I. Write the CAPITAL letter of the correct answer. a. Interest receivable c.

Service revenue
1. Failure to record the entry for accrued salaries results in b. Prepaid rent d. office supplies
a. salaries payable being overstated
b. profit being understated. 9. Accrued revenues
c. salaries expense being understated a. decrease assets c. increase liabilities
d. total assets being understated b. increase assets d. decrease liabilities
e. total assets being overstated
10. An accrued revenue should be recorded by a
2. A business pays weekly salaries of P200,000 on Friday for a a. seller when a customer pays for a service before the
five-day workweek ending on that day. If the fiscal period service is rendered
ends on Wednesday, the adjusting entry is b. seller when a service is rendered before receipt of cash
a. debit Salaries expense, P120,000; credit Withdrawals, c. seller when a service is rendered on receipt of cash
P120,000 d. buyer when a service is received on payment of cash
b. debit Salaries Expense, P120,000; credit salaries payable,
P120,000 11. Posting is the process of
c. debit Withdrawals, P120,000; credit Salaries Payable, a. reconciling entries from the journal to the ledger
P120,000 b. transferring entries from the journal to the ledger
d. debit Salaries Payable, P120,000; credit Salaries Expense, c. reconciling entries from the ledger to the journal
P120,000 d. transferring entries from the ledger to the journal
e. None of these
12. If a person wants to know the balances of a certain
3. An adjusting entry must contain account, he should refer to the
a. two balance sheet accounts a. book of original entry c. book of accounts
b. two income statement accounts b. book of final entry d. chart of accounts
c. a balance sheet account and an income statement account
d. an asset account and a liability account 13. Which of the following statements is false concerning a
e. an asset account and an expense account trial balance?
a. proves the mathematical accuracy of journalized
4. The entry to record expired insurance is omitted. This error transactions
causes a. will not balance if the correct journal entry is omitted in its
a. assets to be overstated entirety
b. expenses to be overstated c. a correct journal entry is posted twice
c. liabilities to be understated d. proves that all transactions have been recorded
d. liabilities to be overstated
e. an increase in liabilities on the balance sheet 14. If the total of the debit entries exceeds to the total of the
credit entries after footing the account- the said account is
5. On Nov. 15, 2009, cash is received in advance of rendering said to be
services. Assuming that the services have been performed by a. in-balance c. out of balance
Dec. 31, 2009, the adjusting entry would be a debit to b. a credit balance d. in a debit balance
a. Unearned revenues and a credit to cash
b. Service revenues and a credit to Accounts receivable 15. A trial balance will not balance if
c. Unearned Revenues and a credit to service revenues a. a correct journal entry is posted twice
d. Cash and credit to service revenues b. the purchase of supplies on account is debited to supplies
and credited to cash
6. Which of the following pairs of accounts could not be a. a P210 payment on account is debited to accounts payable
included in the same adjusting entry? for P21 and credited to cash for P21
a. Salaries expense and Salaries payable d. a P100 cash drawing by owner is debited to drawing
b. Unearned Revenues and Service Revenues account for P1000 and credited to cash for P100
c. Rent expense and Rent payable
d. Interest expense and Interest receivable 16. An error in trial balance wherein the orders of the figure
are written in reverse order as 257 instead 275
7. As the usefulness of the asset Property and Equipment a. transposition error c. posting error
expires, b. sliding error d. footing error
a. a liability is created
b. a related expense account is reduced 17. An accounts receivable has a debit and credit entries of
c. an amount is transferred from one asset account to P60,000 and P20,000 respectively with the normal ending
another balance of P50,000. Which of the following was posted as
d. the cost of the asset is allocated to an expense account. beginning balance?
a. 50,000 c. 25,000
8. Which of the following accounts could not be credited in an b. 35,000 d. 10,000
adjusting entry?
18. What is the possible effect in the balance Sheet if II. Journalizing and Preparation of Trial Balance (13 pts)
recording of depreciation expense is omitted? Dr. King decided to put up a medical clinic. Below are the
a. net income is overstated transactions for the month of July.
b. depreciation expense is understated
c. non-current asset section is overstated July 4 King invest cash of P1,000,000
d. non-current asset section is understated July 5 Bought office equipment at P20,000 paying 25% and
the balance on account
19. Mr. Jose Manila has reported profit of P60,000 at the end July 7 Withdrew cash P70,000 for personal use
of the year but before the following omissions were July 15 Rendered medical treatment to Mr. Sy P40,000 on
discovered: account
1. Unpaid salaries of P5,000 was not booked-up; July21 Paid secretaries’ salaries for P6,000
2. depreciation was not recorded, P4,000 July30 Bought Supplies on account P2,000
3. expired portion of rental paid in advance in the amount of
P2,000 was not taken up. Use the following account titles
Incorporating the would-be adjustment on the above Cash in Bank Accounts Payable
omission, how much is the corrected profit? Accounts Receivable King, Capital
a. 49,000 c. 57,000 Office Supplies King, Withdrawal
b. 53,000 d. 71,000 Office equipment Medical Revenue
Salaries Expense
20. Which of the following events does not require an entry Required: 1. Journalize the transactions
in journal form? 2. Prepare the trial balance
a. Payment for a service performed previously
b. Purchase of a one-year insurance policy III. Adjusting Entries (6 pts)
c. Agreement to perform a service at a future date Caryl Ann Chiu
d. Performance of a service agreed to at a past date Trial Balance
December 31, 20A
21. Which pair of accounts follows the rules of debit and
credit in the same manner?
Account Titles Dr. Cr.
a. Owner’s Capital and Rent expense
Cash in Bank 165,000
c. Repair expense and Notes payable
Accounts Receivable 90,000
d. Service Revenues and Equipment Rental Revenue
Est. Uncollectible Accounts 500
22. Office supplies are expenses Supplies Inventory 25,000
a. at no time, since they are assets Office Equipment 160,000
b. when they are paid for Acc. Dep'n. Office Equip.
c. when they are purchased Accounts Payable 50,000
d. when they are consumed Accrued Salaries Expense
Chiu, Capital 328,500
23. Which of the following does not directly or indirectly Service Income 85,000
affect the owner’s Capital account? Uncollectible Accounts
a. Paying an accounts Payable Depreciation Expense
b. Withdrawals by the owner
Salaries Expense 24,000
c. Earning of Revenues
Supplies used
d. Incurring of expenses
TOTAL 464,000 464,000
The following omissions were discovered in the course of
24. Which of the following statements regarding a trial
your examination.
balance is incorrect?
1. Unpaid salaries as of December 31, 20A P16,000.
a. A trial balance helps to localize errors within an identifiable
2. Supplies that were actually on hand when physical
time period
counting was made , P10,000.
b. A trial balance is a test of the equality of the debit and
3. Payment to a supplier’s account in the amount of P10,000
credit balances in the ledger
was inadvertently omitted. This was covered by Check
c. A trial balance is a list of all of the open accounts in the
Voucher # 018 dated December 31, 20A.
ledger with their balances as of a given date
4. Office Equipment was acquired on July 31, 20A with an
d. a trial balance proves that no errors of any kind have been
estimated life of 5 years without scrap value.
made in the accounts during the accounting period
5. Estimated uncollectible accounts should be adjusted to
equal to 1% of the outstanding accounts receivable
25. An adjusting entry cannot include a debit to a(n)
6. Cash received from a customer for services rendered was
a. expense and a credit to an asset
not recorded in the book. This was covered by Cash Sales
b. asset and a credit to a revenue
Invoice # 0132 dated December 31, 20A, P7,000.
c. liability and a credit to a revenue
Required: Prepare the adjusting entries
d. asset and a credit to a liability