PROBLEM 7-14

Analyzing Various Transactions Involving Liabilities

In conjunction with your firm’s examination of the financial
statements of BATUR< INC. as of December 31,2010, you obtained
the information from the company’s voucher register shown in the
work paper below.
Item Entry Voucher
No. Date Reference Description Amount Account
Charged
1 12/18/10 12-200 Supplies, shipped FOB destination,
12/15/10; received 12/17/10 P15,000 Supplies
on hand
2 12/18/10 12-203 Auto insurance,12/15/10-12/15/11 22,000 Prepaid
insurance
3 12/21/10 12-209 Repairs services;received 12/20/10 19,000 Repairs &
maintenance
4 12/26/10 12-212 Merchandise, shipped FOB shipping
point, 12/20/10; received 12/24/10 123,000 Inventory
5 12/21/10 12-210 Payroll, 12/7/10-12/21/10
(12 working days) 69,000 Salaries
and wages
6 12/21/10 12-234 Subscription to industry magazine
for 2011 5,000 Dues &
subscriptions
expense
7 12/28/10 12-236 Utilities for December 2010 24,000 Utilities
expense
8 12/28/10 12-241 Merchandise, shipped FOB
destination, 12/24/10; received
1/2/11 84,000 Inventory
9 12/28/10 12-242 Merchandise, shipped FOB
destination, 12/24/10; received
1/2/11 84,000 Inventory
10 1/2/11 1-1 Legal services;received 12/28/1046,000 Legal and
professional
fees
expense
11 1/2/11 1-2 Medical services for employees
for December 2010 25,000 Medical
expenses
12 1/5/11 1-3 Merchandise, shipped FOB
shipping point, 12/29/10;
received 1/4/11 15,000 Inventory
13 1/10/11 1-4 Payroll, 12/21/10-1/5/11(12 working
days in total, 4 working days in Jan.2011)72,000 Salaries
and wages
14 1/10/11 1-6 Merchandise, shipped FOB shipping
point, 1/2/11; received 1/6/11 64,000 Inventory
15 1/12/11 1-8 Merchandise, shipped FOB
destination, 1/3/11;
received 1/10/11 38,000 Inventory
16 1/13/11 1-9 Maintenance services;
received 1/9/11 9,000 Repairs &
maintenance
17 1/14/11 1-10 Interest on bank loan,10/10/10-1/10/11 30,000 Interest
expenses
18 1/15/11 1-11 Manufacturing equipment; installed
12/29/10 254,000 Machinery
& equipment
19 1/15/11 1-12 Dividend declared/ 12/15/10 160,000 Dividends
payable
Accrued liabilities as of December 31,2010, were as follows:
Accrued payroll P48,000
Accrued interest payable 26,666
Dividends payable 100,000
The accrued payroll and accrued interest payable were reversed
effective January 1,2011.
Review the given data above and prepare journal entries to adjust
the accounts on December 31, 2010. Assume that the company
follows FOB terms for recording inventory purchases.
SOLUTION 7-14
ADJUSTING JOURNAL ENTRIES
December 31,2010
1. Insurance expense 917
Prepaid insurance 917
(P22,000 x 5/12)
2. Prepaid dues and subscriptions 5,000
Dues and subscriptions expense 5,000
3. Accounts payable 111,500
Inventory
111,500
4. Accounts payable 84,000
Inventory
84,000
5. Legal and professional fees expense 46,000
Accounts payable
46,000
6. Medical expenses 25,000
Accounts payable
25,000
7. Inventory 55,000
Accounts payable
55,000
8. Machinery and equipment 254,000
Accounts payable
254,000