Professional Documents
Culture Documents
Adjusting Entries
Adjusting Entries
Layese
BSBA-FM 1A
Adjusting Entries
I. Sonny Tan Bakeshop borrowed P600, 000 from the bank on September 1,
2020.
The note carried an 8% annual rate of interest and was set to mature on Feb.
28, 2021. Interest and principal were paid in cash on the maturity date.
Required:
1. What was the amount of interest expense paid in cash in 2020?
P0
2. What was the amount of interest expense recognized on the 2020 income
statement?
P 16, 000.00
3. What was the amount of total liabilities shown on the 2020 balance sheet?
P 616,000.00
4. What was the total amount of cash that was paid to the bank on Feb. 28, 2021
for principal and interest?
P 624,000.00
5. What was the amount of interest expense shown on the 2021 income statement?
P8, 000.00
II. Reynaldo San Mateo, an angel investor, decided to invest P1,200,000 excess
Cash in a certificate of deposit on April 1, 2020. The certificate carried an 8%
annual rate of interest and a 1-year term to maturity. Interest will be withdrawn
monthly (disregard tax effects).
Required:
1. What amount of income will be recognized for the year ending Dec. 31, 2020?
P72, 000.00
2. What is the effect of the adjusting entry on the accounting equation?
Increase in Asset and Owners Equity (Income)
3. What amount of cash will be collected for interest revenue in 2020?
P72, 000.00
4. What is the amount of interest receivable as of Dec. 31, 2020?
P24, 000.00
5. What amount of cash will be collected for interest revenue in 2021?
P24, 000.00
6. What amount of interest revenue will be recognized in 2021?
P24, 000.00
7. What is the amount of interest receivable as of Dec. 31, 2021?
P0
III. The preliminary trial balance of Tagum Traders, owned by Merry Chris Ceniza
as of Dec. 31, 20A showed in part the Accounts Receivable and its related
Estimated Uncollectible Accounts:
Debit Credit
Accounts Receivable P300,000
Estimated Uncollectible Account P 4,000
IV. The following property and equipment were acquired on different dates by
Samar Manufacturing Company, a business owned and managed by Christine
Carpeso.
Required:
1. Compute the amount of depreciation expense for each asset at the end of its
fiscal year on June 30, 20B:
Property and Dates Acquisition Scrap Life in Depreciation
Equipment Acquired Cost Value Years Expense
Store Equipment Oct. 1, 20A P 150,000 P 20,000 8 P 16, 250.00
Delivery Truck Jan. 1, 20B 500,000 None 5 P 100, 00.00
Building Nov. 30,20A 950,000 50,000 10 P90, 00.00
2. Prepare the adjusting entries to recognize the depreciation expense for each asset
on June 30, 20B.
Depreciation expense P12, 187.50
Accumulated Depreciation – store equipment P12, 187.50
Reconstruct the wrong entries prepared, the correct entries that should be made, the
would-be correcting entries. Utilize the space provided.
1. Cash received from a bank loan of the business in the amount of P80,000 was
erroneously credited to Capital account instead of Notes Payable.
Wrong Entry
Cash P80, 000.00
Capital P80, 000.00
Correct Entry
Cash P80, 000.00
Notes Payable P80, 000.00
Correct Entry
Cash P80, 000.00
Notes Payable P80, 000.00
2. Payment of rental expense in the amount of P30,000 was erroneously recorded
at P 20,000.
Wrong Entry
Rental expense P20, 000.00
Cash P20, 000.00
Correct Entry
Rental expense P30, 000.00
Cash P30, 000.00
Correcting Entry
Rental expense P10, 000.00
Cash P10, 000.00
Wrong Entry
Cash P16, 000.00
Service Income P16, 000.00
Correct Entry
Cash P16, 000.00
Accounts Receivable P16, 000.00
Correcting Entry
Service Income P16, 000.00
Accounts Receivable P16, 000.00_
Wrong Entry
Office supplies P30, 000.00
Accounts Receivable P30, 000.00
Correct Entry
Office supplies P30, 000.00
Accounts Payable P30, 000.00
Correcting Entry
Accounts Receivable P30, 000.00
Office supplies P10, 000.00
Accounts Payable P20, 000.00
VI. Prepare the adjusting entry for each of the following situations. The last
day of the accounting period is Dec. 31.
a. The payment of the P19, 000 insurance premium for two years in advance was
originally recorded as Prepaid Insurance. One year of the policy has now expired.
Insurance expense P9, 500.00
Prepaid Insurance P9, 500.00
b. All employees earn a total of P10,000 per day for a five-day week beginning on
Monday and ending on Friday. They were paid for the workweek ending Dec. 26.
They worked on Monday, Dec. 29, Tuesday, Dec. 30 and Wednesday, Dec. 31.
Salaries expense P16, 000.00
Accrued salaries expense P16, 000.00
c. The Supplies account had a balance of P4,480 on Jan. 1. During the year,
P11,000 of supplies were bought. A year-end inventory showed that P6,400 worth
of supplies are still on hand.
Office supplies expense P9, 080.00
Unused supplies expense P9, 080.00
d. Equipment costing P588, 000 has a useful life of five years with an P80,000
salvage value at the end of five years. Record the depreciation for the year.
Depreciation expense P20, 320.00
Accumulated Depreciation expense+ equipment P20, 320.00