UNIVERSITY OF CEBU-BANILAD

COLLEGE OF ACCOUNTANCY
BANILAD, CEBU CITY
Accounting 1 (Adjustments)
Name _______________________________ Course & yr. _________ Schedule _______________ Score ___________

A. At the end of June 2014, the first month of operations, the following selected data were taken from the financial
statements of Khalyl Dionne, CPA, a service proprietorship:
Net income for June P119,250
Total assets at June 30 569,100
Total liabilities at June 30 60,600
Total owner’s equity at June 30 508,500
In preparing the financial statements, adjustments for the following were overlooked:
1. Supplies used during June, P5,250.
2. Unbilled fees earned at June 30, P8,700.
3. Depreciation equipment for June, P7,500.
4. Accrued salaries at June 30, P4,500.

Required: Determine the correct amount of net income for June and the total assets, liabilities and owners equity at
June 30. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustments by setting up
and completing the columnar table below.
Net income Total assets Total Liabilities Owners Equity
Reported amounts P119,250 P569,100 P60,600 P508,500
Corrections:
Adjustment (1)

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(2)

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(3)
(4) __________ ___________ ____________ ____________

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Corrected amounts eH w ___________ ___________ ____________ ____________

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B. Billings Company makes rent payments every three months for the next three-month period beginning that day. Billings
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had made the following rent payments applicable for 2015:
November 1, 2014 P3,600
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February 1, 2015 4,500

May 1, 2015 4,500
August 1, 2015 5,400
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November 1, 2015 5,400

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Required: Calculate the rent expense that should be shown on the income statement for the year ended December 31,
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2015 ___________________.

C. Missalou Company began operations on January 1, 2015. During the year it purchased P8,400 in office supplies and
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debited the expense account, Office Supplies Used. On December 31, 2015, a count of office supplies on hand showed
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P900.
Required: Supplies account to be presented in balance sheet on December 31, 2015 _______________
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D. Leonard Company purchased a new van on May 1, 2015, for P150,000. The van had an estimated useful life of five
years and a residual value at the end of that time of P5,000.
Required:
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1. Depreciation expense to be recorded for 2015 __________________

2. Accumulated depreciation – Vans at the end of 2017 ______________
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3. Book value of the vans on December 31, 2016 __________________

E. Car World Magazine Company credited Unearned Subscription Revenue for P78,000 received from subscribers to its
new monthly magazine. All subscriptions were for 12 issues. The initial issue was mailed during August 2015.
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Required:
1. Adjusting entry on December 31, 2015 __________________

2. Suppose the initial issue was mailed during January 2015 and the last issue in December. Prepare an adjusting
entry if needed or write no adjusting entry if not needed.
_

F. Denton Company employs six clerks at a weekly salary of P2,500 each. The clerks are paid on Friday, the last day of a
five-day work week. Make the adjusting journal entry assuming:
a. The accounting period ended on Monday.
_

b. The accounting period ended on Wednesday.

_
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 G. On April 15, 2015 Chope Company received a 60-day, 12% note for P36,000 from a customer.
Required:
1. Interest expense to be recorded by Chope on April 30 _______________
2. Maturity date of the note _________________

H. LGAR rented a trenching machine during September from Quality Equipment Rent Company at P50 per hour. It used
the machine for 140 hours during the month. The company had made an initial payment of P2,500 to Quality Equipment
Rent Company for the rental of the machine. It debited the payment to Equipment Rent Expense.
Required:
1. Equipment Rent Expense to be recognized during the month ________________
2. Adjusting entry at the end of September.
_

I. Calculation of information from adjustment data:

1. The balance sheets of Bat Products Company as of December 31, 2015 and 2016, showed office supplies totalling
P3,000 and P4,000, respectively. During 2016, office supplies totalling P7,000 were purchased.
Required: What was the amount of office supplies expense for the year 2016 ______________

2. The balances of the Prepaid Insurance account of Jobello Company were as follows:
December 31, 2015 P1,000
December 31, 2016 1,200
The company debits Prepaid Insurance for all insurance premiums when it makes cash payments. The income
statement for 2016 showed insurance expense for P2,600.
Required: What was the total cash expenditure for insurance premiums during 2016? _______________

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J. (Adjustments and effect on statements) Certain unadjusted account balances from the trial balance of Edwardsville
Consulting for the year ended December 31, 2015, are given below:

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eH w EDWARDSVILLE CONSULTING

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PARTIAL UNADJUSTED TRIAL BALANCE
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December 31, 2015
Account Title Debits Credits
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Account Receivable P50,000

Notes Receivable 6,000
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Office Supplies 1,800

Prepaid Insurance 3,000
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Automobiles 26,500
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Accumulated Depreciation – Automobiles P9,000

Notes Payable 8,000
Unearned Rent 3,300
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Unearned Professional Fees 4,200

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Professional Fees Revenue 180,000

Salaries Expense 25,500
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Utilities Expense 9,500

Adjustment data on December 31 are as follows:

a. A count of office supplies on hand on December 31, 2015, showed P200 unused.
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b. The company owns two automobiles. They were purchased on January 1, 2013. They have an estimated useful
life of five years, and the total residual value of the two cars is P4,000. The company uses straight-line
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depreciation.
c. The company has not received the utilities bill for December. It estimates that the cost of utilities used is P800.
d. The company accepted a P6,000, 90-day note from a customer dated December 1, 2015. The note carries an
interest rate of 12%. No interest has been recorded.
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e. The balance in Prepaid Insurance represent a 12-month policy effective September 1, 2015.
f. Property taxes accrued but unrecorded are P2,400.
g. Salaries earned by employees as of December 31 but unrecorded are P500.
h. Edwardsville has leased some unused equipment to another company. It received a P3,300 payment for six
months’ rent on November 1.
i. On November 1, 2015, Edwardsville borrowed P8,000 from the local bank. It signed a 120-day note at 12%
interest. The company has recorded no interest.
j. On December 1, Edwardsville signed a contract to provide consulting services for a client. The client paid
P4,200 on that date. As of December 31, Edwardsville had provided 40% of the services.

Required: Using the format shown below (Item a was answered)

1. Record the adjusting journal entries.
2. Indicate the financial statement classification where each account in the entry would appear.
3. Show the amount that would be reported on the financial statement for each account after the adjusting
entry is posted.

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 Example:
Adjusting Journal Financial Statement Amount reported on
Item December 31, 2015 Classification___ Financial Statement
a Office Supplies Expense 1,600 Expense P1,600
Office Supplies 1,600 Current asset 200
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K. The following data are related to Accounts Receivable and the recorded Allowance for Doubtful Accounts of A & T
Computer Services owned and managed by Mr. Andreau Torralba.
Accounts Receivable P80,000
Allowance for Doubtful Accounts 2,000

Required: Assuming the balance of the valuation account should be brought-up to 10% of the outstanding accounts
receivable compute the following.
1. Net realizable value ___________________
2. Assume that out of the total accounts receivable, P5,000 was written off. Compute the net increase or
(decrease) in total assets ________________
L. On March 1, 2015 Ms. Allen Ramones, owner of Pagadian Rice Mill acquired a “satake rice mill” on account from
Mindanao Iron Works at a purchase price of P360,000. A discount of 10% can be availed if the account is paid within 60
days from the invoiced date. The business incurred the following incidental costs:
a. Crating, Freight and Handling P4,000
b. Installation cost 7,000
c. Trial-run Expense 800
The account was paid April 24, 2015.

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Required:

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1. Compute the cost of machine that will be recorded in the book of the business._____________
2. Assuming the machine has an economic life of 10 years without any salvage value but was retired on May 1, 2020.

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Prepare the journal entry to record the retirement.
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M. Evaluation and restatement of financial statements to conform to accrual basis of accounting.
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After completing the first course in financial accounting at a local college, Cindy Conservative decided to leave school
and to open up a parking lot in Banilad, Cebu City. Using P50,000 in cash that she received as a gift from her rich aunt
as an initial investment, Cindy rented a parking lot on January 1, 2015, and began operations. Cindy has completed her
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first month in business and desires a P40,000 bank loan in order to expand her business. She plans to pay the loan back
at the end of one year. You are a loan officer at Metrobank of Banilad. On your request, Cindy has prepared a set of
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financial statements for her first month in business. The financial statements are as follows:
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CONSERVATIVE PARKING LOT

INCOME STATEMENT
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For the month ended January 31, 2015

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Parking lot revenues P24,000

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Expenses:
Advertising expenses P12,000
Wages expense 3,000
Rent expense 48,000
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Office supplies expense 6,000

Insurance expense 2,520 71,520
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Net Loss (P47,520)

CONSERVATIVE PARKING LOT

STATEMENT OF OWNERS EQUITY
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For the month ended January 31, 2015

C. Conservative, Capital January 1, 2015 P 0

Add: Initial Investment 50,000
Subtotal P50,000
Less: Net Loss P47,520
Withdrawals 1,000 48,520
C. Conservative, Capital January 31, 2015 P1,480

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 CONSERVATIVE PARKING LOT
BALANCE SHEET
As of January 31, 2015

ASSETS
Current Asset:
Cash P19,480

LIABILITIES
Current Liabilities:
Advance payments from customers P18,000

OWNER’S EQUITY
C. Conservative, Capital 1,480
Total Liabilities and owner’s equity P19,480

In reviewing the financial statements, you request that Cindy provide some additional information regarding the
treatment of certain financial statement accounts. Cindy provides the following information:

Parking lot revenues

Revenues collected in cash P24,000

Other revenue information

Revenue from customers on account that Cindy did not record

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since cash was not received. 31,000

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Cash collections from customers paying for six months in

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advance on January 1, 2015 18,000

Wages Expense
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Wages paid for four parking lot attendants for first half of January.
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(Wages of P3,000 earned during second half of January will be paid in Feb.) 3,000
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Office Supplies
Parking lot tickets and office supplies purchased for cash on January 2, 2015.
(At the end of January, P4,800 of supplies remain in inventory) 6,000
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Prepaid Insurance
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Premium on liability insurance policy for the period January 1, 2015 to July 1, 2015 2,520
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Prepaid parking lot rent

Amount paid on January 1, 2015, to rent a parking lot in downtown Cebu for
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12 months. (Comparable lots were renting for an average monthly rent of P6,000) 48,000
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Advertising campaign expenditures

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Cost of extensive advertising during the first two weeks in January to advertise
the parking lot. (Cindy took out full-page newspaper ads and feels that the
advertising campaign will help to generate business for years to come.) 12,000
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Required: (6 points each statement) Restate the financial statements using the accrual basis of accounting.
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***end***
Thought : “Winners are ordinary people, with extraordinary determination.”

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 Key :

A. Net Income Total Assets Total Liabilities Owners Equity

Unadjusted Balances P119,250 P569,100 P60,600 P508,500
(1) (5,250) (5,250) (5,250)
(2) 8,700 8,700 8,700
(3) (7,500) (7,500) (7,500)
(4) (4,500) 4,500 (4,500)
Corrected Balances P110,700 565,050 65,100 499,950

B. P19,200
C. P900
D. 1. P19,333.33
2. P77,333.33
3. P101,666.67
E. 1 – Unearned Subscription Revenue 32,500
Subscription Revenue 32,500
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2 – Unearned Subscription Revenue 78,000
Subscription Revenue 78,000
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F. 1. Salaries Expense 3,000
Salaries Payable 3.000
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2. Salaries Expense 9,000

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Salaries Payable 9,000
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G. 1. -0- Income not expense eH w
2. June 14, 2015

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H. 1. P7,000
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2. Rent Expense 4,500
Rent Payable 4,500
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I. 1. 6,000
2. 2,800
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J. Item Adjusting Entries F/S Classification Amount

b Depreciation Expense – Automobiles 4,500 Expense 4,500
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Accumulated Depreciation – Automobiles 4,500 Contra Asset 13,500

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c Utilities Expense 800 Expense 10,300
Utilities Payable 800 Liability 800
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d Interest Receivable 60 Asset 60

Interest Income 60 Income 60
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E Insurance Expense 1,000 Expense 1,000
Prepaid Insurance 1,000 Asset 2,000
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F Taxes and Licenses 2,400 Expense 2,400

Taxes Payable 2,400 Liability 2,400
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#
G Salaries Expense 500 Expense 26,000
Salaries Payable 500 Liability 500
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H Unearned Rent Revenue 1,100 Liability 2,200

Rent Revenue 1,100 Income 1,100
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I. Interest Expense 160 Expense 160
Interest Payable 160 Liability 160
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J Unearned professional fees 1,680 Liability 2,520
Professional Fees Revenue 1,680 Income 181,680

K. 1. P72,000
2. -0-
L. 1. 335,800
2. Accumulated Depreciation 173,496.67
Loss on retirement 162,303.33
Machinery 335,800
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 M.
CONSERVATIVE PARKING LOT
INCOME STATEMENT
For the month ended January 31, 2015
Revenues P58,000
Less: Expenses
Advertising Expense 12,000
Wages Expense 6,000
Rent Expense 4,000
Office Supplies Expense 1,200
Insurance Expense 420 23,620
Net Income P34,380

CONSERVATIVE PARKING LOT

STATEMENT OF CHANGES IN EQUITY
For the month ended January 31, 2015
C. Conservative, Capital Jan 1 50,000
Add: Net Income 34,380
Subtotal 84,380
Less: C. Withdrawals 1,000
C. Conservative, Capital January 31 P83,380

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CONSERVATIVE PARKING LOT

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BALANCE SHEET
As of January 31, 2015

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Current Assets:
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Cash 19,480
Accounts Receivable 31,000
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Office Supplies 4,800

Prepaid Insurance 2,100
Prepaid Rent 44,000
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TOTAL ASSETS P101,380

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LIABILITIES
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Current Liabilities:
Advance payments from customers 15,000
Salaries Payable 3,000
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TOTAL LIABILITIES P18,000

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OWNERS EQUITY
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C. Conservative, Capital 83,380

TOTAL LIABILITIES & OWNERS EQUITY P101,380
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