Adjustments

Deferrals – nabaydan
Prepaid Expense – paid but not yet incurred – asset
Deferred Revenue/ Unearned Revenue – received but not yet earned – liability

RENT
Asset Method

Initial Recognition – Asset

Prepaid Rent xxx
Cash xxx

Adjusting:
Rent Expense xxx
Prepaid Rent xxx

November 1, 2022. 5 months rent, 20,000/month

Initial Entry – Asset Method
Prepaid Rent 100,000
Cash 100,000

December 31
Rent Expense 40,000
Prepaid Rent 40,000
Nov1 to Dec31 = 2 months * 20k = 40,000

Initial Entry – Expense Method

Rent Expense 100,000
Cash 100,000
December 31, 2022
Prepaid Rent 60,000
Rent Expense 60,000
January 1 to March 31 = 3 months * 20k = 60k

Sept 1 = Insurance 15k/ month for 9 months (Asset Method)

Prepaid Insurance 135,000
Cash 135,000

December 31
Insurance Expense 60,000
Prepaid Insurance 60,000
15,000 * 4 (nagamit na) = 60,000

Sept 1 = Insurance 15k/ month for 9 months (Expense Method)

Insurance Expense 135,000

Cash 135,000

Dec 31
Prepaid Insurance 75,000
Insurance Expense 75,000
15,000 * 5 (nabilin) = 75,000

Expense Method
Initial Recognition - Expense

Accruals – wala pa nabaydan

Accrued Revenue – earn but not yet collected (paid)
Accrued expense – incurred but not yet paid
Liability Method
November 1: Initial Recognition 3 months – 10k per month
Cash 30,000
Unearned Revenue 30,000

December 31
Unearned Revenue 20,000
Revenue 20,000
Pila na ang na earn – 2 months * 10k = 20,000

Revenue Method
November 1: Initial Recognition 3 months – 10k per month
Cash 30,000
Revenue 30,000

December 31, 2022

Revenue 10,000
Unearned Revenue 10,000
Pila pa ang wala na earn = 1 month * 10k = 10,000

October 1, 17k/month, 7 months

Liability Method
October 1:
Cash 119,000
Unearned Rent Income 119,000

December 31, 2022

Unearned Rent Income 51,000
Rent Income 51,000
Pila na ang na earn = 3 months * 17k = 51,000

October 1, 17k/month, 7 months

Revenue Method
October 1:
Cash 119,000
Rent Income 119,000

December 31, 2022

Rent Income 68,000
Unearned Rent Income 68,000
Pila ang wala pa na earn = 4 months * 17k = 68,000

PPE – depreciation = (Carrying Amount – Salvage value) / Years

Equipment 100,000, salvage value of 10k, 10 years = (100,000-10,000)10 =
9,000/ year
Initial Recognition: January 1, 2022
Equipment 100,000
Cash 100,000

December 31, 2022

Depreciation Expense 9,000
Accumulated Depreciation 9,000
Carrying amount of the equipment at Dec 31, 2022 = 91,000

December 31, 2023

Depreciation Expense 9,000
Accumulated Depreciation 9,000

December 31, 2024

Depreciation Expense 9,000
Accumulated Depreciation 9,000

January 1 2022 = 100,000

Dep Exp on Dec 31, 2022 = 9,000 = temporary – wala ga carry over
Accumulated Depre Dec 31, 2022 = 9k – permanent – ga carry over
Carrying Value Dec 31, 2022 = 91k

Dep exp Dec 31, 2023 = 9,000

Total Accum Depr Dec 31, 2023 = 18,000
Carrying Value Dec 31, 2023 = 82,000

Dep Exp on Dec 2024 – 9k

Total Accum Dep Dec 2024 = 27,00
Carrying Value 2024 = 73k

June 1 = 9000 (7/12) = 5250 dep 2022 june 1 – dec 31

Depreciation 2023 = 9000 = Jan1 to dec 31
Dep 2024 – 9k
Accum Dep 2022 – 5250
Accum Dep 2023 - 14250

Doubtful Accounts
Allowance for Doubtful Accounts – Contra Accounts Receivable
Doubtful Accounts Expense – Expense

AR = 100,000, 1%

Doubtful Acc Exp 1,000 (100,000 * 1%) – Expense is dr

ADA 1,000 – CA of Receivable – contra is credit normal
balance

AR = 115,000, 3%, CREDIT balance of 1,000 = 3450 total

DAE 2450 (115,000 * 3%) – 1,000 = 2450

ADA 2450

Net Realizable Value of AR = 111,550 = (115,000 – (115,000*3%))