PROBLEM 1. The records of Jerry Corp.

show the following information: (a) Purchased a three-year insurance policy for P7,200 on September 1, 2005, and recorded the premium payment in the asset account. (b) Borrowed P60,000 on a 1-year, 12% note on July 1, 2005. Interest is payable at maturity. (c) Collected P8,400 on October 1, 2005, to cover six months' rent paid in advance, and recorded the receipt in a liability account. (d) The Allowance for Doubtful Accounts shows an unadjusted balance of P300 (debit) as of December 31, 2005. Based on an aging of receivables, it is determined that the balance in the allowance account should be P1,775 at December 31, 2005. (e) Machinery purchased on January 1, 2005, for P300,000 is to be depreciated at the rate of 20 percent per year. Prepare journal entries to record the above transactions and adjust the books of Jerry Corp. at December 31, 2005.

PROBLEM 2. The information listed below was obtained from the accounting records of JANABEE Company as of June 30, 2005. (a) Payments to vendors of P1,700 were made for purchases on account during the year and were not recorded. (b) On June 28, 2005, Cahill received P5,400 in advance for services to be performed in July 2005. The P5,400 was credited to Sales Revenue. (c) Building and land were purchased in 1997 for P780,000. The building's fair market value was P650,000 at the time of purchase. The building is being depreciated over a 25-year life using the straight-line method, and assuming no salvage value. (d) On May 1, 2005, P120,000 was loaned to a shareholder on a 6month note with interest at an annual rate of 8 percent. Interest is due at maturity. (e) Accrued salaries and wages are P2,740 at June 30, 2005. (f) The office supplies account has a balance of P3,170. An inventory of supplies revealed a total of P1,550. Prepare journal entries to adjust the books of JANABEE GANDA Company at June 30, 2005. PROBLEM 3 Bergstrom Co. had the following transactions pertaining to the fiscal year ended October 31, 2005.

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June 15, 2005, paid an annual casualty insurance premium of P5,400 for a policy beginning July 1, 2005. -October 1, 2005, received advance payment of P6,930 from a customer for a 9-month equipment rental. Provide the appropriate journal entries to record the preceding transactions. Adjust the accounts at year-end assuming that no entries have been made between the transaction date and year-end and assuming that: (1) transactions were originally recorded in asset and liability accounts. (2) transactions were originally recorded in revenue and expense accounts. Problem 4Adjusting entries. Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries which caused the changes in the balances are not given.) You are asked to supply the missing journal entries which would logically account for the changes in the account balances. 1. Interest receivable at 1/1/04 was P1,000. During 2004 cash received from debtors for interest on outstanding notes receivable amounted to P5,000. The 2004 income statement showed interest revenue in the amount of P4,900. You are to provide the missing adjusting entry that must have been made, assuming reversing entries are not made. 2. Unearned rent at 1/1/04 was P5,300 and at 12/31/04 was P6,000. The records indicate cash receipts from rental sources during 2004 amounted to P40,000, all of which was credited to the Unearned Rent Account. You are to prepare the missing adjusting entry. 3. Accumulated depreciationequipment at 1/1/04 was P230,000. At 12/31/04 the balance of the account was P280,000. During 2004, one piece of equipment was sold. The equipment had an original cost of P40,000 and was 3/4 depreciated when sold. You are to prepare the missing adjusting entry. 4. Allowance for doubtful accounts on 1/1/04 was P50,000. The balance in the allowance account on 12/31/04 after making the annual adjusting entry was P60,000 and during 2004 bad debts written off amounted to P30,000. You are to provide the missing adjusting entry. 5. Prepaid rent at 1/1/04 was P9,000. During 2004 rent payments of P110,000 were made and charged to "rent expense." The 2004 income statement shows as a general expense the item "rent expense" in the amount of P125,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made.

6. Retained earnings at 1/1/04 was P150,000 and at 12/31/04 it was P200,000. During 2004, cash dividends of P50,000 were paid and a stock dividend of P40,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry.

MULTIPLE CHOICE PROBLEMS 1.Jolenz Company uses a periodic inventory system. Jolen purchased cattle from BabyRuth Ranch at a cost of P27,000 on credit. The entry to record the receipt of the cattle would be a. Purchases ........................... 27,000 Accounts Payable .................. b. Inventory ........................... 27,000 Accounts Payable ..................

27,000

27,000

c. Purchases ........................... 27,000 Cash .............................. 27,000 d. Inventory ........................... 27,000 Cash .............................. 27,000 2. Beginning and ending Accounts Receivable balances were P28,000 and P24,000, respectively. If collections from clients during the period were P80,000, then total services rendered on account were apparently a. P76,000. b. P84,000. c. P104,000. d. P108,000. 3. For a given year, beginning and ending total liabilities were P8,400 and P10,000, respectively. At year-end, owners' equity was P26,000 and total assets were P2,000 larger than at the beginning of the year. If new capital stock issued exceeded dividends by P2,400, profit or (loss) for the year was apparently a. (P2,800). b. (P2,000). c. P400. d. P2,800. 4. The Supplies on Hand account balance at the beginning of the period was P6,600. Supplies totaling P12,825 were purchased during the period and debited to Supplies on Hand. A physical count shows P3,825 of Supplies on Hand at the end of the period. The proper journal entry at the end of the period a. debits Supplies on Hand and credits Supplies Expense for P9,000. b. debits Supplies Expense and credits Supplies on Hand for P12,825.

c. debits Supplies on Hand and credits Supplies Expense for P15,600. d. debits Supplies Expense and credits Supplies on Hand for P15,600. 5. Diaz Company paid P1,704 on June 1, 2004, for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2004, adjusting entry is a. debit Prepaid Insurance and credit Insurance Expense, P497. b. debit Insurance Expense and credit Prepaid Insurance, P497. c. debit Insurance Expense and credit Prepaid Insurance, P1,207. d. debit Prepaid Insurance and credit Insurance Expense, P1,207. 6. Lupanggo Company purchased equipment on November 1, 2004, by giving its supplier a 12-month, 9 percent note with a face value of P48,000. The December 31, 2004, adjusting entry is a. debit Interest Expense and credit Cash, P720. b. debit Interest Expense and credit Interest Payable, P720. c. debit Interest Expense and credit Interest Payable, P1,080. d. debit Interest Expense and credit Interest Payable, P4,320. 7. In November and December 2004, JanaBee Company, a newly organized newspaper publisher, received P72,000 for 1,000 three-year subscriptions at P24 per year, starting with the January 2, 2005, issue of the newspaper. How much should Bee report in its 2004 income statement for subscription revenue? a. P0 b. P12,000 c. P24,000 d. P72,000 8. The following errors were made in preparing a trial balance: the P1,350 balance of Inventory was omitted; the P450 balance of Prepaid Insurance was listed as a credit; and the P300 balance of Salaries Expense was listed as Utilities Expense. The debit and credit totals of the trial balance would differ by a. P1,350. b. P1,800. c. P2,100. d. P2,250. 9. JAPE Corporation's interest revenue for 2004 was P13,100. Accrued interest receivable on December 31, 2004, was P2,275 and P1,875 on December 31, 2003. The cash received for interest during 2004 was a. P1,350. b. P10,825. c. P12,700. d. P13,100.

10. Sky is the Limit Corporation's salaries expense for 2004 was P136,000. Accrued salaries payable on December 31, 2004, was P17,800 and P8,400 on December 31, 2003. The cash paid for salaries during 2004 was a. P126,600. b. P127,600. c. P145,400. d. P153,800.

11.Garcia Company received P9,600 on April 1, 2004 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2004 adjusting entry is a. debit Rent Revenue and credit Unearned Rent, P2,400. b. debit Rent Revenue and credit Unearned Rent, P7,200. c. debit Unearned Rent and credit Rent Revenue, P2,400. d. debit Unearned Rent and credit Rent Revenue, P7,200. 12. Dy Company paid P7,200 on June 1, 2004 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2004 adjusting entry is a. debit Insurance Expense and credit Prepaid Insurance, P2,100. b. debit Insurance Expense and credit Prepaid Insurance, P5,100. c. debit Prepaid Insurance and credit Insurance Expense, P2,100 d. debit Prepaid Insurance and credit Insurance Expense, P5,100. Taddeus Company purchased equipment on November 1, 2004 and gave a 3month, 9% note with a face value of P50,000. The December 31, 2004 adjusting entry is a. debit Interest Expense and credit Interest Payable, P4,500. b. debit Interest Expense and credit Interest Payable, P1,125. c. debit Interest Expense and credit Cash, P750. d. debit Interest Expense and credit Interest Payable, P750. MADELINE GANDA Company's account balances at December 31, 2004 for Accounts Receivable and the related Allowance for Doubtful Accounts are P460,000 debit and P700 credit, respectively. From an aging of accounts receivable, it is estimated that P18,000 of the December 31 receivables will be uncollectible. The necessary adjusting entry would include a credit to the allowance account for a. P18,000. b. P18,700. c. P17,300. d. P700. SALVADOR Company's account balances at December 31, 2004 for Accounts Receivable and the Allowance for Doubtful Accounts are P640,000 debit and P1,200 credit. Sales during 2004 were P1,800,000. It is estimated that 1% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for a. P19,200. b. P18,000. c. P16,800. d. P6,400.

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14.

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REJ Corporation received cash of P9,000 on August 1, 2004 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2004 adjusting entry is a. debit Rent Revenue and credit Unearned Rent, P3,750. b. debit Rent Revenue and credit Unearned Rent, P5,250. c. debit Unearned Rent and credit Rent Revenue, P3,750. d. debit Cash and credit Unearned Rent, P5,250. ALLANNE Corporation has an incentive commission plan for its salesmen, entitling them to an additional sales commission when actual quarterly sales exceed budgeted estimates. An analysis of the account "incentive commission expense" for the year ended December 31, 2004, follows: Amount For Quarter Ended Date Paid P42,000 December 31, 2003 January 23, 2004 36,000 March 31, 2004 April 24, 2004 39,000 June 30, 2004 July 19, 2004 43,000 September 30, 2004 October 22, 2004

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The incentive commission for the quarter ended December 31, 2004, was P45,000. This amount was recorded and paid in January 2005. What amount should Lane report as incentive commission expense for 2004? a. P160,000. b. P118,000. c. P163,000. d. P205,000. c 18. On September 1, 2003, Kiler Co. issued a note payable to National Bank in the amount of P900,000, bearing interest at 12%, and payable in three equal annual principal payments of P300,000. On this date, the bank's prime rate was 11%. The first payment for interest and principal was made on September 1, 2004. At December 31, 2004, Kiler should record accrued interest payable of a. P36,000. b. P33,000. c. P24,000. d. P22,000. 19. JIMENEZ Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenues. This account had a balance of P900,000 at December 31, 2004 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of P225,000 at December 31, 2004. Service contracts still outstanding at December 31, 2004 expire as follows: During 2005 P190,000 During 2006 285,000 During 2007 175,000 What amount should be reported as Unearned Service Revenues in Jimenez's December 31, 2004 balance sheet? a. P675,000. b. P650,000. c. P425,000. d. P250,000. b In November and December 2004, Mahal Co., a newly organized magazine publisher, received P75,000 for 1,000 three-year subscriptions at P25 per year, starting with the January 2005 issue. Mahal included the entire P75,000 in its 2004 income tax return. What amount should Mahal report in its 2004 income statement for subscriptions revenue? a. P0. b. P4,167. c. P25,000. d. P75,000.

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21.

On June 1, 2004, Joana Corp. loaned Ruth P600,000 on a 12% note, payable in five annual installments of P120,000 beginning January 2, 2005. In connection with this loan, Ruth was required to deposit P6,000 in a noninterest-bearing escrow account. The amount held in escrow is to be returned to Ruth after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2004. Ruth made timely payments through November 1, 2004. On January 2, 2005, Joana received payment of the first principal installment plus all interest due. At December 31, 2004, Joana's interest receivable on the loan to Ruth should be a. P0. b. P6,000. c. P12,000. d. P18,000.

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Jolenz Corp.'s liability account balances at June 30, 2004 included a 10% note payable in the amount of P1,800,000. The note is dated October 1, 2002 and is payable in three equal annual payments of P600,000 plus interest. The first interest and principal payment was made on October 1, 2003. In Jolenz's June 30, 2004 balance sheet, what amount should be reported as accrued interest payable for this note? a. P135,000. b. P90,000. c. P45,000. d. P30,000.

23. MIKOL DEWAY Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. MIKOL DEWAY accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2004 are as follows: Last payroll was paid on 12/26/04, for the 2-week period ended 12/26/04. Overtime pay earned in the 2-week period ended 12/26/04 was P5,000. Remaining work days in 2004 were December 29, 30, 31, on which days there was no overtime. The recurring biweekly salaries total P90,000. Assuming a five-day work week, MIKOL DEWAY should record a liability at December 31, 2004 for accrued salaries of a. P27,000. b. P32,000. c. P54,000. d. P59,000. 24. JERRY Corp.'s trademark was licensed to PETER Co. for royalties of 15% of sales of the trademarked items. Royalties are payable semiannually on March 15 for sales in July through December of the prior year, and on September 15 for sales in January through June of the same year. JERRY received the following royalties from PETER: March 15 September 15 2003 P5,000 P7,500 2004 6,000 8,500 PETER estimated that sales of the trademarked items would total P80,000 for July through December 2004. In JERRY's 2004 income statement, the royalty revenue should be a. P20,500. b. P22,000. c. P26,500. d. P28,000. At December 31, 2004, JAGs Boutique had 2,000 gift certificates outstanding, which had been sold to customers during 2004 for P50 each. JAGs operates on

25.

a gross margin of 60% of its sales. What amount of revenue pertaining to the 2,000 outstanding gift certificates should be deferred at December 31, 2004? a. P0. b. P40,000. c. P60,000. d. P100,000. 26. JRL Company sells magazine subscriptions for one- to three-year subscription periods. Cash receipts from subscribers are credited to Magazine Subscriptions Collected in Advance, and this account had a balance of P9,600,000 at December 31, 2004, before year-end adjustment. Outstanding subscriptions at December 31, 2004, expire as follows: During 2005 .................. P2,600,000 During 2006 .................. 3,200,000 During 2007 .................. 1,800,000 In its December 31, 2004, balance sheet, what amount should JRL report as the balance for magazine subscriptions collected in advance? a. P2,000,000 b. P3,800,000 c. P7,600,000 d. P9,600,000 27. MRD received P12,000 from a tenant on December 1 for four months' rent of an office. This rent was for December, January, February, and March. If MRD debited Cash and credited Unearned Rental Income for P12,000 on December 1, what necessary adjustment would be made on December 31? a. Unearned Rental Income ............. 3,000 Rental Income .................... 3,000 b. Rental Income ...................... 3,000 Unearned Rental Income ........... 3,000 c. Unearned Rental Income ............. 9,000 Rental Income .................... 9,000 d. Rental Income ...................... 9,000 Unearned Rental Income ........... 9,000 28. John Michael Joshua Company paid P12,960 for a four-year insurance policy on September 1 and recorded the P12,960 as a debit to Prepaid Insurance and a credit to Cash. What adjusting entry should Ingle make on December 31, the end of the accounting period? a. Prepaid Insurance .................. 810 Insurance Expense ................ 810 b. Insurance Expense .................. 1,080 Prepaid Insurance ................ 1,080 c. Insurance Expense .................. 3,240 Prepaid Insurance ................ 3,240 d. Prepaid Insurance .................. 11,880

Insurance Expense ................ 11,880 29. Joana Allanne Ruth Inc.'s fiscal year ended on November 30, 2004. The balance in the prepaid insurance account as of November 30, 2004, was P35,200 (before adjustment) and consisted of the following policies: Policy Number 279248 694421 800616 Date of Purchase 7/1/2004 12/1/2002 4/1/2003 Date of Expiration 6/30/2005 11/30/2004 3/31/2005 Balance in Account P14,400 9,600 11,200 P35,200

The adjusting entry required on November 30, 2004, would be a. Insurance Expense ................... 24,000 Prepaid Insurance ................. 24,000 b. Insurance Expense ................... 9,600 Prepaid Insurance ................. 9,600 c. Insurance Expense ................... 11,200 Prepaid Insurance ................. 11,200 d. Insurance Expense ................... 16,400 Prepaid Insurance ................. 16,400 30. U CAN DO IT ;) Company paid P24,900 in insurance premiums during 2004. Kite showed P3,600 in prepaid insurance on its December 31, 2004, balance sheet and P4,500 on December 31, 2003. The insurance expense on the income statement for 2004 was a. P16,800. b. P24,000. c. P25,800. d. P33,000.

31. The work sheet of DONT LOSE HOPE Company shows Income Tax Expense of P9,000 and Income Tax Payable of P9,000 in the Adjustments columns. What will be the ultimate disposition of these items on the work sheet? a. Income Tax Expense will appear as a debit of P9,000 and Income Tax Payable as credit in the Balance Sheet columns. b. Income Tax Expense will appear as a debit of P9,000 and Income Tax Payable as credit in the Income Statement columns. c. Income Tax Expense will appear as a debit of P9,000 in the Balance Sheet columns and Income Tax Payable as credit in the Income Statement columns. d. Income Tax Expense will appear as a debit of P9,000 in the Income Statement columns and Income Tax Payable as credit in the Balance Sheet columns. 32. IMMA ALWAYS HERE FOR U Inc. reported an allowance for doubtful accounts of P30,000 (credit) at December 31, 2004, before performing an aging of accounts receivable. As a result of the aging, IMMA ALWAYS HERE FOR U Inc. determined that an estimated P52,000 of the December 31, 2004, accounts receivable would prove uncollectible. The adjusting entry required at December 31, 2004, would be a. Doubtful Accounts Expense ........... 22,000 Allowance for Doubtful Accounts ... 22,000 b. Allowance for Doubtful Accounts ..... 22,000 Accounts Receivable ............... 22,000 c. Doubtful Accounts Expense ........... 52,000 Allowance for Doubtful Accounts ... 52,000 d. Allowance for Doubtful Accounts ..... 52,000 Doubtful Accounts Expense ......... 52,000 33. I WILL PASS THIS Corporation's liability account balances at June 30, 2004, included a 10 percent note payable. The note is dated October 1, 2002, and carried an original principal amount of P600,000. The note is payable in three equal annual payments of P200,000 plus interest. The first interest and principal payment was made on October 1, 2003. In I WILL PASS THIS's June 30, 2004, balance sheet, what amount should be reported as Interest Payable for this note? a. P10,000 b. P15,000 c. P30,000 d. P45,000

34. While preparing this years trial balance, J.J Companys accountant committed the following errors: Omission of prepaid supplies account amounting to P4,000; overstatement of the inventory account byP2,400; understatement of the revenues account by P3,600; receivables totaling to P12,300 was included in the trial balance as P21,300; accounts payable totaling to P1,100 was included as P11,000; discount on bonds payable was included as a credit rather than as a debit, P1,500: Revenue expenditures of P3,500 was erroneously capitalized to furniture and fixtures (instead of repairs and maintenance expense). The difference between the debit and credit amounts in J.J Companys trial balance is? a. P400 b. P1,900 c. P5,400 d. P13,800

35. JRL Co. collects magazine subscriptions from customers at the time subscriptions are sold. Subscription revenue is recognized over the term of the subscription. JRL Co. collected a total of P1,800,000 in subscription sales during 2008. The following adjusting entry was made to establish the unearned portion at that time: Subscription revenue 340,000 Unearned subscriptions 340,000 In 2009, JRL Co. collected a total of P1,650,000. After adjustments were made at the end of 2009, JRL Co. reported subscriptions revenue in its income statement at P980,000. Assuming that JRL Co. does not prepare reversing entries, the adjusting entry to be made on December 31, 2009 in relation to the subscriptions collected would most likely to include a a. debit to unearned subscriptions revenue for P670,000 b. credit to unearned subscriptions revenue for P670,000 c. credit to unearned subscriptions revenue for P1,010,000 d. debit to unearned subscriptions revenue for P1,010,000