FDNACCT

AY 2022-24 Term 1
Quiz #3
SET C
TEST I. TRUE OR FALSE

1. Adjusting entries are made to update certain accounts so that they reflect correct balances as of
the designated time.
TRUE

2. The primary accounting principle supporting the use of the allowance for doubtful accounts is the
cost principle.
FALSE
The primary accounting principles supporting the use of the allowance for doubtful are matching
and conservatism.

3. The adjusting entry for doubtful accounts will increase the total expenses and decrease the total
assets of the company.
TRUE

4. Depreciation is the gradual decrease in value, not the cost, of a non-current asset.
TRUE

5. Before adjustments for the ending merchandise inventory, cost of sales is overstated, and assets
are understated.
TRUE

6. Accrued revenues are amounts that have been received but not yet entered in the accounting
records.
FALSE
Accrued revenues are income earned but not yet collected.

7. An expense – liability relationship exists with accrued expense adjusting entries.

TRUE

8. Adjusting entry for either accrued or prepaid expenses will increase the total expense.
TRUE

9. Failure to adjust a prepayment recorded under the asset method causes total assets and total
expenses to be overstated.
FALSE
Total expenses will be understated.

10. The balance of unearned revenue after adjustments will be zero if all advance payments were
collected during the period.
FALSE
The balance of unearned revenue after adjustments will be zero if all advance payments were
earned during the period.

TEST II. MULTIPLE CHOICE THEORY

1. Adjusting entries are required

A. every time financial statements are prepared.
B. yearly.
C. quarterly.
D. monthly.

2. The procedure that most nearly attains the objective of matching revenues and expenses to
specific accounting periods
A. Deferral basis of accounting
B. Accrual basis of accounting
C. Cash basis of accounting
D. Double-entry accounting
3. Following periodic inventory system, the account debited when providing adjusting entry to record
unsold goods at the end of the period is
A. Merchandise Inventory
B. Income Summary
C. Cost of Sales
D. Purchases

4. Accrued interest income is presented as

A. Other operating income in the Statement of Profit or Loss
B. Operating expense in the Statement of Profit or Loss
C. Current liability in the Statement of Financial Position
D. Current asset in the Statement of Financial Position

5. Failure to adjust for the accrued expense at the end of the period would result in
A. Understated profit and understated liabilities
B. Overstated profit and understated liabilities
C. Understated profit and overstated liabilities
D. Overstated profit and overstated liabilities

6. Under the asset method of recording prepayments of expense items, the portion of the prepaid rent
that have expired will be credited to
A. Prepaid Rent Expense
B. Accrued Expense
C. Income Summary
D. Rent Expense

7. An adjustment for unearned income includes

A. a debit to an unearned income account and a credit to an expense account
B. a debit to an unearned income account and a credit to an income account
C. a debit to an income account and a credit to an unearned income account
D. a debit to an prepaid expense account and a credit to an income account

8. The following are contra-accounts EXCEPT

A. Purchase Returns and Allowances
B. Allowance for Doubtful Accounts
C. Accumulated Depreciation
D. Depreciation

9. The following data are considered in the computation of the depreciation of property and equipment
EXCEPT
A. Estimated scrap value
B. Estimated useful life
C. Appraised value
D. Original cost

10. At the end of accounting period, FDN Trading debited Doubtful Accounts Expense and credited
Allowance for Doubtful Accounts. The purpose of this entry is to:
A. Determine the provision for estimated uncollectible accounts
B. Determine the net carrying amount of Accounts Receivable
C. Decrease the Allowance for Doubtful Accounts
D. Decrease the Doubtful Accounts Expense

TEST III. PROBLEM SOLVING

1. Given the following information from FDN Trading, how much should be debited to Merchandise
Inventory to adjust for the amount of Merchandise Inventory at the end of the accounting
period?
Beginning Inventory ₱105,000
Physical count of ending office supplies ₱50,000
Physical count of ending merchandise ₱45,000

2. On December 1, 2022, FDN Trading received a 90-day 15% note for ₱30,000 from a customer for
merchandise sold. How much is the amount of interest earned for the period ended December
31, 2022?
3. FDN Trading pays weekly wages every Friday for a five-day week period based on the actual hours
worked, including overtime pays. The following salary computation was provided for Week 44:

Date Daily Wages Computation

Monday, October 30, 2023 ₱ 14,200
Tuesday, October 31, 2023 15,000
Wednesday, November 1, 2023 11,500
Thursday, November 2, 2023 14,200
Friday, November 3, 2023 11,000
Total Wages – Week 44 ₱ 65,900 _

How much is the Accrued Wages Expense recognized as of month-ended October 31, 2023?

4. The beginning balance of the Supplies account for FDN is ₱2,600. During the year, additional
supplies were purchased for ₱8,700 and were recorded using asset method. At the end of the
accounting period, a physical inventory count indicates ₱1,500 of supplies on hand. How much is
the amount of Supplies Expense reported on the Statement of Profit or Loss?

5. To increase the business exposure of FDN Trading in the market, the company paid the following
advertising costs during the year:

Production of flyers ₱ 4,700

Creation of business jingle 20,000
Prepaid radio advertising that will run the jingle 70,700
Total ₱ 95,400

The company accounts prepaid expenses using Asset Method. As of December 31, 2022,
40% of the radio ads have been released. How much is the balance of Prepaid Advertising
Expense on December 31, 2022?

6. Starting August 1, 2022, FDN Trading decided to rent out one delivery van to another merchandising
business. FDN Trading received an advance six months rental fee on August 1, 2022 for ₱360,000
and the same amount was credited to Unearned Rent Income. For the period ended December
31, 2022, how much should FDN Trading report as Rental Income from this transaction?

7. Faith D. Nakpil Accounting Services (FDNACCT) provides bookkeeping services to its clients on
yearly contractual basis. Full-year payment amounting ₱240,000 is collected upon inception of the
services for each client.

For the year 2022, FDNACCT has secured contract agreement with 2 clients and have collected
the advance payment accordingly. The following are the inception dates of the services made to the
following clients, (1) August 1, 2022 and (2) December 1, 2022.

How much is the balance of Unearned Income on December 31, 2022?

For the next two items, use the following information:

On September 1, 2023, FDN Trading acquired furniture amounting to ₱30,000 in cash. Its estimated
useful life is 5 years with a salvage value of ₱3,000. Financial statements of FDN Trading are
prepared monthly.

8. How much Depreciation Expense should be recorded for the month ended October 31, 2023?

9. How much would be the Accumulated Depreciation as of December 31, 2024?

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10. FDN Trading owns a delivery equipment costing ₱1,500,000 which was acquired last February 1,
2022. This equipment has an estimated useful life of 5 years and a depreciable cost equivalent to
90% of its purchase price. On December 31, 2022, how much should FDN Trading report as
the net carrying amount of this delivery equipment?

11. Before any period-end adjustments, FDN Trading has the following information.

Accounts Receivable, Dec 31 ₱478,000

Allowance for Doubtful Accounts, Dec 31 ₱ 3,500
(before any necessary year-end adjustments)

The aging of receivable is shown below:

Days Past Due Receivable Balance % Uncollectible

Not Past Due ₱288,000 0%
0 – 60 87,500 1%
61 -120 50,000 3%
Over 120 52,500 8%
Total Accounts Receivable, Dec 31 ₱478,000

How much is the Doubtful Accounts Expense for the period ended December 31, 2022?

12. The outstanding Account Receivable as of December 31, 2022 totaled ₱757,600 while the
Allowance for Doubtful Accounts amounted to ₱8,105 before adjusting entries. It is a company
policy of FDN Trading to increase its allowance to 3% of the total outstanding account receivable
every year. How much is the Net Realizable Value of the Account Receivable on December
31, 2022?