CHAPTER 5

TRUE OR FALSE

1 T 11 T 21 F 31 T
2 T 12 F 22 F 32 T
3 F 13 T 23 T 33 F
4 F 14 F 24 F 34 F
5 T 15 F 25 F 35 T
6 T 16 T 26 T 36 T
7 T 17 F 27 F 37 F
8 T 18 T 28 F 38 T
9 T 19 F 29 T 39 T
10 F 20 F 30 T 40

MFULTIPLE CHOICE

1 B 11 A 21 B 31 B 41 D 51 BCAD 61 B 71 D 81 B 91 C
2 B 12 D 22 A 32 C 42 B 52 D 62 D 72 B 82 D 92 B
3 A 13 B 23 B 33 B 43 D 53 D 63 D 73 D 83 C 93 C
4 D 14 B 24 B 34 D 44 A 54 B 64 C 74 C 84 B 94 C
5 D 15 D 25 C 35 B 45 C 55 C 65 C 75 C 85 B 95 C
6 D 16 B 26 C 36 B 46 B 56 D 66 A 76 B 86 D 96
7 C 17 C 27 A 37 B 47 D 57 C 67 D 77 D 87 B 97
8 D 18 D 28 D 38 B 48 AB 58 D 68 B 78 B 88 C 98
9 C 19 A 29 D 39 C 49 A 59 DA 69 B 79 D 89 A 99
10 C 20 C 30 C 40 B 50 BA 60 C 70 D 80 C 90 A 100

STRAIGHT PROBLEMS

Problem 1:

Adjustments Debit Credit

A. Depreciation Dep. expense Accumulated Dep.

Doubtful account Allowance for

B. Doubtful account expense Doubtful account

C. Accrued expense Expense Payable

Receivable Income
D. Accrued income
 E. Deferrals
1. Prepaid expense
Asset method Expense Asset
Expense Method Asset Expense

2. Unearned revenues
Liability method Liability Income
Revenue method Income Liability

Problem 2:

Transactions Assets Liabil ity Capital Income Expense

1. Failure to record the
depreciation O O U
2. Failure to record the accrued
salary U O U
3. Failure to record the doubtful
account expense O O U
4. Failure to record unearned
rent revenue U O O
5. Failure to record prepaid rent U U O
6. Failure to record accrued
interest on bank deposit U U U
7. Failure to record expired rent O O U
8. Failure to record earned
service revenue O U U

Problem 3:

Supplies expense 1. Expired portion of supplies

Accrued Income 2. Income earned but not yet received
Unearned revenue 3. Advance collection of services to be provided
Accrued expense 4. Expenses paid but not yet paid
Depreciation 5. A decrease in value of a fixed asset
Unearned revenue 6. Income received but not yet earned
Accrued expense 7. Expenses incurred but not yet paid
Allowance for
doubtful account 8. Provision for doubtful account
Appreciation 9. An increase in value of fixed asset
10. Entries made at the end of the period to correct
Adjusting entries and update the records
Prepaid expense 11. Expense already paid but not yet incurred.
Prepaid expense 12. Insurance payments in advance
Accrued expense 13. Salaries earned by employees but nt yet paid
Unearned revenue 14. Subscription payment received in advance
Unearned revenue 15. Tuition fee received by University
Problem 4:
a. Interest Receivable
Interest Income 1,833
(100K x 2% x 11/12) 1,833

b. Rent expense 21,000

Prepaid Rent 21,000
(84K x 3/12)

c. Unearned rent income 14,000

Rent income 14,000
(42K x 4/12)

d Depreciation expense 28,417

Accumulated Depreciation 28,417
(260,000 - 12,000)/8 yrs x 11/12

e Insurance expense 9,450

Prepaid Insurance 9,450
(16,200 x 7/12)

f Interest expense 22,500

Interest payable 22,500
(250K x 12% x 9/12)

g Salaries expense 20,000

Salaries payable 20,000
(10,000 x 5 = 50,000 x 2/5)

h Doubtful accounts expense 5,000

Allowance for doubtful accounts 5,000
(100K x 5%)

i Interest Receivable 5,000

Interest income 5,000
(150,000 x 10% x 4/12)

j Advertising expense 2,400

Prepaid advertising 2,400
(12K x 1/5)

Problem 5:

a. Supplies expense 145,250

Supplies 145,250
(31,250 + 125,000 -11,000)

b. Utilities expense 14,000

Utilities payable 14,000
 c. Rent income 14,400
Unearned rent income 14,400
(18,000 x 4/5)

d Office supplies expense 1,000

Supplies 1,000

e Depreciation expense 17,067

Accumulated depreciation 17,067
(290,000 - 34,000)/10 yrs x 8/12

f Utilities expense 16,000

Utilities payable 16,000

g Doubtful accounts expense 6,000

Allowance for doubtful accounts 6,000
(120K x 5%)

h Interest Receivable 7,500

Interest income 7,500
(100K x 18% x 5/12)

i Insurance expense 8,250

Prepaid insurance 8,250
(9K x 11/12)

j Salaries expense 50,000

Salaries payable 50,000

Problem 6:
a. Insurance expense 5,133
Prepaid insurance 5,133
(8,800 x 7/12)

b Taxes expense 5,824

Prepaid taxes 5,824
(8,736 x 8/12)

c Supplies expense 13,880

Supplies 13,880
(17,160 - 3,280)

d Depreciation expense 28,000

Accumulated Depreciation 28,000
(580,000 - 20,000) /10 yrs x 6/12

e Unearned Commission 38,080

Commission 38,080
 (7/12 x 65,280)_

f Rent Income 25,600

Unearned Rent income 25,600
(38,400 x 4/6)

g Doubtful account expense 498,000

Allowance for doubtful account 498,000
(5M x 10% = 500K - 2K)

h Salaries expense 72,000

Salaries payable 72,000
(108,000 x 4/6)

i Interest Receivable 165

Interest Income 165
15K x 12% x 15/360 = 75
18K x 18% x 10/360 90

j Insurance expense 10,667

Prepaid Insurance 10,667
Fire 4,320 x 12/24 2,160
Accident 8,160 x 10/12 6,800
Car 3,120 x 7/36 607
Life 5280 x 5/24 1,100

Problem 7:
1 Professional fee 90,000
Unearned Professional fee 90,000
(120K x 9/12)

2 Insurance expense 7,000

Prepaid insurance 7,000
(36K x 7/36)

3 Depreciation expense 16,917

Accumulated Depreciation 16,917
(150K - 5K)/5 yrs x 7/12

4 Interest Receivable 3,000

Interest income 3,000
(50,000 x 18% x 4/12)

5 Salaries expense 45,000

Salaries payable 45,000
10 x 7,500 = 75,000 x 3/5

6 Depreciation expense 83,333

 Accumulated Depreciation 83,333
(1.2M /6 yrs x 5/12)

7 Interest expense 1,400

Interest payable 1,400
(20K x 12% x 7/12)

8 Doubtful account expense 2,000

Allowance for doubtful account 2,000
(100k x 2%)

9 Supplies 1,200
Supplies expense 1,200

Problem 8:

a. Supplies expense 14,520

Supplies 14,520
(17,500 - 2980)

b Prepaid insurance 4,500

Insurance expense 4,500
(10,800 x 5/12)

c Prepaid tax 5,824

Taxes expense 5,824
(17,472 x 4/12)

d Rent expense 17,500

Prepaid rent 17,500
(42,000 x 2.5/6)

e Advertising expense 4,032

Prepaid advertising 4,032
(7,488 x 28/52)

f Depreciation expense 3,600

Accumulated Depreciation 3,600
(64,000 - 10,000)/15

g Depreciation expense 9,000

Accumulated Depreciation 9,000
(160,000 - 16,000)/8 yrs x 6/12

h Interest expense 1,750

Interest payable 1,750
(100,000 x 7% x 3/12)
 i Interest Receivable 2,400
Interest income 2,400
(90K x 4% x 8/12) -

j Salaries expense 50,400

Salaries payable 50,400
(84,000 x 3/5)

Problem 9:
a. Interest Receivable 7,833
Interest income 7,833
500,000 x 12% x 47/360)

b Doubtful account expense 4,000

Allowance for doubtful account 4,000
(200k x 2%)

c Supplies expense 9,600

Supplies 9,600
(12K - 2.4K)

d Insurance expense 6,750

Prepaid insurance 6,750
(9K x 9/12)

e Depreciation expense 5,700

Accumulated depreciation 5,700
(60K - 3K)/5 x 6/12

f Depreciation expense 50,000

Accumulated depreciation 50,000
(1.2M /20 yrs x 10/12)

g Service fee 300,000

Unearned service fee 300,000
(480K x 5/8)

h Prepaid rent 16,000

Rent expense 16,000
(24K x 4/6)

Problem 10:

Royalties received 2,000,000

Add: Royalties receivable - 2031 850,000
Unearned royalties - 2030 600,000
Total 3,450,000
 Less: Royalties receivable - 2030 900,000
Unearned royalties - 2031 400,000 1,300,000
2,150,000

Problem 11:

a. Doubtful account expense 1,000

Allowance for doubtful account 1,000
(100K x 3% = 3,000 - 2K )

b Rent expense 50,000

Prepaid rent 50,000

c Depreciation expense 4,000

Accumulated Depreciation 4,000
(120,000/10 yrs x 4/12)

d Interest expense 10,000

Interest payable 10,000
(60,000 x 1/6)

e Supplies 200
Supplies expense 200

Problem 12:
Balance per book 990,000
Add: Radio advertising accrued on Dec. 31, 2030 50,000
Total 1,040,000
Less: Prepaid newspaper advertising 60,000
Advertising expense 980,000

Problem 13:
Prepaid royalties - Jan. 1, 2030 1,950,000
Add: Adjustments on Dec. 31, 2030 750,000
Prepaid royalties Dec. 31, 2030 2,700,000

Problem 14:
Prepaid insurance (80,000 x 6/12) 40,000
Prepaid rent 50,000
Total prepaid expenses - Dec. 31, 2030 90,000

Problem 15:
Royalties paid 3,000,000
Add: Prepaid royalties 2029 550,000
Royalties payable 2030 750,000
Total 4,300,000
 Less: Prepaid royalties 2030 450,000
Royalties payable 2029 800,000 1,250,000
Royalties expense 2030 3,050,000

Problem 16:

a. Allowance for doubtful accounts – 2030 (3% x 20M) = 600,000

b. Doubtful account expense:
Allowance for doubtful account - Dec. 31 2030 600,000
Add: Allowance for doubtful account - Jan. 1, 2030 160,000
Doubtful account expense 760,000

Problem 17:

a. Allowance for doubtful account

Doubtful account expense (28,900,000 - 500,000) x 2% 568,000
Less: Allowance for doubtful account - Jan. 1, 2030 64,000
Total Allowance for doubtful account - Dec. 31, 2030 504,000

b. Doubtful account expense (28,900,000 – 500,000) x 2% = 568,000

Problem 18:

December 1, 2029 - May 1, 2030 20,000,000

June 1, 20230 - November 30, 2030 17,000,000
December 1, 2030 - December 31, 2030 2,800,000
Total sales 39,800,000
x Royalty rate 20%
Royalty revenue 7,960,000
Less: Accrued royalty receivable on Dec. 31, 2029
pertaining to period Dec. 1, 2029 - Dec. 31, 2029 600,000
Total Royalty revenue for 20230 7,360,000

Problem 19:
54,000
Problem 20:
Answer
Insurance per book 72,000 + 3,000 – 70,000 = 5,000 insurance expense
Insurance paid Mar. 1, 2030 P72,000 – Insurance expired from Mar.1to Mar.31 P2,000 = Prepaid insurance
12/31 P70,000

Problem 21:
1,000,000
Problem 22:
20x1 20x2
Net income 5,000,000 4,000,000
Prepaid insurance
20x1 200,000 (200,000)
20x2 120,000
Accrued salaries
20x1 (150,000) 150,000
20x2 (60,000)
Unearned rental income
20x1 (100,000) 100,000
20x2 (80,000)
Accrued interest receivable
20x1 20,000 (20,000)
20x2 15,000
Total Net income 4,970,000 4,025,000