ADJUSTING JOURNAL ENTRIES

Evangeline Jamili Landscaping Service has the following completed transactions:

DEPRECIATION
March 1 Bought a used backhoe from Mobile Equipment, P62,000, paying P30,000
in cash and the balance on account. Equipment will be used for three years

Original Journal Entry

01-Mar Equipment 62,000
Cash 30,000
Accounts Payable 32,000

Adjusting Journal Entry

31-Mar Depreciation Expense - Equipment 1,722
Accumulated Depreciation 1,722

Computation:
Depreciation = (Cost - Salvage Value) / Estimated Useful Life
= (62000 - 0) / 36
= 1,722

PREPAYMENT
March 1 Paid rent for the year, P60,000

Original Journal Entry - Asset Method

01-Mar Prepaid Rent 60,000
Cash 60,000

Adjusting Journal Entry

31-Mar Rent Expense 5,000
Prepaid Rent 5,000

Original Journal Entry - Expense Method

01-Mar Rent Expense 60,000
Cash 60,000

Adjusting Journal Entry

31-Mar Prepaid Rent 55,000
Rent Expense 55,000

Computation
Used (Expense) = 1/12 months * 60,000 = 5,000
Unused (Asset) = 11/12 months * 60,000 = 55,000
PREPAYMENT
March 1 Bought liability insurance for one year, P9,000 Prepayment

Original Journal Entry - Asset Method

01-Mar Prepaid Insurance 9,000
Cash 9,000

Adjusting Journal Entry

31-Mar Insurance Expense 750
Prepaid Insurance 750

Original Journal Entry - Expense Method

01-Mar Insurance Expense 9,000
Cash 9,000

Adjusting Journal Entry

31-Mar Prepaid Insurance 8,250
Insurance Expense 8,250

Computation
Used (Expense) = 1/12 months * 9,000 = 750
Unused (Asset) = 11/12 months * 9,000 = 8,250

PREPAYMENT
March 14 Bought supplies on account from Office Decor, P2,400. On March 31,
there's P900 worth of supplies unused

Original Journal Entry - Asset Method

01-Mar Supplies 2,400
Accounts Payable 2,400

Adjusting Journal Entry

31-Mar Supplies Expense 1,500
Supplies 1,500

Original Journal Entry - Expense Method

01-Mar Supplies Expense 2,400
Accounts Payable 2,400

Adjusting Journal Entry

31-Mar Supplies 900
Supplies Expense 900

Computation
Used (Expense) = 2,400 - 900 = 1,500
Unused (Asset) = 900
DEFERRED REVENUE - money received in advance for products or services that are going to be
performed in the future
March 20 Received 100,000 from a client for a service to be rendered every 25th of
the month for four months starting March. Jamili renendered services on
March 25 for the first month

Original Journal Entry - Liability Method

01-Mar Cash 100,000
Unearned Landscaping Revenue 100,000

Adjusting Journal Entry

25-Mar Unearned Landscaping Revenue 25,000
Landscaping Revenue 25,000

Original Journal Entry - Revenue Method

01-Mar Cash 100,000
Landscaping Revenue 100,000

Adjusting Journal Entry

31-Mar Landscaping Revenue 75,000
Unearned Landscaping Revenue 75,000

Computation
Earned (Revenue) = 1/4 * 100,000 = 25,000
Unearned (Liability) = 3/4 * 100,000 = 75,000

ACCRUALS - expenses incurred but not yet paid (no invoice/billing)

March 29 The company didn't receive billing for telephone but estimated to be
around P1,860

Adjusting Journal Entry

31-Mar Communication Expense 1,860
Accrued Communication Expense 1,860

March 30 Salaries of the employees, P13,400 payable every 5th and 20th of the
month

Adjusting Journal Entry

31-Mar Salaries & Wages 13,400
Accrued Salaries & Wages 13,400