Name: ___________________________________________________________________ Section :_____________________ Score:_______

Problem - I — Multiple Choice. Write the letter of your answer on the space provided. (20 points)
__1. A private organization which establishes broad accounting principles as well as specific accounting rules is the
a. Securities and Exchange Commission.
b. Internal Revenue Service.
c. Financial Accounting Standards Board.
d. Corporate Board of Directors.

__2. Taco Hut pays the current month’s rent in advance, P6000. This transaction
a. increases revenues by P6000.
b. increases assets by P6000.
c. decreases liabilities by P6000.
d. decreases stockholders’ equity by P6000.

__3. A corporation with total stockholders’ equity of P85,000 paid a P5,000 business debt. As a result of this transaction, total stockholders’
equity
a. did not change.
b. increased by P5,000.
c. decreased by P5,000.
d. increased to P90,000.

__4. The right side of an account is always

a. the debit side.
b. the credit side.
c. the balance of that account.
d. carried forward to the next accounting period.

__5. Posting is the process of

a. preparing a chart of accounts.
b. adding a column of figures.
c. transferring journal entries to ledger accounts.
d. recording entries in a journal.

__6. Warton Company depreciates its equipment at the rate of P500 per month. The January 31 entry to record depreciation expense would
include
a. a debit to Equipment for P500.
b. a credit to Retained Earnings for P500.
c. a credit to Accumulated Depreciation for P500.
d. a credit to Depreciation Expense for P500.

__7. Logan Company debited Prepaid Insurance for P960 on July 1, 2019 for a one-year fire insurance policy. If the company prepares monthly
financial statements, failure to make an adjusting entry on July 31 for the amount of insurance that has expired would cause
a. assets to be overstated by P960 and expenses to be understated by P960.
b. expenses to be overstated by P80 and assets to be understated by P80.
c. assets to be overstated by P80 and expenses to be understated by P80.
d. expenses to be overstated by P960 and assets to be understated by P960.

__8. Which of the following accounts is not closed at the end of the accounting period?
a. common stock
b. dividend expense
c. service revenue
d. insurance expense

__9. The second set of debit and credit columns on a work sheet is generally used for
a. closing entries.
b. the trial balance.
c. the balance sheet figures.
d. the adjustments.

__10. Worksheet is used to prepare the data for ___.

a. Trial Balance
b. Financial Adjustments
c. Financial Statements
d. Reconciliations
Problem - II — Adjusting Entries (20 points)
The following information for Nelsen Company is available on Dec 31, 2019, the end of accounting period. You are to prepare the necessary
adjusting journal entries for Nelsen Company for the month of June for each situation given. Appropriate adjusting entries had been recorded in
previous months. You may omit journal entry explanations.

1. Nelsen Company purchased a 2-year insurance policy on February 1, 2019 and debited Prepaid Insurance for P18,000.
2. On October 1, 2019, a tenant in an apartment building owned by Nelsen Company paid P57,000 which represents six months' rent in
advance. The amount received was credited to the Unearned Rent account.
3. On January 1, 2019, the balance in the Office Supplies account was P20,000. During June, office supplies costing P40,000 were
purchased. A physical count of office supplies at Dec 30 revealed that there was P12,000 still on hand.
4. On March 31, 2019, Nelsen Company purchased a delivery van for P420,000. It is estimated to have a useful life of 8 years with
salvage value of P20,000.
5. Nelsen Company has two employees who earn P700 and P800 per day, respectively. They are paid each Friday for a five-day work
week that begins each Monday. Assume that the last working day of December (Dec 31) falls on a Thursday.
6. The company have outstanding bonds payable amounting to P100,000 with 10% interest taken from Nov 1, 2019. No interest have
been paid as to date.
7. The company made an error in journalizing payment of Commission Expense amounting to 10,000 as Rent Expense.
8. Nelsen have been issued bill on his monthly utilities. He has not paid the monthly cost of P5,000 for months of November and
December.
9. Receivables from the customers have been estimated collectible at 95% rate. The outstanding balance of AR is currently P60,000. The
Allowance for Bad Debts have also a beginning balance of P2,000.
10. The company have acquired a new equipment by Dec 1, 2019 at a cost of P600,000. Estimated that it will be useful for 10 years and
the annual depreciation rate set by the company is 10% of its actual cost.

AJE Adjusting Journal Entries - Particulars (indent the Credit entry) Debit Credit
1

10

Problem III – Worksheet

Prepare the 10-column worksheet for the above adjustments in reference to the Unadjusted Trial Balance as of Dec 31, 2019.