Classification

Classify the following items as (A) prepaid expense, (B) unearned revenue, (C)
accrued revenue, or (D) accrued expense.

__ expense incurred but not yet paid D

__ paid or acquired in advance such as insurance premium A

__ also known as deferred income B

__ income earned but not yet collected C

Problem 1 (Prepaid Expense)

Hotdogan ni Robert COMPANY purchased office supplies on September 1, 2021

amounting to P350,000 in which the company immediately paid in cash. At
December 31,2021 which coincides with the end of the accounting period, inventory
records show that the amount of remaining office supplies amount to P40,000.

Direction: Prepare the initial and adjusting entries for this transaction using two
methods namely, asset method and expense method.
Asset method Expense Method

September Office supplies 350,000 Office supplies exp 350,000

1, 2021 Cash 350,000 Cash 350,000

December Office supplies expense 310,000 Office supplies 40,000

31, 2021 Offices supplies 310,000 Office supplies exp 40,000

Note: We deducted 2 points for those who entered the wrong accounts
Problem 2 (Accrued Income)
Stark Industries Medical Clinic received a 90-day, 12%, P80,000 note from a
client on November 15, 2019. Journalize the adjusting entry for the year
ended.
Dec. 31
Interest Receivable 1,226.67
Interest Income 1,226.67
(P80,000 x 0.12 x 46/360)
Note: We considered the answer of those who answered 1,200 (45 days).
From November 15-30 = 15 days, December 1-31 = 31 days. A total of 46
days. We also made a mistake on one of our examples saying that there are
only 30 days from December 1-31.

Problem 3 (Depreciation)
I am Oliver Company purchased equipment on January 1, 2020 amounting
to P500,000 with residual value of P50,000 and useful life of five (5) years.
Prepare adjusting entries on asset depreciation and fill up the depreciation
table.

Date Depreciation Accumulated Carrying Value

Expense Depreciation
Jan 1, 2020 500,000

Dec 31, 2020 90,000 90,000 410,000

2021 90,000 180,000 320,000

2022 90,000 270,000 230,000

2023 90,000 360,000 140,000

2024 90,000 450,000 50,000