Problem 1: At year end, unrecorded interest expense due to creditors was Rs.

4,000 (payable in the next

year). Prepare the adjusting entry at year end (12/31):

Problem 2: Prepaid Insurance account began the year with a balance of Rs. 230. During the year,
insurance in the amount of Rs. 570 was purchased. At the end of the year March 31st, 2009 the amount
of insurance still unexpired was Rs. 350. Prepare the year end adjusting entry:

Problem 3: Wages are paid every Saturday for a five-day work week (Mon – Fri; two days are unpaid and
free). Wages are Rs. 2,000 per week. Prepare the adjusting entry on June 30, assuming July 1 falls on a
Wednesday:

Problem 4: At year end, unrecorded interest receivable from the Government bonds is Rs. 1,700.
Prepare the adjusting entry:

Problem 5: On July 3, a deposit in the amount of Rs. 5,000 was received for services to be performed. By
the end of the month, services in the amount of Rs. 1,200 were performed. Prepare journal entries for
the original receipt of the deposit and the adjusting entry on 31st July:

Problem 6: On October 4, Smith Company rendered services valued at Rs. 11,000. The client will pay for
the services November 1 and closing are done at the end of each month pass this transaction at the end
of period:

Problem 7: The Supplies asset account began the year with a balance of Rs. 190. During the year,
supplies in the amount of Rs. 490 were purchased. At the end of the year the inventory of supplies on
hand was Rs. 220. Prepare the year end adjusting entry:

Problem 8: The depreciation expense on office equipment for the month of March is Rs. 50. This is the
second month that the office Equipment, which cost Rs. 950, has been owned. Prepare the adjusting
entry for March and show the adjustment using written down method (WDM) for depreciation
recording.

Problem 9: Bad Debts during the year were Rs.  1,500. Pass journal entry by using direct write off
method for bad debt treatment.

Problem 10: During the year 2000, XYZ Company identified Rs. 16,000 of uncollectible Accounts
receivable and wrote them off.  Prepare the journal entry for XYZ Company to write off Rs. 16,000 of
uncollectible Accounts receivable.

Problem 11: Prepare the journal entry for XYZ Company to estimates Rs. 17,000 of Bad debt expense for
the year 2017 by using allowance method for bad debt treatment.

Problem 12: Prepare the journal entries for ABC Company to record cash collections was Rs. 900 that
represented collections of Accounts receivable that had previously been written off.

Problem 13: Company reports the following financial information before adjustments:

Dr. Cr.
Accounts Receivable 100,000
Allowance for Doubtful Accounts 2,000
Sales (all on credit) 900,000

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 Sales Return and Discount 50,000
Prepare the journal entry to record estimated Bad Debt Expense assuming the company estimates bad
debts at (a) 1% of net sales and (b) 5% of net accounts receivable.

Problem 14: Prepare adjusting journal entries for the year ended December 31, 2010, for each of these
separate situations. Assume that prepaid expenses are initially recorded in asset accounts. Also assume
that fees collected in advance of work are initially recorded as liabilities:

a. Depreciation on the company’s machinery is computed to be Rs.16,000 by cost method.

b. The prepaid Insurance account had a Rs. 9,000 debit balance at December 31, 2010, before
adjusting for the costs of any expired coverage. An analysis of the company’s insurance policies
showed that Rs. 3,000 of unexpired insurance coverage remains.
c. The office supplies account had Rs. 600 debit balance on January 1, 2010; and Rs. 2,600 of the
supplies was purchased during the year. The December 31, 2010, physical count showed Rs. 500
of the supplies available.
d. One half of the work related to Rs. 10,000 received in advance was performed during the
period.
e. Interest expenses of Rs.3,500 have been incurred but are not paid as of December 31, 2010.
f. On December 31, of the current year, a company’s unadjusted trial balance revealed the
following: Accounts receivable of Rs. 185,600; and Allowance for Doubtful Accounts of Rs. 1,600
(credit balance). Prepare the adjusting journal entry to record the estimate for bad debts,
assuming 6% of the accounts receivable balance is assumed to be uncollectible.

Problem 15: The following information is available as a source for preparing adjusting entries at
December 31, 2016 for the AR Khan Country Club:

a. Salaries earned by club’s employees that have not yet been recorded or paid amount to Rs.
17,500.
b. Depreciation of the country club’s equipment is based on an estimated life of 10 years by WDM. 
The equipment had originally been purchased for Rs. 180,000.  The straight-line method is used.
c. A 12-month bank loan in the amount of Rs. 50,000 had been obtained by the country club on
October 1.  Interest is computed at an annual rate of 12%.  The entire Rs. 50,000, plus all of the
interest accrued over the 12-month life of the loan, is due in full on September 30 of the
upcoming year.  The necessary adjusting entry was made on November 30 to record the first
two months of accrued interest expense.  However, no adjustment has been made to record
interest expense accrued in December.
d. Unrecorded Income Taxes Expense accrued in December amounts to Rs. 1,700.  This amount will
not be paid until January 15.

Depreciation

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Problem 1

Unadjusted Trial Balance

December 31, 2013
Machinery 50,000
Accumulated Depreciation-Machinery 4,500

a. The equipment has 10,000 SV and a 4-year useful life.

b. The Machinery is 5 years old as of December 31, 2012.
c. The Machinery is 5 years old as of December 31, 2015.
d. The Machinery is 2 years old as of December 31, 2011.

Problem 2

Unadjusted Trial Balance

December 31, 2019
Machinery 50,000
Accumulated Depreciation-Machinery 4,500

a. The Machinery has a remaining life of 3 years as of December 31, 2019.

Book Value (50,000-4,500) = 45,500
b. The Machinery has a remaining life of 5 years as of January 1, 2019.
c. The Machinery has a remaining life of 4 years as of December 31, 2019 with a SV of 10,000
d. The Machinery is 5 years old as of June 30, 2019.

Prepayments
Unadjusted Trial Balance
December 31, 2018
Prepaid Rent 30,000
Prepaid Insurance 7,500

a. The prepaid rent was for 2 years starting August 1, 2018.

b. The prepaid rent pertains to the whole year of 2019.
c. The Prepaid rent was half expired as of year-end.
d. ¼ of the prepaid rent pertains to last 3 months of 2018.
e. The Prepaid rent was paid to apply to 24 months starting June 30, 2017.
f. The prepaid rent pertains to 12 months ending March 31, 2019.
g. The Prepaid rent was paid to apply to 12 months starting June 30, 2017.
h. The prepaid rent was paid to apply to 12 months ending June 30, 2018.

Supplies
Unadjusted Trial Balance

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 December 31, 2019
Supplies 50,000

a. Half of the supplies remain at year-end

b. An inventory of the remaining supplies reveal that supplies worth 20,000 remain.
c. The 4000 of supplies were used throughout the year.

Problem 3: On January 1, 2019, Gong Cha Inc. purchased a Milk Tea Machine at a purchase price of
P500,000. It also paid freight of P10,000; insurance while the machine was in transit at P15,000; and
installation costs at their establishment of P5,000. The machine had a residual value of P30,000. The
estimated useful life:

Years 10 years
Service Hours 50,000 hours
Production 100,000 milk teas
Actual Operations Service Hours Production
2019 15,000 30,000
2020 5,000 40,000
2021 10,000 10,000

a. Using the straight-line method, determine the:

I. Depreciation expense for 2019
II. Depreciable cost for 2019
III. Depreciation expense for 2020
IV. Depreciable cost for 2020
V. Carrying amount at 2020
VI. Carrying amount at 2021
b. Using the working hours method, determine the:
i. Depreciation expense for 2019
ii. Depreciable cost for 2019
iii. Depreciation expense for 2020
iv. Depreciable cost for 2020
v. Carrying amount at 2020
vi. Carrying amount at 2021
c. Using the output method, determine the:
i. Depreciation expense for 2019
ii. Depreciable cost for 2019
iii. Depreciation expense for 2020
iv. Depreciable cost for 2020
v. Carrying amount at 2020
vi. Carrying amount at 2021

Problem 4: ABC Co. disclosed the depreciation policy on machinery is as follows:

- A full year of depreciation is taken in the year of acquisition.

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 - No depreciation is taken in the year of disposal.
- The estimated useful life is 8 years.
- The straight-line method is used.
a. On June 2015, the entity sold for P2,350,000 a machine acquired in 2012 for P4,200,000. The
residual value was P600,000. What amount of gain on the disposal should be recorded in 2015?
b. What amount of gain on the disposal should be recorded in 2015 if the company has no
depreciation policy?

Doubtful Accounts
Problem 1: Township Co., a medium-sized enterprise located in Tacloban City, has the following
information at the end of its operations for the year 2019:
Cash Revenue P100,000
Credit Revenue P5,500,000
Total Revenue P5,600,000
Accounts Receivable, end P1,200,000
Allowance for Doubtful Accounts, beg P50,000

a. Prepare the journal entry to record the Doubtful Accounts Expense for 2019 if the company
estimated that 10% based on revenue is considered to be uncollectible.
b. Prepare the journal entry to record the Doubtful Accounts Expense for 2019 if the company
estimated that 15% based on AR is considered to be uncollectible.

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