MCQ on adjusting entries
1. Adjusting entries
A. Assign revenue to the periods in which they are earned
B. Help to measure properly the period's net income or net loss
C. Bring asset and liability accounts to correct balance
D. All of the above.
2. The accumulated depreciation is reported in the
A. Balance sheet
B. Income statement
C. Statement of owners' equity
D. Statement of cash flows
3. The adjusting entry to accrue salaries expense
A. Debit salaries expense credit cash
B. Debit salaries expense and credit accrued salaries payable
C. Debit salaries payable and credit cash
D. Debit salaries expense and credit salaries
4. The adjusting entry to record estimated uncollectible accounts
A. Debit uncollectible account expense and credit allowance for uncollectible accounts
B. Debit allowance for uncollectible accounts and credit uncollectible accounts expense
C. Debit accounts receivable and credit uncollectible accounts expense
D. Debit uncollectible accounts expense and credit accounts receivable
5. Which is an incorrect adjusting entry
A. Debit depreciation and credit accumulated depreciation
B. Debit salaries and credit accrued salaries payable
C. Debit accumulated depreciation and credit depreciation
D. Debit uncollectible accounts and credit allowance for uncollectible accounts
6. Which of the following is an example of an adjusting entry
A. Recording the depreciation expense
B. Recording the purchase of supplies on account
C. Recording payments of wages to employees
D. Recording receipts of cash for services rendered
7. Under the revenue recognition principle, revenue is recorded
A. At the latest acceptable time
B. After it has been earned but not before
C. At the end of the accounting period
D. At the earliest acceptable time
8. If a P20,000 adjustment for depreciation is not recorded, which of the following financial statement
errors will occur?
A. Expenses overstated
B. Income understated
C. Assets understated
D. Owners' equity overstated
9. Accrued revenues
A. Decrease assets
B. Increase liability
C. Decrease liabilities
D. Increase assets
10. The adjusting entry to recognize prepaid insurance if payment was recorded under the expense
method
A. Debit prepaid insurance and credit insurance expense
B. Debit insurance expense and credit prepaid insurance
C. Debit insurance expense and credit cash
D. Debit cash and credit insurance expense.
ADJUSTING ENTRIES
PROBLEM 1. At the end of the operations for the year, ABC Services’ accountant prepared the
following trial balance as of December 31, 2023:
Account Debit Credit
Assets P500,000
Liabilities P100,000
Juan, capital P308,000
Revenues P216,000
Expenses P124,000
Total P624,000 P624,000
In analyzing the accounts of ABC Services, the adjustment data listed below are determined on
December 31, 2023:
a. The prepaid insurance account shows a debit of P3,600, representing the cost of a 2-year fire
insurance policy dated July 1, 2023.
b. On September 1, 2023, rent revenue account was credited for P3,750, representing revenue from
sub-rental for a five-month period beginning on that date.
c. Unearned revenue account was credited for P1,350, representing payment for services to be
rendered uniformly for one year starting August 1, 2023.
d. Accrued expense not yet recorded, 12,800
1. How much is the adjusted net income for 2023?
A) P78,112.50 C) P91,800.00
B) P92,100.00 D) P92,750.00
2. How much is the adjusted total assets at December 31, 2023?
A) P500,000 C) P499,100
B) P496,400 D) P497,250
PROBLEM 2: Presented below is the unadjusted trial balance of Go Company for the year ended
December 31, 2023:
Account Debits Credits
Cash P75,000
Office supplies 8,000
Prepaid insurance 12,000
Office equipment 150,000
Computer equipment 60,000
Notes payable P50,000
Accounts payable 5,000
Go, capital 114,000
Go, drawing 35,000
Service revenue 390,000
Rent expense 50,000
Salaries expense 120,000
Utilities expense 49,000
Total P559,000 P559,000
Export to Sheets
Information for year-end adjustments are as follows:
a. Office supplies on hand at year-end amount to P3,000.
b. On June 1 of the current year, Go purchased office equipment which cost P150,000 with an
expected life of 5 years and no salvage value.
c. Computer equipment costing P60,000 with an expected useful life of 3 years and no salvage value
was purchased on March 31 of the current year.
d. A premium of P12,000 for a one-year insurance policy was paid on November 30.
e. Salaries earned by employees, who have not yet been paid, amounted to P3,100.
8. How much is the adjusted total expenses for the period?
A) P259,500 C) P260,600
B) P261,700 D) P262,800
9. How much is the net income for the year ended December 31, 2023?
A) P127,800 C) P128,900
B) P129,400 D) P130,500
10. How much is the total assets as of December 31, 2023?
A) P266,500 C) P271,500
B) P273,000 D) P275,600
