ye-12/31- exp&rev for IS and asset&liab balance for the BS Analysis

Problem 1. Prepare AJE from the books of Silent as of Dec 31, 2012.
Consider the ff information:
Assuming it is a 1-year insurance
policy. For the first policy, the
entity consumed 11 months
worth of insurance. For the
1. The Prepaid Insurance(A) account has a balance of P96,000 as of year- second insurance, the entity
end.The balance represented two insurance policies acquired during the consumed 4 months of
year as follows: Policy A for P51,000 dated February 1,2012 Policy B was insurance.
acquired on August 31,2012 for P45,000; JE ASSET M -A+E

2. New equipment was installed on April I of the current year at a cost of The equipment has 9 months
P846,000. The equipment is estimated to have a salvage value of P20,000 worth of depreciation.
and useful life of 14 years.
3 months worth of interest
3. On September 21, 2012 the company borrowed P280,000 from the BPI consumed (20%).
by issuing a 20% one-year note. Int = P x r x time 9/21 - 12/31 = ___ days

4. The ledger balance of Supplies(A) as of yearend is P 18,920 of which P Unused supplies at the end of
12,000 is unconsumed. the year.
For the first lease, the entity
5. Silent Company entered into a lease agreement with another company consumed 10 months worth of
on March l. 2012 for rental of office space for the next 24 months for the rent for office space. For the
P156,000. A second lease was signed on November 2 of the same year for 2nd lease, the entity consumed
storage space for 6 months for P 56,400 both paid in advance. 2 months of rent.

6. Salaries per general ledger is P288,000 of which P 5,600 is paid in

advance,

7. Advertising contract is recorded at P62,000 as Advertising expense. This

is a l0-month contract signed Feb. 1,2012.

8. Notes Receivable has a balance of P40,000 which is a 120 day 12 % note

received December 23, 2012.
9. Fees Collected in Advance(L) has a balance of P174,000 of which 80% has
been earned.
10. Interest Income(income) of P6,200 is recorded of which P2,600 is
actually earned deferral
11. Interest expense (exp)of P4,200 is recorded , of this PI,200 is paid in
advance.

P5-8 The following information were gathered from the records of NEW
ZEALAND COMPANY as of December 31 ,2012:
a. Prep Insurance(A) has a balance of 860,000 per General Ledger, of which
P40,000 is expired
b. Advertising Expense shows a balance of P52,000, paid on September 30,
2012 and the contract is for 8 months.
c. Notes Payable was issued on November 28, 2012 for P 100,000 at 15%
for one year. No interest has been accrued on this note.
d. Equipment has a balance of P250,000 acquired on March 1,2012 with life
of 4 years and residual value ofP10,000.
e. Building was acquired on June 30,2011 at a cost of P45,000,000 with a
scrap value of P80,000 and life of 40 years.
f. Office supplies(A) has a balance per General Ledger of P18,000. Of this
amount, P12,000 was consumed.

g. Notes Receivable was received on November l, 2012 in the amount of

P60,000 at 16% per annum. No interest has been accrued on the note.

h. Furniture and Fixtures has a General Ledger balance of P320,000 as of

December 31, 2012. Additional fixtures were acquired on March 31, 2012 in
the amount of P40,000. Furniture and fixtures are depreciated at 12% per
year.

i. Taxes and Licenses(exp) balance per General Ledger is P32,000 of which

P6,000 applies to the year 2012.
j Rent Expense has a balance of P144,000 paid on September 1,2012.
Contract on the rent is for one year
k. Unpaid Salaries as of year-end, P12,000. exp, unpaid ,accrual of exp,
accrued a liability
l. Accounts Receivable has a balance of P600,000 and Allowance for
Doubtful Accounts is P50,000. [t is estimated that 12 % of Accounts
Receivable is considered uncollectible.

REQUIRED: For each of the following information pertaining to the

Dawn Company, a fiscal-year company, prepare the necessary
adjusting journal entries as of May 31,2012:

a) Dawn Company entered into a lease agreement with Carmel Company

on November l, 2011 for the rental of office space for the next 24 months
for P312,000. All rent payments for this lease was paid when due at the end
of each month. A second lease agreement was signed on February 1,2012
for use of a warehouse for six months, with P112,800 paid in advance,
which Dawn debited to rent expense.

b) On May 31,2011, the Office Supplies account had a debit balance of

P21,300. Office supplies in the amount of P82,600 were purchased during
the year. A count of office supplies on hand on May 31,2012 totaled
PI5,950.

c) On December 1, 2011, Dawn Company acquired a new printer for

P179,200. It is estimated that the printer will have a useful life of 4 years
with a P7,200 residual value.
d) Dawn Company borrowed P2,500,000 from Clarence Lending. Inc. on
February 28 , 2012, and issued a note for the loan. The note carries a 20%
annual interest rate and will be due one year from date of issue.

e) On October l, 2011, Dawn Company paid P32,400 for 6-months' worth of

insurance. The transaction was debited to Prepaid Insurance(A). No entry
was made to adjust the account at period-end.

f) On January 1,2012, Dawn Company received P91,200 from Wyeth, Inc, a

customer, for services to be rendered during the months of January,
February, March, April, and May 2012 5 mos earned. The whole amount
5/5 was credited to Service Fee Income.

g) Dawn Company also acquired additional equipment worth P75,600 on

April l, 2012. The equipment is expected to last five years, after which it will
be worthless. The accountant failed to record this transaction. 4/1-5/31

h) Dawn Company had year-end accounts receivable totaling P520,000. It is

estimated that 5Yo of the receivables will prove uncollectible. The
Allowance for bad debts has a credit balance of P2,000 before adjustments.
 If deferral, what Accrual of Rev or Not to be
Deferral of Rev or Exp? method? Exp? Depr Bad debts adjusted

Deferral of Expense Asset Method

Accrual of Expense

Deferral of Expense Asset Method

Deferral of Expense Asset Method

Defferal of Expense Expense Method

ü
 AJE Dr Cr

Insurance Expense ₱61,750.00

Prepaid Insurance ₱61,750.00

Dept. Expense - Equipment ₱44,250.00

Accum. Dept. - Equipment ₱44,250.00

Interest Expense ₱14,000.00 ₱15,496.00

Interest Payable ₱14,000.00

Supplies Expense ₱6,920.00

Supplies ₱6,920.00
Rent Expense ₱65,000.00 ₱18,800.00

Prepaid Rent ₱65,000.00

Prepaid Salaries ₱282,400.00 ₱282,400.00

Salaries Expense ₱282,400.00

Interest Expense
Notes Receivable
 ₱15,496.00

₱18,800.00

₱282,400.00