Use the following information for the next two questions:

QUIZ On August 1, 20x1, an entity prepays one-year insurance for ₱240,000.

1. It is the basic storage of information in accounting.
a. Journal entry c. Debit or Credit 12. If the entity uses the asset method of initial recording, the 20x1 year-
b. T-account d. Account end adjusting journal entry will include
a. a credit to prepaid insurance for ₱140,000.
2. A trial balance b. a credit to insurance expense for ₱140,000.
a. proves that debits and credits are equal in the ledger. c. a credit to prepaid insurance for ₱100,000.
b. provides a listing of open accounts and their balances which are d. a debit to prepaid insurance for ₱140,000.
used in preparing financial statements.
c. is usually prepared three times in the accounting cycle. 13. If the entity uses the expense method of initial recording, the 20x1 year-
d. all of these. end adjusting journal entry will include
a. a debit to prepaid insurance for ₱140,000.
3. When an item of expense is paid and recorded in advance before it is b. a credit to insurance expense for ₱100,000.
incurred, it is normally called a(n) c. a debit to prepaid insurance for ₱100,000.
a. prepaid asset/expense. c. estimated expense. d. a debit to insurance expense for ₱140,000.
b. accrued expense. d. cash expense.
14. The inexperienced accountant of Raymel Co. prepared the following
4. An accounting record into which the essential facts and figures in closing entry on December 31, 20x1:
connection with all transactions are initially recorded is called the Dec. 31, Sales 1,800,00
a. ledger. c. trial balance. 20x1 Interest income 0
Unrealized gain – OCI 40,000
b. account. d. none of these. Accrued interest income 20,000
Dividend income 32,000
5. These are entries made at the end of the accounting period to update Cost of goods sold 16,000 680,000
certain amounts so that they reflect correct balances at the designated Prepaid insurance 18,000
time. Dividends 280,000
a. Correcting entries c. Reclassification entries Accrued interest expense 70,000
b. Adjusting entries d. Reversing entries Finance cost 50,000
Depreciation expense 60,000
Income summary 750,000
6. ABC Co. prepared its unadjusted trial balance and determined that the
totals of debits and credits do not equal. Further investigation revealed
Dec. 31, Income summary 750,000
the following: Retained earnings 750,000
20x1
● The debit posting for a cash sale was omitted. 6,000
● The balance of Inventory was listed as a credit 36,000 How much is the correct amount of “Income summary” to be closed to
instead of debit retained earnings? __________________________________
● The balance of Insurance expense was listed as 9,000
Rent expense 15. Reversing entries are
● Unearned interest income was listed as a debit 15,000 1. normally prepared for prepaid, accrued, and estimated items.
instead of credit 2. necessary to achieve a proper matching of revenue and expense.
3. desirable to exercise consistency and establish standardized
How much is the difference between the total debits and total credits in the procedures.
trial balance? ______________________ a. 1 c. 3
b. 2 d. 1 and 2
7. The credit total of a trial balance exceeds the debit total by ₱700. In
investigating the cause of the difference, the following errors were 16. When a buyer returns merchandise purchased for cash, the buyer may
determined: record the transaction using the following entry
(a) A credit to accounts receivable of ₱660 was not posted; a) debit Merchandise Inventory; credit Cash
(b) A ₱6,000 debit to be made to the Purchases account was debited to b) debit Cash; credit Merchandise Inventory
Accounts payable instead; c) debit Cash; credit Sales Returns and Allowances
(c) A ₱3,600 credit to be made to the Sales account was credited to the d) debit Sales Returns and Allowances; credit Cash
Accounts receivable account instead;
(d) The Interest payable account balance of ₱5,040 was included in the 17. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on
trial balance as ₱6,400. account to a customer for $15,000. The seller paid transportation costs
of $1,000 and issued a credit memorandum for $5,000 prior to
The reconciled balance from the given information is _________________ payment. What is the amount of the cash discount allowable?
_____________
Use the following information for the next four questions:
On January 1, 20x1, an entity collects a 3-year advance rent of ₱360,000. 18. A retailer purchases merchandise with a catalog list price of $10,000.
The retailer receives a 25% trade discount and credit terms of 2/10,
8. If the entity uses the liability method of initial recording, the 20x1 year- n/30. What amount should the retailer debit to the Merchandise
end adjusting journal entry will include Inventory account? ____________________________
a. a debit to rent income for ₱120,000.
b. a credit to unearned rent for ₱240,000. 19. A sales invoice included the following information: merchandise price,
c. a debit to unearned rent for ₱120,000. $4,000; transportation, $300; terms 1/10, n/eom, FOB shipping point.
d. a credit to rent income for ₱240,000. Assuming that a credit for merchandise returned of $600 is granted
prior to payment, that the transportation is prepaid by the seller, and
9. If the entity uses the income method of initial recording, the 20x1 year- that the invoice is paid within the discount period, what is the amount of
end adjusting journal entry includes cash received by the seller? _______________________
a. a debit to rent income for ₱240,000
b. a credit to unearned rent for ₱120,000 20. Merchandise with an invoice price of $4000 is purchased on June 2
c. a debit to unearned rent for ₱240,000 subject to terms of 2/10, n/30, FOB destination. Transportation costs
d. a credit to rent income for ₱120,000 paid by the seller totaled $150. What is the cost of the merchandise if
paid on June 12, assuming the discount is taken?
10. If the entity uses the income method of initial recording, how much is _____________________
the rent income for the year 20x1? ____________________________

11. If the entity uses the liability method of initial recording, how much is the “A wise man will hear and increase learning, and a man of understanding will
unearned rent as of December 31, 20x1? _______________________ attain wise counsel.” (Proverbs 1:5)
- END –
Answer Key

1. D
2. D
3. A
4. D
5. B

6. 48,000
7. 8,940
8. C
9. A
10. 120,000

11. 240,000
12. C
13. A
14. 1,066,000
15. C

16. B
17. 100
18. 7,500
19. 3,666
20. 3,920