CKS - College Adjusting Entries – Exercises G.

Ong
Prepaid Expenses Deferred Income
1. The ledger at the beginning of the year shows Unused Supplies of P5,600. During the year 1. On August 1, a company received from a tenant the advance payment of P81,000 for six-
supplies amounting to P24,750 were purchased and charged to the same account. A month rent of office space and credited this to the Unearned Rent Income account. The
physical count at the end of the year disclosed supplies on hand worth P3,400. tenant started to occupy the office space on September 1. Adjustment on December 31.

Supplies Expense 26,950 Unearned Rent Income 54,000

Unused Supplies 26,950 Rent Income 54,000

2. Advertising Expense has a debit balance of P39,000 at December 31 which represents the 2. A concession stand is operated by a concessionaire who pays 10% of gross receipts for the
advance payment on October 15 of a yearly contract for a uniform amount of space in 52 privilege of selling sandwiches and soft drinks in the football field. An advance payment
consecutive issues of weekly publication. As of December 31, advertisements had of P12,000 was received and credited to Unearned Concession Revenue. Sales for
appeared in 9 issues of the publication. December totaled P80,000.

Prepaid Advertising 32,250 Unearned Concession Revenue 8,000

Advertising Expense 32,250 Concession Revenue 8,000

3. The Advertising Expense account balance is P30,000 which includes the cost of 3. The Admission Revenue account balance is P250,000. This amount includes 1,000
advertisement in the Accountants Journal for the first quarter of the succeeding year. admission coupon booklets that were sold at P200 each. These coupons could be used for
Actual advertising cost amounts to P2,000 per month. admission any time after January 1 of the succeeding period. Adjustment on December 31.

Prepaid Advertising 6,000 Admission Revenue 200,000

Advertising Expense 6,000 Unearned Admission Revenue 200,000

4. Prepaid Subscriptions account was debited for the advance payment of six months 4. A company received in January an advance payment for services to be rendered over the
subscription to a magazine that cost P100 per issue. The magazine comes out twice a next two years. The unearned service revenue account was credited for P36,000 at that
month. The business started receiving its copy in August. The company need to prepare time. One half of this has been earned by the end of the current year. Adjustment on
its financial statements on December 31. December 31.

Subscription Expense 1,000 Unearned Service Income 18,000

Prepaid Subscription 1,000 Service Income 18,000

5. Office Supplies had a balance of P14,600 at the beginning of the year. During the year, 5. Part of the building owned by a company was leased to a tenant on November 2. The
additional supplies totaling P35,500 were bought. A physical count conducted at leased contract for 6 months called for an advance payment by the tenant for P60,000.
September 30 revealed that P7,100 worth of supplies were still on hand. This was credited to Unearned Rent Revenue. Accounting year ends December 31.

Office Supplies Expense 43,000 Unearned Rent Income 20,000

Office Supplies 43,000 Rent Income 20,000

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CKS - College Adjusting Entries – Exercises G. Ong
Accrued Expense and Prepaid Expenses Accrued Income and Deferred Income
1. A company has an outstanding note with the bank amounting to P300,000 and payable in 1. On January 1, 2016, a company extended a loan of P50,000 to an employee receiving a
60 days with a 24% interest. The note is dated August 15. The company fiscal year ends two-year 24% note. The interest for the year 2016 has not yet been collected nor recorded.
on September 30. The company accounting period ends on December 31.

Interest Expense 9,000 Interest Receivable 12,000

Interest Payable 9,000 Interest Income 12,000

2. On March 1, a company borrowed P200,000 issuing a 3-year mortgage note bearing 2. Interest at 18% per annum on the P15,000 90-day note receivable has accrued and is
interest at 6% per annum. Interest is payable semi-annually on March 1 and September 1. expected to be collected by the company when the note matures on January 31, 2016. The
The company fiscal year ends on December 31. company accounting period ends on December 31.

Interest Expense 4,000 Interest Receivable 450

Interest Payable 4,000 Interest Income 450

3. A business has a liability on a long-term note of P500,000 bearing interest at 15% per 3. On August 1, a company recognized as income the P16,500 it received for advertising
annum payable every March 1, June 1, September 1, and December 1 of each year for services which were to be equally completed by January 31, 2016. The company
three years. The last interest payment was made accordingly on December 1. accounting period ends on September 30.

Interest Expense 6,250 Advertising Revenue 11,000

Interest Payable 6,250 Unearned Advertising Revenue 11,000

4. NoKaYa Company issued 180-day 12% P100,000 promissory note to Bangko ng Lupa on 4. A publishing company received P930,000 from subscribers to its weekly magazine.
October 1, 2016, and paid the interest in full on October 1, 2016. Interest expense was Examination of the records indicates that of this amount, P380,000 is applicable to the
debited upon the payment of interest. The accounting period of the company ended on succeeding accounting period. The amount received was credit to the Subscription
December 31, 2016. Revenue account.

Prepaid Interest 3,000 Subscription Revenue 380,000

Interest Expense 3,000 Unearned Subscription Revenue 380,000

5. On September 1, 2014. The ElikSun Corporation rented a store space at P36,000 a month. 5. A computer rental center also sells internet and phone cards on commission basis. It
The company paid rent amounting P432,000 for one year ending October 31, 2015. The receives its commission of P15 for every card sold on the 15th day of the month following
company needs to update its record on December 31, 2014. Rent expense was debited. the month of sale. The logbook maintained by the business shows that it still have 210
unsold cards as of November 30 and that 5,000 more cards were delivered by the supplier
Prepaid Rent 360,000 in December. An inventory on December 31 disclosed that 1,050 remain unsold.
Rent Expense 360,000
Commission Receivable 62,400
Commission Income 62,400
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CKS - College Adjusting Entries – Exercises G. Ong
Depreciation Doubtful Accounts
Described below are the different types of property assets owned by Geo Company. Prepare Prepare the adjusting entries on December 31, 2014, end of the accounting period, to record
the adjusting journal entries to record the depreciation on December 31, 2015. the doubtful accounts expense under each of the following independent cases:
Asset Cost Scrap value Useful life Date of Acquisiiton 1. Accounts receivable as of December 31 amounted to P140,600. The Allowance for
Building P 750,500 P 50,500 5 years 07/01/2013 Doubtful Accounts per general ledger showed a credit balance of P4,700 before adjustment.
Furniture & Fixtures 45,600 5,000 4 years 10/01/2014 It is the company’s policy to record 4% of accounts receivable as doubtful of collection.
Office Equipment 36,700 1,000 5 years 06/01/2015
Store Equipment 650,000 70,000 8 years 08/01/2015 Doubtful Account Expense 924
Allowance for Doubtful Account 924

Depreciation for Building: 2. Outstanding Accounts Receivable for the period totaled P162,100 while Allowance for
Doubtful Accounts amounted to P8,105 before adjusting entries. Allowance is to be
Depreciation Expense – Building 140,000 increase by 3% of accounts receivable every year.
Accumulated Depreciation – Building 140,000
Doubtful Account Expense 4,863
Allowance for Doubtful Account 4,863

3. It is the company’s policy to record 6% of Accounts Receivable as doubtful accounts.

Depreciation for Furniture & Fixtures: Accounts Receivable for the period totaled P157,350. The Allowance for Doubtful
Accounts as shown in the trial balance amounted to P1,700.
Depreciation Expense – Furniture & Fixtures 10,150
Accumulated Depreciation – Furniture & Fixtures 10,150 Doubtful Account Expense 7,741
Allowance for Doubtful Account 7,741

4. Accounts receivable per trial balance totaled P100,500. Allowance for Doubtful Accounts
Depreciation for Office Equipment: at the beginning of the year amounted to P7,700. Allowance is to be increase to 10% of
accounts receivable.
Depreciation Expense – Office Equipment 4,165
Accumulated Depreciation – Office Equipment 4,165 Doubtful Account Expense 2,350
Allowance for Doubtful Account 2,350

Depreciation for Store Equipment:
Depreciation Expense – Store Equipment 30,208.33
Accumulated Depreciation – Store Equipment
5. Per June 30, balance showed Accounts Receivable P421,850 and Allowance for Doubtful
Accounts P33,748. During the period of July 1 – December 31, sales on account amounted
to P724,600, collection made from receivable amounted to P465,200. Allowance for
Doubtful Accounts is estimated to be equal the same percentage of accounts receivable as
30,208.33 use in previous period.

Doubtful Account Expense 20,752

Allowance for Doubtful Account 20,752
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