Adjusting Entries Discussion and Solution
Adjusting Entries Discussion and Solution
Adjusting Entries Discussion and Solution
1. On November 1, 2017, the business borrowed P 850,000 at 8 % payable 1 year after. The interest was deducted in advance .
JOURNAL ENTRY ASSET METHOD EXPENSE METHOD
CASH 782,000 CASH 782,000
PREPAID INTEREST 68,000 INTEREST EXPENSE 68,000
NOTES PAYABLE 850,000 NOTES PAYABLE
3. Unearned rent account has a balance of P 250,000 as of December 31, 2017. An amount of P 120,000 is applicable for January, 2
LIABILITY METHOD INCOME METHOD
CASH 250,000 CASH 250,000
UNEARNED RENT INCOME 250,000 RENT INCOME
4. The business received a 24 months, 10% note from customer on April 1, 2017 amounting to P 150,000 for services rendered.
5. August 1, 2017, borrowed P 380,000 from a multipurpose cooperative on a 24-months, 8% per annum note payable.
The principal plus interest is payable at the end of the term.
6. Weekly payroll is P 120,000, paid every day Friday for a five -day workweek. Assume December 31,2017,
falls on a Wednesday so the employees will not be paid until Friday.
7. On Sunday,January 1, 2018, the company, which is on a six- day workweek, will pay its regular salaried employees P 350,000.
8. Invested P 250,000 cash in a certificate of deposit that paid 10% annual interest.
The certificate was issued on June 1 and carried a 18 months term to maturity.
9. Rental collection was received in advance, P85, 000. At year end 60% was earned.
10. Paid an insurance premium amounting to P 60,000. At the end of the period, P 25,000 is expired.
JOURNAL ENTRY ASSET METHOD JOURNAL ENTRY EXPENSE METHOD
PREPAID INSURANCE 60,000 INSURANCE EXPENSE 60,000
CASH 60,000 CASH
11. Office equipment was acquired on February 1, 2017 that cost P 120,000. It is estimated that it will last for
12. Refer to number 11, what is the amount of depreciation expense on December 31,2018?
PAID 68,000/12 5667 EXPENSE MONTHLY
s deducted in advance . 12 MONTHS 68,000 PAID
EXPENSE METHOD ASSET METHOD 1 ASSET 10 MONTHS X 5667
PREPAID INTEREST 68,000 2 EXPENSE 2 MONTHS X 5667
12 MONTHS
850,000 EXPENSE METHOD
INTEREST EXPENSE 68,000
ASSET METHOD
CORRECT AMOUNT SUPPLIES = DECREASED BY 26,500
EXPENSE METHOD SUPPLIES 3500 ASSET SUPPLIES EXPENSE = INCREASED BY 26,500
SUPPLIES EXPENSE 26,500 EXPENSE
30,000 PAYMENT 30,000 ADJ.
SUPPLIES EXPENSE 26,500
SUPPLIES 26,500
is applicable for January, 2018.
INCOME METHOD CORRECT AMOUNT EXPENSE METHOD
UNEARNED RENT INCOME 120,000 SUPPLIES = INCREASED BY 3500
250,000 RENT INCOME 130,000 SUPPLIES EXPENSE = DECREASED BY 3500
250,000
OME = INCREASED BY 120,000 = CR
EASED BY 120,000 = DR
120,000
ed employees P 350,000.
INCOME METHOD CORRECT AMOUNT
UNEARNED RENT INCOME 34,000
85,000 RENT INCOME 51,000
85,000
OME = INCREASED BY 34,000 = CR
EASED BY 34,000 = DR
34,000
60,000
ADJUSTING ENTRIES
ENSE MONTHLY
CORRECT ASSET METHOD INTEREST EXPENSE 11,333
56,667 PREPAID PREPAID INTEREST = DECREASED BY11,333 PREPAID INTEREST
11,333 EXPENSE INTEREST EXPENSE = INCREASED BY 11,333
68,000
PREPAID INTEREST INTEREST EXPENSE
68,000 11,333 11,333
56,667 11,333
SED BY 26,500 ADJUSTING ENTRIES
EXPENSE METHOD
56,667