SUBJECT CODE: ACCOUNTING 11

QUIZ NO: Number 2

SUBJECT NAME: ACCOUNTING FOR SERVICE AND MERCHANDISING ENTITIES
TOPIC: ADJUSTMENTS – Prepaid Expenses and Doubtful Accounts

Requirements: Write your answers DIRECTLY, CLEARLY and LEGIBLY in a 1

whole sheet of paper or anything convenient to you. This is good for 3 1/2
hours quiz. After answering, TURN IN your work in our Google Classroom.
Late submissions means DEDUCTION.

1. On May 1, Mativo paid P8,000 for two months’ rent in advance. This
expenditure resulted to an asset consisting of the right to occupy the
office for two months. A portion of the asset expires and becomes an
expense each day. By May 31, one half of the asset expired, and should
be treated as an expense.
a. Prepare adjusting journal entries for the expiration of one month’s rent.
b. After adjustments, how much is the balance of Prepaid rent account?
c. After adjustments, how much will reflect for the rent expense account?
2. Mativo acquired a one-year comprehensive insurance coverage on the
service vehicle and paid P14,400 premiums. In a manner similar to
prepaid rent, prepaid insurance expires daily.
a. Prepare adjusting journal entries for the expiration of one month’s insurance.
b. After adjustments, how much is the balance of Prepaid insurance account?
c. After adjustments, how much will reflect for the insurance expense account?
3. On May 8, Mativo purchased supplies, P18,000. During the month, the
entity used supplies in the process of performing services for clients.
There is no need to account for these supplies everyday since the
financial statement will not be prepared until the end of the month. At
the end of the Month, Anton made a careful physical inventory of the
supplies. The inventory showed that supplies costing P15,000 are still
on hand.
a. Prepare adjusting journal entries for the consumption of supplies.
b. After adjustments, how much is the balance of Supplies account?
c. After adjustments, how much will reflect for the supplies expense account?
4. Assume that the entity made credit sales of P1,100,000 and
P2,000,00o Acounts recievable in 2021 and prior experience indicates
an expected 1% average uncollectible rate based on credit sales and
based on Accounts receivable. Data shows that Allowance for Doubtful
Accounts has a balance of 10,000.
a. Prepare adjusting journal entries based on credit sales.
b. Prepare adjusting journal entries based on Accounts receivable.
c. After posting, how much is the balance of the Allowance for Doubtful Accounts
based on credit sales?
 d. After posting, how much is the adjustments needed of the Allowance for
Doubtful Accounts based on accounts receivable?
5. On October 1, 2020, Agrado Company acquired a 3-year insurance
policy for P36,000 paid in advance.
Initial Entry is recorded as: October 1, 2020
1. An Asset
Prepaid Insurance P36,000
Cash P36,000

2. An Expense
Insurance Expense P36,000
Cash P36,000

At the end of the year, an adjusting journal entry is needed to establish the proper
balances in the prepaid insurance and insurance expense accounts.
a. At the end of the year, what is the adjusting journal entries? (ASSET Method)
b. At the end of the year, what is the adjusting journal entries? (EXPENSE Method)

1. a. 5/31 Rent Expense 4,000.00

Prepaid Rent 4,000.00
b. Php 13,200.00
c. Php 1,200.00
2. a. Insurance Expense 1,200.00
Prepaid Insurance 1,200.00
b. Php 13,200.00
c. Php 1,200.00
3. a. 5/31 Supplies Expense 3,000.00
Supplies 3,000.00
b. Php 15,000.00
c. Php 3,000.00
4. a. Doubtful Accounts 11,000.00
Allowance for Doubtful Accounts 11,000.00
Note: 1,100,000.00 x1% = 11,000.00
b. Doubtful Accounts 20,000.00
Allowance for Doubtful Accounts 20,000.00
Note: 2,000,000.00 x1% = 11,000.00
c. Php 1,089,000.00
d. Php 20,000.00
5. a. Prepaid Insurance 3,000.00
Cash 3,000.00
b. Insurance Expense 3,000.00
Prepaid Insurance 3,000.00