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