financial Position. b: An overstatement of assets and an understatement of equity on the Statement of Financial Position. c: An understatement of assets and equity on the Statement of Financial Position. d: An overstatement of assets and equity on the Statement of Financial Position.
answer: C
The accountant made an error by failing to include December's unpaid electricity bill in the list of expenses. Identify the effect on NET INCOME and LIABILITIES. a: No effect, no effect b: Understated, no effect c: Overstated, understated d: Understated, understated
answer: C
Failure to account for the residual value of a depreciable asset will a: overstate total asset b: not affect the net income. c: overstate total liabilities. d: overstate total expenses.
answer: D
The advantage of relating the doubtful accounts to accounts receivable is that this approach a: Relates doubtful accounts expense to the period of sale. b: Is the only generally accepted method for measuring accounts receivable. c: Makes estimate of uncollectible accounts necessary. d: Gives a reasonably correct measurement of accounts receivable in the Statement of Financial Position.
answer: D
NOBLE Company signed a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1, 20xx in the amount of P50,000 with annual interest of 12%. How much is the interest expense accrued on December 31, 20xx, if no entries have been made previously for the interest?
1,000
On August 17, 20xx, HOPE Trading received a 90-day, 8% promissory note for P60,000 in settlement of its client's outstanding accounts receivable. Both the principal and interest are due on the maturity date. How much is the accrued interest income as of October 31, 20xx, if no entries have been made previously for the interest?
1,000