Mock Test for Fundamentals of Accounting (Adjusting Entries)

Prepared by: Tamayo, B.I.

Disclaimer: This mock test is provided solely for practice purposes. Students are advised to proceed at their own risk, as some questions have been sourced
online and may contain inaccuracies. This material does not reflect official exam content.

TEST I - Preparation of Adjusting Entries 5. As of December 31, the unadjusted balance of Accounts Receivable
1. On December 1, 2025, your company lent ₱60,000 at 6% annual and Allowance for Bad Debts is P35,000 and P2,400, respectively. The
interest. The note is due in 3 months. No interest has been recorded company makes it a policy to provide for bad debts on 15% of the
yet. Prepare the adjusting entry on December 31, 2025. outstanding accounts of customers.
​ A.​ Provide the adjusting entry at the end of the year.
a. Debit Cash ₱300; Credit Interest Revenue ₱300 B.​ Provide the net realizable value
b. Debit Interest Receivable ₱900; Credit Interest Revenue
₱900 SOLUTION: For Allowance for Bad Debts​
c. Debit Interest Receivable ₱300; Credit Interest Revenue ₱35,000 x 15% = ₱5,250 (ending balance) - ₱2,400 (starting balance) =
₱300 ₱2,850 (adjustment)
d. Debit Interest Expense ₱300; Credit Interest Payable ₱300
A. Adjusting Entry
SOLUTION: ₱60,000 x 6% x (1/12) = ₱300 accrued interest revenue​ Bad Debts Expense​ ​ ​ ₱2,850
​ Allowance for Bad Debts​ ​ ₱2,850
2. On October 1, 2025, the company received ₱24,000 in advance for a B. Net Realizable Value
12-month service contract. At year-end (December 31, 2025), what ₱35,000 (Accounts Receivable) - ₱5,250 (End. Allowance for Doubtful
would be the adjusting entry? Accounts) = ₱29,750 ← Net realizable value
​
a. Debit Unearned Revenue ₱24,000; Credit Service Revenue 6. There are two notes payable. The two-month note for P15,000 signed
₱24,000 on November 1 of the current year carries interest at 12% per annum.
b. Debit Service Revenue ₱6,000; Credit Unearned Revenue The eight-month note for P15,000 dated May 1 of the current carries
₱6,000 interest at 14% per annum. Interest is payable at the time of maturity of
c. Debit Unearned Revenue ₱6,000; Credit Service Revenue the notes.
₱6,000
d. Debit Cash ₱6,000; Credit Service Revenue ₱6,000 A.​ Provide the adjusting entry at the end of the year

SOLUTION: ₱24,000 ÷ 12 = ₱2,000 per month x 3 months = ₱6,000​ SOLUTION:

2
Note 1: ₱15,000 x 12% x 12
= ₱300
8
3. Notes Receivable has a debit of P65,000 at December 31. The two Note 1: ₱15,000 x 14% x 12
= ₱1,400
notes on hand, both of which were accepted at face value, are as A. Adjusting Entry
follows: Interest Expense​ ​ ₱1,700
​ Interest Payable​ ​ ₱1,700

Date Face Value Term Interest Rate 7. Employees are paid every Friday for a five-day workweek. Total
weekly salaries are ₱75,000. December 31 falls on a Tuesday.
June 10 P20,000 210 days 8%
a. Debit Accrued Salaries Expense, 30,000; Credit Salaries
Nov 25 P45,000 120 days 10% Payable, 30,000
b. Debit Salaries Expense, 30,000; Credit Salaries Payable,
30,000
A.​ Provide the adjusting entry at the end of the year c. Debit Salaries Expense, 45,000; Credit Salaries Payable, 45,000
d. Debit Salaries Expense, 60,000; Credit Salaries Payable, 60,000
SOLUTION:
200
Note 1: ₱20,000 x 8% x 360
= ₱888.89 ← (June 11 to 30 = 20 days + 6 months (180 days)​ SOLUTION: ₱75,000 ÷ 5 = ₱15,000 x 2 months (Monday & Tuesday
35
Note 2: ₱45,000 x 10% x 360 = ₱437.50 accrued) = ₱30,000 ← Salaries Expense & Salaries Payable

ADJUSTING ENTRY: 8. On December 31 of the current year, the Office Equipment Account
Interest Receivable​ ​ ₱1,326.39 showed a total of P350,000, which consists of the following:
​ Interest Income​ ​ ₱1,326.39 ●​ Equipment 1 costing P255,000 (acquired July of the previous
year with an estimated useful life of four years with a
P55,000 residual value).
4. Notes Receivable has a debit of P100,000 at December 31. The two notes ●​ Equipment 2 costing P95,000 (acquired in July of the current
on hand, both of which were accepted at face value, are as follows: year with an estimated useful life of 5 years, no residual
value.

Date Face Value Term Interest Rate

A.​ Provide the adjusting entry at the end of the year
B.​ Compute the net book value of each equipment
July 16 P35,000 60 days 6%
SOLUTION:
Dec 21 P65,000 90 days 7% Equipment 1:
255,000 − 55,000
=
200,000
= ₱50,000
4 4
95,000 6
Equipment 2: 5
× 12 = ₱9,500 ← (Owned for only 6 months this year)
A.​ Provide the adjusting entry at the end of the year
A. Adjusting Entry
SOLUTION: Depreciation Expense​ ​ ​ ₱59,500
Note 1: no adjustment (July 16, matures before December 31)​ ​ Accumulated Depreciation - Equipment​ ​ ₱59,500
10
Note 2: ₱65,000 x 7% x 360
= ₱126.39 B. Net Book Value
Equipment 1: ₱255,000 - ₱50,000 - ₱25,000 = ₱180,000
ADJUSTING ENTRY: Owned since July 15 of the previous year →
Interest Receivable​ ​ ₱126.39 ½ year depreciation (previous year): 50,000 × 6/12 = ₱25,000
​ Interest Income​ ​ ₱126.39 Equipment 2: ₱95,000 - ₱9,500 = ₱85,500
9. As of December 31, the company’s Accounts Receivable has an TEST II - SOLUTION
unadjusted balance of ₱120,000, and the Allowance for Doubtful
Accounts has a debit balance of ₱1,200 before adjustment.
●​ Management estimates that 5% of Accounts Receivable will
be uncollectible.
●​ Question: What is the adjusting entry to record Bad Debt
Expense on December 31? Supplies Expense = ₱66,200

a. Debit Bad Debt Expense ₱6,000; Credit Allowance for

Doubtful Accounts ₱6,000
b. Debit Allowance for Doubtful Accounts ₱6,000; Credit Bad
Debt Expense
c. Debit Bad Debt Expense ₱7,200; Credit Allowance for Rent Expense = ₱813,250
Doubtful Accounts ₱7,200
d. Debit Bad Debt Expense ₱4,800; Credit Allowance for
Doubtful Accounts ₱4,800

SOLUTION: ₱120,000 x 5% = ₱6,000 + ₱1,200 = ₱7,200

EXPLANATION: Service Revenues = ₱1,575,700
➔​ The Allowance for Doubtful Accounts currently has a ₱1,200
debit balance (before adjustment). TEST III - Adjusted Trial Balance
➔​ Since the account should have a ₱6,000 credit balance after
adjustment, the company must record enough Bad Debt
Expense to eliminate the debit and establish the required
credit balance.
➔​ Therefore, the amount of adjustment is: ₱6,000 (desired
credit balance) + ₱1,200 (existing debit balance) = ₱7,200

10. Unearned Service Revenue had a balance of ₱9,000 at the end of

April and ₱6,500 at the end of May. Service Revenue earned during
May amounted to ₱58,000.

A.​ Compute the total amount of cash received from customers

for services during May.
REQUIRED: Determine the original Journal entries and the following:
SOLUTION:
1.​ The monthly rent expense.
2.​ The original cost of the 12-month property insurance policy
3.​ The age of the building in months
4.​ How many P25 vouchers for future hotel accommodations
were sold to the travel agency on June 1?

SOLUTION
1. Monthly Rent Expense
8,400
ANSWER: Cash Received: P55,500 7 𝑚𝑜𝑛𝑡ℎ𝑠
= ₱1,200 ← monthly rent expense
11. Given that depreciation is the decrease in the value of a fixed asset Original Journal Entry:
over a period of time, what is the residual value left available to be Prepaid Rent ​ ​ ₱9,600
sold? ​ Cash​ ​ ​ ₱9,600
Explanation: ₱1,200 (monthly expense) x 8 months prepayment = ₱9,600
a.​ Refund Value​ ​ ​
b.​ Replacement Value 2. The original cost of the 12-month property insurance policy
2,100
c.​ Salvage Value​ ​ ​ 7 𝑚𝑜𝑛𝑡ℎ𝑠
= ₱300 x 5 months = ₱1,500 + ₱2,100 = ₱3,600 ← original cost
d.​ Resale Value Explanation:
➔​ 7 months is the unused portion (June 30 - Feb. 31)
EXPLANATION: Salvage value means the same as the residual value ➔​ 5 months is the used portion (Feb. 1 purchased -> June 30)
Original Journal Entry:
TEST II - Analysis of Accounts Prepaid/Unexpired Insurance​ ​ ₱3,600
The adjusted Trial balances of Makaveli Records as of December 31, 2025, ​ Cash​ ​ ​ ​ ₱3,600
and November 30, 2025, include these amounts:
3. The age of the building in months
78.500
Nov. 30, 2025 Dec. 31, 2025 20 𝑦𝑒𝑎𝑟𝑠
= ₱3,925 ← yearly depreciation expense
15,700
Supplies P11,000 P20,000 3,925
= 4 years or 48 months ← Age of building in months
Explanation:
Rent Payable 34,700 55,450 ➔​ Since ₱3,925 is the yearly depreciation amount, we divide it to
the given ₱15,700 to know how many years has the building
Unearned Service Revenues 129,600 154,600 been used.

Original Journal Entry:

Analysis of accounts revealed these transactions for December:
Building ​ ​ ₱78,500
​ Cash​ ​ ₱78,500
Supplies purchased P75,200 4. How many P25 vouchers for future hotel accommodations were sold to
the travel agency on June 1?
Rent Payable 834,000 ₱25 x 125 = ₱3,125
1,025
25
= 41
Cash received in advance for service revenues 1,600,700 125 + 41 = 166 tickets ← Amount of P25 vouchers

A.​ Compute the amount of Supplies Expense, Rent Expense, Original Journal Entry:
and Service Revenues to be reported on the December 31, Cash​ ​ ​ ₱4,150
​ Unearned Revenue​ ​ ₱4,150
2025, income statement.