NAME: DOMUGHO, Danica S.
COURSE: BSA-2
FINANCIAL ACCOUNTING AND REPORTING
Exercise 1
Prepare the adjusting entry for each of the following for year ended December 31, 2010.
1. Paid Trio Insurance Co. P 33,000 one year car insurance to commence August 1, 2010. The
amount of premium was debited to Prepaid Insurance.
2. Borrowed P 200,000 from Metro Bank issuing a one-year note with 12% annual interest on
April 30, 2010.
3. Bought P 20,000 equipment with five-year estimated life and a salvage value of P 2,000.
Depreciation is computed on a straight line basis.
4. Received P 51,000 cash advance from a customer for one year services to be rendered starting
June 30, 2010. The amount was credited to Unearned Service Income.
5. Purchased P 7,100 supplies at the beginning of the year. Supplies remaining at the end of the
year amounted to P 2,900. Use the asset method.
6. Accounts receivable has a balance of P 130,000. It is estimated that P 5,000 of this is
uncollectible.
ANSWERS ARE GIVEN BELOW:
Date Explanation PR Debit Credit
2010
1 Insurance Expense ₱ 13,750
Prepaid Insurance ₱ 13,750
To record expired insurance
2 Interest Expense ₱16,000
Accrued Interest Payable ₱ 16,000
To record unpaid accrued interest
3 Depreciation Expense ₱ 3,600
Accumulated Depreciation ₱ 3,600
To record depreciation of equipment
Cost ₱ 20,000
Less: Salvage Value ₱ 2,000
Depreciable cost ₱ 18,000
Divided by: Estimated Useful Life 5 years
Annual Depreciation ₱ 3,600
4 Unearned Service Income ₱25,500
Service Income ₱ 25,500
To record service earned
5 Supplies Expense ₱ 4,200
Supplies ₱ 4,200
To record supplies used for the year
6 Bad Debts Expense ₱ 5,000
Allowance for Bad Debts ₱ 5,000
To record provision for bad debts
Exercise 2
Prepare the adjusting entry for each of the following for year ended December 31, 2010.
1. Received P 63,000 cash advance from a customer for one year services to be rendered starting
June 1, 2010. The amount was credited to Unearned Service Income.
2. Paid one year rent in the amount of P 180,000 to commence August 31, 2010. The amount of
premium was debited to Prepaid Rent
3. Purchased P 5,900 supplies at the beginning of the year. Supplies used for the year amounted
to P 1,750. Use the Asset Method.
4. Received an 18% P 120,000 note on May 1, 2010. Interest will be paid together with the
principal on maturity date.
5. Bought P 42,000 equipment with five-year estimated life and a salvage value of P 3,000.
Depreciation is computed on a straight line basis.
6. Accounts receivable has a balance of P 50,000. It is estimated that 5% of this is uncollectible.
Allowance for Bad Debt has a balance of P 1,500.
2010
1 Unearned Service Income 36,750
Service Income 36,750
(P 63,000 x 7/12 = P 36,750)
2 Rent Expense 60,000
Prepaid Rent 60,000
(P 180,000 x 4/12 = P 60,000)
3 Supplies Expense 1,750
Supplies 1,750
4 Interest Receivable 14,400
Interst Income 14,400
(P 120,000 x .18 x 8/12 = P 14,400)
5 Depreciation Expense 7,800
Accumulared Depreciation 7,800
Less: Salvage Value 3,000
Depreciable cost 39,000
Annual Depreciation 7,800
6 Bad Debts Expense Allowance 1,000
Allowance for Bad Debts 1,000
Required Allowance
P 50,000 x .05 P 2,500
Less: Credit balance of Allowance 1,500
Bad Debts Expense for the year P 1,000
Exercise 1
L. Ching Company presented the following information pertaining to accounts to be adjusted.
1. On September 30, L. Ching Co. paid 6 months insurance premium P 21,000. (Use Asset
Method)
2. Office Supplies account shows a balance of P 10,000 at the beginning of the year. A count of
office supplies at the end of the year amounted to P 3,800.
3. On December 1, L. Ching Co. received P 39,000 for services to be rendered for the next 3
months starting on December 1. This was credited to Unearned Service Income.
4. L. Ching Co. acquired office equipment on January 1, 2010 worth P 40,000. The equipment is
expected to be used for 5 years after which it is expected to be worthless.
5. Estimated doubtful accounts for the year is P 4,000. Allowance for Doubtful accounts has a
balance of P 1,000.
6. On December 31, accrued salaries amounted to P 27,000. This will be paid on January 5, 2011.
Solution:
2010
1 Insurance Expense 10,500
Prepaid Insurance 10,500
(P 21,000/6 x 3 = P 10,500)
2 Supplies Expense 6,200
Supplies 6,200
(P 10,000 - 3,800 = P 6,200)
3 Unearned Service Income 13,000
Service Income 13,000
(P 39,000/3 x 1 = P 13,000)
4 Depreciation Expense 8,000
Accumulated Depreciation 8,000
Cost 40,000
Less: Salvage Value 0
Depreciable cost 40,000
Annual Depreciation 8,000
5 Doubtful Accounts Expense 3,000
Allowance for Doubtful Accounts 3,000
Esitmated Doubtful Accounts 4,000
Less: Credit Balance of Doubtful Accounts 1,000
Doubtful Accounts Expense 3,000
6 Salaries Expense 27,000
Salaries Payable 27,000
Exercise 2
Flora Company presented the following information pertaining to accounts to be adjusted.
1. On July 30, Flora Co. paid 6 months rent, P 48,000.This was debited to Prepaid Rent.
2. Office Supplies account shows a balance of P 13,000 on Jan. 1, 2010. A count of office
supplies on Dec. 31 showed supplies balance of P 4,200.
3. On November 1, Flora Co. received P 54,000 for services to be rendered for the next 3 months
starting November 1. This was credited to Unearned Service Income.
4. Flora Co. acquired office equipment on January 1 , 2010 for P 60,000. The equipment is
expected to be used for 6 years after which it is expected to be worthless.
5. Estimate doubtful accounts for the year is P 1,500.
6. On December 31, received utility bill for the month in the amount of P 5,600. This will be paid
on January 3, 2011.
Solutions:
2010
1 Rent Expense 40,000
Prepaid Rent 40,000
(P 48,000/6 x 5 = P 40,000)
2 Supplies Expense 8,800
Supplies 8,800
(P 13,000 - 4,200 = P 8,800)
3 Unearned Service Income 36,000
Service Income 36,000
(P 54,000/3 x 2 = P 36,000)
4 Depreciation Expense 10,000
Accumulated Depreciation 10,000
Cost 60,000
Less: Salvage Value 0
Depreciable cost 60,000
Annual Depreciation 10,000
5 Bad Debts Expense 1,500
Allowance for Bad Debts 1,500
6 Utilities Expense 5,600
Utilities Payable 5,600
Assignment 1
Presented is the year-end unadjusted trial balance of Look New Repair Shop
Look New Repair Shop
Trial balance
December 31, 2016
Cash P 50,000
Accounts Receivable 59,000
Prepaid Rent 78,000
Equipment 127,000
Accumulated Depreciation-Equipment P 25,000
Accounts Payable 66,000
L, Capital 100,000
L, Withdrawal 50,000
Repair Income 320,000
Rent Expense 75,000
Salaries Expense 45,000
Utilities Expense 27,000
P 511,000 P 511,000
Year-end adjustments:
a) Rent Expense for the year is P 28,000.
b) Depreciation Expense for Equipment is P 25,000.
c) Allowance for Bad Debts is P 3,000.
Look New Repair Shop
Worksheet
For Year Ended December 31, 2010
No. Account Title Trial Balance Adjustments Adjusted Trial Income Statement Balance Sheet
Balance
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
110 Cash P 50,00 P 50,00 P 50,00
0 0 0
120 Accounts Receivable 59,000 59,000 59,000
130 Prepaid Rent 78,000 1) 28,00 50,000 50,000
0
140 Equipment 127,000 127,000 127,000
150 Accumulated P 25,00 2) 25,00 P 50,00 P 50,00
Depreciation 0 0 0 0
210 Accounts Payable 66,000 66,000 66,000
280 L, Capital 100,000 100,000 100,000
290 L, Drawing 50,000 50,000 50,000
310 Repair Income 320,000 320,000 P 320,00
0
410 Rent Expense 75,000 75,000 P 75,00
0
420 Salaries Expense 45,000 45,000 45,000
430 Utilities Expense 27,000 27,000 27,000
Totals P 511,00 P 511,00
0 0
Rent Expense 1) 28,00 28,000 28,000
0
Depreciation Expense 2) 25,00 25,000 25,000
0
Bad Debts Expense 3) 3,00 3,000 3,000
0
Allowance for Bad 3) 3,00 3,000 3,000
Debts 0
P 56,00 P 56,00 P 539,00 P 539,00 P 203,00 P 320,00 P 336,00 P 219,00
0 0 0 0 0 0 0 0
Net Income 117,000 117,000
P 320,00 P 320,00 P 336,00 P 336,00
0 0 0 0
