Chapter 5 p.246 1.) B. an expense that is incurred during an accounting period 2.) D.

a contra account on the balance sheet 3.) B. salaries that have been neither earned by employees nor paid 4.) D. contra asset, credit 5.) B. debit Depreciation Expense; credit Accumulated Depreciation 6.) D. 10,000 Annual Depreciation = (Cost salvage value) / useful life =(100000 10000) / 9 = 10,000 7.) D. owners capital 8.) C. 140,000 Net book Value = Cost of equipment Accumulated Depreciation = 200,000 60,000 = 140,000 9.) C. salaries expense being understated 10.) 11.) A. debit Prepaid Insurance, P600; credit Insurance Expense, P6oo B. debit Salaries Expense, P120,000; credit Salaries Payable, P120,000 200000 / 5 = 40000 x 3 = 120000 12.) C. a balance sheet account and an income statement account

13.) 14.) p.249

A. assets to be overstated. B. total expenses to be understated

1. A. Expiration of usefulness of equipment during the accounting period 2. B. Cost of employee salaries 3. D. Salaries Expense 4. B. Service rendered on credit 5. C. to produce liabilities 6. B. an expense 7. D. increase the assets for the company 8. A. the cost of the asset is allocated to an expense account 9. A. a revenue account will increase 10. C. during the slack season 11. A. The use of equipment 12. B. to make comparison meaningful 13. B. the cash basis of accounting 14. C. Recording advertising revenues at the time the cash payment is receive 15. A. Recording utilities expense when the monthly bill Is received 16. B. The purchase of a company vehicle 17. B. Recording depreciation 18. D. Land

19. B. the original cost minus accumulated depreciation 20. B. Interest Revenues and Unearned Revenues 21. D. Debit Store Supplies Expense, P2,200 and credit Store Supplies P2,200 Supplies Balance Supplies on hand 2,800 600 = 2,200 22. C. liabilities would be overstated 23. C. overstatement of owners equity 24. A. Debit Salaries Expense P3,000 and credit Salaries Payable P3,000 5,000 / 5 = 1000 x 3 = 3000 25. A. overstatement of profit for the period 26. D. both test that the ledger is still in balance after the accounts have been adjusted 27.) b. Depreciation Expense-Equipment 28.) C. all these errors will cause unequal trial balance totals Page 254 1.) c. after it has been earned, but not before. 2.) d. all of the above 3.) b. adjusting entries 4.) b. accrual and deferrals 5.) a. asset 6.) c. depreciation

7.) c. owners equity will be overstated 8.) a. a liability 9.) d. an unearned revenue 10.) a. a prepaid expense 11.) c. an accrued revenue 12.) c. an accrued revenue 13.) b. increase assets 14.) d. increase liabilities 15.) c. expense and liability 16.) a. asset and income 17.) d. Money has not been paid or received but the service has already been performed or rendered. 18.) Solution: (P16, 000 + P29, 000) P21, 000 b. P24, 000. 19.) d. debits salaries expense and credits salaries payable. 20.) a. debit unearned revenues and credit revenues for P19,000. 21.) a. balance sheet 22.) d. at least one real and one nominal account. 23.) d. recording the payment of salaries to employees 24.) d. reflecting unrecorded expenses incurred during the accounting period

Page 248 1.) b. a change in an account balance that is neither an accrual or a deferral. 2.) b. The recording of depreciation on equipment. 3.)Solution: (P2, 750 + P1, 500) P875 c. P3, 375. 4.) Solution: P5, 600 / 2 d. P2, 800. 5.) b. P375, 000. 6.) b. seller when a service is rendered before receipt of cash. 7.) c. when an expense is incurred before cash is paid. 8.) b. seller when a customer pays for a service before the service is rendered. 9.) d. cash is paid before an expense has been incurred. 10.) d. a deferred expense. 11.) d. an accrued expense. 12.) c. liabilities on the balance sheet. 13.) c. assets on the balance sheet. 14.) a. revenues on the income statement. 15.) d. liabilities on the balance sheet Page 261

1.) d. an investment in the business by the owner 2.) a. cash withdrawal by the owner 3.) b. owners equity 4.) b. going concern assumption 5.) a. supplies 6.) b. cash withdrawal by the owner 7.) d. Land 8.) a. a commission collected in advance 9.) c. interest earned but not yet received 10.) d. cash 11.) b. asset and a credit to a liability 12.) d. liability and a credit to a revenue 13.) d. Unearned Revenues and credit Service Revenues 14.) c. Interest Expense and a credit to Notes Payable 15.) b. understatement of owners equity 16.) b. overstatement of total liabilities 17.) c. debit to Supplies Expense 18.) b. credit to Prepaid Insurance for P3, 000 19.) a. credit to Accumulated Depreciation Office Equipment 20.) c. debit to Rent Expense for P10, 000 21.) d. credit to Service Revenues for P12, 500 22.) c. debit to Supplies Expense for P8, 000 23.) b. credit to Accumulated Depreciation Buildings for P50, 000 24.) b. credit to Prepaid Insurance for P5, 000

25.) d. debit to Interest Expense for P1, 000 26.) a. debit to Unearned Service Revenues for P27, 000 27.) a. P18, 700 Solution: P18 000 + P3 500 = P21 500 P21 500 P2 800 = P18 700 28.) d. P43, 500 Solution: P42 000 + P7 500 = P49 000 P49 500 P6000 = P43 000 29.) d. P5, 400 Solution: P11 400 + P3 000 = P14 400 P14 400 P9000 = P5 400 Page 267 1.) d. Unearned Revenue for entire proceeds 2.) c. Prepaid Insurance: P34, 900; Insurance Expense: P10,100 3.) b. P36,000 4.) 5.) b. P450, 000 6.) c. P350, 000 7.) a. P470, 000 8.) d. P448, 000 9.) c. P1, 440, 000