New Era University

COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

ADJUSTING ENTRIES

1. Which of the following is an example of an adjusting entry?

a. Recording the purchase of supplies on account
b. Recording depreciation expense on a 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 a 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 revenue to reflect 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

4. On Jan. 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 Dec. 31, 2019?
a. P10,000
b. P20,000
c. P120,000
d. P140,000

5. On Nov. 2018, five months of insurance amounting to P125,000 were paid for the period from
Nov. 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 Dec. 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

1
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

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. P282,000

8. Suppose the opening 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

10. Lorelei Corpuz 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 Dec. 31, 2018, Lorelei Corpuz paid
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 by P180,000

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

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

14. Elvira Dacayo rents a new office and the lease term is from Jan. 1, 2019 to Dec. 31, 2019.
For the year ended Dec. 31, 2018, Elvira Dacayo pays rent for three months. Based on the

2
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

__________, 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. Daisy Dangayo will rent a warehouse from 3) 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

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.

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 provisions 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 most of 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

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 the period is both an expense and
a. a deferral.
b. A liability

3
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

c. an asset.
d. an income.

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.

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 have been provided.
c. Money has been paid for a service to be performed during the next period.
d. Money has not been paid or received but the service has already been performed or
rendered.

26. 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.

27. 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

28. The cost of doing business is also known as

a. a liability.
b. an asset.
c. an expense.
d. revenue.

29. 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.

30. 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.

31. Which of the following is an example of an adjusting entry?

a. recording depreciation expense on a truck

4
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

b. recording the billing of customers for services rendered
c. recording the payment of salaries to employees
d. recording the purchase of supplies on account

32. 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

33. Which of the following pairs of accounts would not appear in the same adjusting entry?
a. Interest Revenues and Interest Payable
b. Rent Expense and Rent Payable
c. Service Revenues and Accounts Receivable
d. Service Revenues and Unearned Revenues

34. The Supplies account had a P2,800 debit 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.

35. 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 total P21,000. Supplies
expense for the period is
a. P24,000.
b. P29,000.
c. P45,000.
d. P21,000.

36. The adjusting entry to accrue salaries expense

a. debits salaries expense and credits cash.
b. debits salaries expense and credits salaries payable.
c. debits salaries payable and credits cash.
d. debits salaries payable and credits salaries expense.

37. Adjusting entries involve

a. at least one real and one nominal account.
b. only capital accounts.
c. only nominal accounts.
d. only real accounts.

38. A prepaid expense is not an

a. asset.
b. economic resource.
c. expired cost.
d. unexpired cost.

39. The decrease in usefulness of property and equipment as time passes is called
a. consumption.
b. contra asset.
c. depreciation.
d. deterioration.

40. Accumulated Depreciation is reported in the

5
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

a. balance sheet.
b. income statement.
c. statement of owner's equity.
d. both “a” and “b”.

41. Under the revenue recognition principle, revenue is recorded

a. after it has been earned, but not before.
b. at the earliest acceptable time.
c. at the end of the accounting period.
d. at the latest acceptable time.

42. The broad classifications of adjusting entries are

a. accruals and closing.
b. accrual and deferrals.
c. closing and trials.
d. trials and deferrals.

43. On Nov. 15, 2018, cash is received in advance of rendering services. Assuming that the
services have been performed by Dec. 31, 2018, the adjusting entry would be a debit to
a. Cash and a credit to Service Revenues.
b. Service Revenues and a credit to Accounts Receivable.
c. Unearned Revenues and a credit to Cash.
d. Unearned Revenues and a credit to Service Revenues.

44. Which of the following pairs of accounts could not be included in the same adjusting entry?
a. Interest Expense and Interest Receivable
b. Rent Expense and Rent Payable
c. Salaries Expense and Salaries Payable
d. Unearned Revenues and Service Revenues

45. Which of the following is an example of an accrual?

a. Payment of two years' insurance in advance
b. Salaries incurred but not yet paid
c. The purchase of office supplies
d. Tuition revenue collected in advance

46. An adjusted trial balance is prepared to

a. both test that the ledger is still in balance after the accounts have been adjusted and
facilitate preparation of the financial statements.
b. facilitate preparation of the adjusting entries.
c. facilitate preparation of the financial statements.
d. test that the ledger is still in balance after the accounts have been adjusted.

47. Which of the following accounts would normally be found on the credit side of the adjusted
trial balance?
a. Accumulated Depreciation-Equipment
b. Depreciation Expense-Equipment
c. Janet Matuguinas, Withdrawals
d. Prepaid Insurance

48. Which of the following is not an application of accrual accounting?

a. Adjusting unearned advertising revenues to the proper balance at the end of the month
b. Recording advertising revenues at the time the cash payment is received
c. Recording advertising revenues at the time the work is done
d. Recording telephone expense when the monthly bill is received

49. Which of the following accounts is an income statement account?

6
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

a. Accounts Receivable
b. Owner's Capital
c. Salaries Expense
d. Salaries Payable

50. Which of the following is an example of a deferral?

a. Legal fees already earned but not yet collected
b. Property taxes accrued but not yet paid
c. The accumulation of interest in a bank account
d. The purchase of an entity vehicle

51. Which of the following situations involves a deferral?

a. Recording accrued interest
b. Recording depreciation
c. Recording unrecorded revenue
d. Recording unrecorded salaries

52. When a sale takes place

a. a revenue account will increase.
b. assets will be unaffected.
c. liabilities will increase.
d. one asset account will increase, and another will decrease.

53. Which of the following accounts is a contra account?

a. Accumulated Depreciation Office Equipment
b. Depreciation Expense-Office Equipment
c. Office Equipment
d. Unearned Revenues

54. Which of the following situations is an example of an accrual?

a. Recording depreciation
b. Recording supplies consumed
c. Recording the portion of prepaid rent that has expired
d. Recording unrecorded revenues

55. Failure to adjust for accrued salaries at the end of the period will result in an
a. overstatement of assets.
b. overstatement of liabilities.
c. overstatement of profit for the period.
d. understatement of profit for the period.

56. Companies usually choose a fiscal year that ends

a. at different times each year, depending on the tax consequences.
b. during the peak of the busy season.
c. during the slack season.
d. on July 31.

57. Expenses are incurred

a. only during the adjustment process.
b. to generate revenue.
c. to produce assets.
d. to produce liabilities.

58. The matching rule relates the least to

a. accrual accounting.
b. cause-and-effect relationships.
c. systematic and rational allocation.

7
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

d. the cash basis of accounting.

59. Which of the following assets is not subject to depreciation?

a. Art equipment
b. Computers
c. Land
d. Store fixtures

60. The carrying value of a depreciable asset equals

a. the estimated amount for which the asset could be sold.
b. the estimated cost to replace the asset.
c. the original cost minus accumulated depreciation.
d. the original cost minus depreciation expense for the current period.

61. Which of the following transactions is the most difficult to assign to specific time periods?
a. The accrual of interest
b. The expiration of insurance
c. The incurrence of salaries
d. The use of equipment

62. Financial statement time periods should be of equal length

a. and should correspond with the calendar year.
b. and should end during the peak season.
c. to comply with loan agreements.
d. to make comparison meaningful.

63. An entity recorded office supplies in an asset account when the supplies were purchased.
Failure to take an inventory and make an adjusting entry will result in an
a. overstatement of owner's equity.
b. understatement of assets.
c. understatement of liabilities.
d. understatement of owner's equity.

64. Which of the following is an application of accrual accounting?

a. Depreciating a building as quickly as allowed by income tax regulations
b. Expensing a machine in its entirety when purchased
c. Recording revenue at the time payment is received
d. Recording utilities expense when the monthly bill is received

65. An entity's weekly payroll of P5,000 is paid on Fridays. Assume that the last day of the month
falls on Wednesday. Which of the following is the required adjusting entry?
a. Debit Salaries Expense P3,000 and credit Salaries Payable P3,000
b. Debit Salaries Expense P2,000 and credit Salaries Payable P2,000
c. Debit Salaries Payable P3,000 and credit Salaries Expense P3,000
d. Debit Unpaid Salaries P3,000 and credit Salaries Payable P3,000

66. Which of the following transactions results in the recognition of an expense?

a. Expiration of usefulness of equipment during the accounting period
b. Payment of the principal of a loan
c. Payment on accounts payable
d. Withdrawal of cash by the owner

67. A customer's promise to pay for goods or services

a. creates a liability for the company.
b. decreases the company's liabilities.
c. increases the assets of the company.
d. increases the company's Cash account.

8
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

68. The journal entry to record an accrued revenue 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

69. A business received cash of P30,000 in advance for revenue that will be earned later. The
cash receipt entry debited cash and credited unearned revenues for P30,000. At the end of
the period, P11,000 is still unearned. The adjusting entry for this situation will
a. debit revenues and credit unearned revenues for P19,000.
b. debit revenues and credit unearned revenues for P11,000.
c. debit unearned revenues and credit revenues for P19,000.
d. debit unearned revenues and credit revenues for P11,000.

70. As the usefulness of the asset Property and Equipment expires,

a. a liability is created.
b. an amount is transferred from one asset account to another.
c. a related expense account is reduced.
d. the cost of the asset is allocated to an expense account.

71. 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

72. The principal difference between depreciation and most other types of expenses is that
depreciation
a. can be avoided if the asset is in as good condition as when it was purchased.
b. does not require an immediate cash outlay.
c. is not deductible if it will cause a loss.
d. is subject to more precise measurement.

73. Which of the following events would be associated with an end-of-period adjustment?
a. The decision to start a second production shift.
b. The payment of salaries and wages.
c. The recording of depreciation on equipment.
d. The transfer of staff to another department.

74. Deferred revenues should be reported as

a. contributed capital on the balance sheet.
b. expenses on the income statement.
c. income on the income statement.
d. liabilities on the balance sheet.

75. Accrued revenues should be reported as

a. assets on the balance sheet.
b. expenses on the income statement.
c. liabilities on the balance sheet.
d. revenues on the income statement.

76. WIN.com sells one-year and two-year subscriptions for its electronic book-of-the month
download business. Subscriptions are collected in advance and credited to sales. An analysis
of the recorded sales activity revealed the following:

9
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

2018 2019
Sales P420,000 P500,000
Less: Cancellations 20,000 30,000
Net Sales P400,000 P470,000

Subscription Expirations:
2018 P120,000
2019 155,000 P130,000
2020 125,000 200,000
2021 140,000
P400,000 P470,000

In WIN.com Dec 31, 2019 balance sheet, the balance for unearned subscription revenues
should be
a. P470,000.
b. P465,000
c. P400,000
d. P340,000.

77. A deferred expense should be recorded when

a. an expense is incurred as cash is paid.
b. a non-cash resource is consumed after cash is paid.
c. a service is rendered before payment of cash.
d. cash is paid before an expense has been incurred.

78. An accrued expense should be recorded

a. by a buyer when a service is received on payment of cash.
b. by a seller when a service is rendered before payment of cash.
c. when an expense is incurred as cash is paid.
d. when an expense is incurred before cash is paid.

79. An analysis of Angelina Tagay Antiques unadjusted prepaid expense account at Dec. 31,
2019 revealed the following:

• An opening balance at P15,000 for Angelina Tagay'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 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 Angelina Tagay report as prepaid
expenses?
a. P52,000
b. P36,000
c. P20,000
d. P16,000

80. An accrued revenue should be recorded by a

a. buyer when a service is received on payment of cash.
b. seller when a customer pays for a service before the service is rendered
c. seller when a service is rendered before receipt of cash.
d. seller when a service is rendered on receipt of cash.

10
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

81. On Nov. 1, 2019, Alevir Pido Portraits paid P36,000 to renew its insurance policy for 3 years.
On Dec. 31, 2019, Alevir Pido's unadjusted trial balance showed a balance of P900 for prepaid
insurance and P44,100 for insurance expense. What amounts should be reported for prepaid
insurance and insurance expense in Alevir Pido’s Dec. 31, 2019 financial statements?
Prepaid Insurance Insurance Expense
a. P33,000 P12,000
b. P34,000 P12,000
c. P34,000 P11,000
d. P34,900 P10,100

82. An entity that pays employees every two weeks has paid workers P375,000 in Wage and
salaries for work completed during 2018. In addition, the employees earned one week's salary
of P7,200 at the end of December that will be paid as part of the P14,400 payroll at the end
of the first week of January in 2019. How much should the company report for salaries and
wages expense for 2018?
a. P367,800.
b. P375,000.
c. P389,400.
d. P382,200.

83. Deferred expenses should be reported as

a. assets on the balance sheet.
b. expenses on the income statement.
c. income on the income statement.
d. liabilities on the balance sheet.

84. Accrued expenses should be reported as

a. assets on the balance sheet.
b. expenses on the income statement.
c. liabilities on the balance sheet.
d. revenues on the income statement.

85. Roberto Orcajada Realty pays commissions to its sales staff at the rate of 3% of net sales.
Sales staff are not paid salaries but are given monthly advances of P15,000. Advances are
charged to commission expense, and reconciliations against commissions are prepared
quarterly. Net sales for the year ended Mar. 31, 2019 were P15,000,000. The unadjusted
balance in the commissions expense account on March 31, 2019 was P400,000. March
advances were paid on Apr. 3, 2019. In its income statement for the year ended Mar. 31,
2019, what amount should Roberto Orcajada report as commission expense?
a. P465,000
b. P450,000
c. P415,000
d. P400,000

86. At the beginning of 2018, an entity purchased a fire insurance policy covering a property for
a period of two years. The P5,600 cost of the policy was paid in cash. At the end of 2018, the
company will reduce Prepaid Insurance for this policy by
a. P0.
b. P467.
c. P5,600.
d. P2,800.

87. An end-of-period adjustment involves

a. a change in an account balance that is neither an accrual or a deferral.
b. a recognition of the extra cash flows related to the year-end delivery of goods and
services.

11
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

c. an adjustment that results in revenues or expenses being reported in a different time
period from the associated cash flows.
d. an exchange of resources between two departments in an organization.

88. A deferred revenue should be recorded by a

a. buyer when a service is received on payment of cash.
b. seller when a customer pays for a service before the service is rendered.
c. seller when a service is rendered before receipt of cash.
d. seller when a service is rendered on receipt of cash.

89. Based on 2019 sales of music recorded by an artist under a contract with Therese Indie Music,
the artist earned P200,000 after an adjustment of P16,000 for anticipated returns. In addition,
Therese paid the artist P150,000 in 2019 as a reasonable estimate of the amount recoverable
from future royalties to be earned by the artists. What amount should Therese report in its
2019 income statement as royalty expense?
a. P200,000
b. P216,000
c. P350,000
d. P366,000

90. How would the proceeds received from the advance sale of non-refundable tickets for a
theatrical performance be reported in the seller's financial statements before the
performance?
a. Revenue for the entire proceeds.
b. Revenue to the extent of related costs expended.
c. Unearned revenue for the entire proceeds.
d. Unearned revenue to the extent of related costs expended.

91. Under Maurice Sabio Vintage Clothing Services accounting system, all insurance premiums
paid are debited to prepaid insurance. For interim financial reports, Maurice Sabio makes
monthly estimated charges to insurance expenses with credits to prepaid insurance.
Additional information for the year ended Dec. 31, 2019 is as follows:

Prepaid insurance at Dec. 31, 2018 P110,000

Charges to insurance expense during 2019 (including a year- 437,500
end adjustment of P10,500)
Prepaid insurance at Dec. 31, 2019 120,500

What was the total amount of insurance premiums paid by Maurice Sabio during 2019?
a. P327,500
b. P427,000
c. P437,500
d. P448,000

92. Salaries and wages that are recorded as expenses at year end but remain unpaid are an
example of
a. a deferred expense.
b. a deferred revenue.
c. an accrued expense.
d. an accrued revenue.

93. An entity has P1,500 of supplies on hand at the end of 2018. During 2019, P2,750 of supplies
were purchased. A count of supplies on hand at the end of 2019 found an inventory of P875.
What was the amount of supplies expense for 2019?
a. P1,875.
b. P5,125.
c. P3,375.

12
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

d. P4,250.

94. Edgar Detoya Law must determine the Dec. 31, 2019 year-end accruals for advertising and
rent expenses. A P5,000 advertising bill was received Jan. 7, 2020. It related to cost of P3,750
for advertisements in Dec. 2019 issues and P1,250 Tor advertisements in Jan. 2020 issues
of the newspaper.

A store lease, effective Dec. 16, 2018 calls for fixed rent of P12,000 per month, payable one
month from the effective date and monthly thereafter. In addition, rent equal to 5% of net sales
over P3,000,000 per calendar year is payable on Jan. 31 of the following year. Net sales for
2019 were P5,500,000. In its Dec. 31, 2019 balance sheet, Edgar Detoya should report
accrued liabilities of
a. P125,000.
b. P128,750.
c. P131,000.
d. P134,750.

95. SuySan Real Estate owns an office building and leases the office under a variety of rental
agreements involving rent paid in advance monthly or annually. Not all tenants make timely
payments of their rent. SuySan's balance sheets contained the following data:

2018 2019
Rental Receivable P192,000 P248,000
Unearned Rentals 640,000 480,000

During 2019, Suysan received P1,600,000 from tenants. What amount of rental revenues
should Suysan record for 2019?
a. P1,816,000
b. P1,708,000
c. P1,440,000
d. P1,332,000

96. The purchase of a prepaid insurance policy would initially be recorded as

a. a deferred expense.
b. a deferred revenue.
c. an accrued expense.
d. an accrued revenue.

97. Which of the following transactions will not result in the recognition of an expense
a. A cash withdrawal by the owner.
b. Expiration of prepaid insurance.
c. Interest accrued on a bank loan.
d. Use of machinery during the period.

98. The accountant may spread the cost of a building over many years primarily because of the
a. fiscal year assumption.
b. going concern assumption.
c. periodicity assumption.
d. periodicity assumption and going concern assumption.

99. Which of the following accounts would probably need to be adjusted at year-end?
a. Land
b. Notes Payable
c. Supplies
d. Withdrawals

100. Which of the following is an example of an accrual?

13
 New Era University
COLLEGE OF ACCOUNTANCY
Bachelor of Science in Accountancy

Fundamentals of Accounting (ACCTG00-19)

a. Bookkeeping fees collected but not yet earned.
b. Equipment purchased for use in the business.
c. Interest earned but not yet received.
d. Six months' rent paid in advance.

101. Which of the following accounts would likely not need to be adjusted at year-end?
a. Land
b. Office Supplies
c. Prepaid Advertising
d. Unearned Revenues

102. Which of the following is an example of a deferral?

a. A commission collected in advance.
b. Interest earned on a bank account.
c. Interest expense incurred but not yet paid.
d. Medical fees earned but not yet collected.

14