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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.
Solutions:
2010
1 Insurance Expense 13,750
Prepaid Insurance 13,750
(P 33,000/12 x 5 = P 13,750)
Cost 20,000
Depreciable cost 18,000
Annual Depreciation 3,600
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)
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
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)
Cost 40,000
Less: Salvage Value 0
Depreciable cost 40,000
Annual Depreciation 8,000
Exercise 2
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)
Cost 60,000
Less: Salvage Value 0
Depreciable cost 60,000
Annual Depreciation 10,000
Assignment 1
Presented is the year-end unadjusted trial balance of Look New Repair Shop
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 Balance Income Sta