Adjusting Entries

Subtitle
•In A Nutshell

•The unadjusted trial balance of Charisma Beauty Parlor is shown below. Prepare adjusting journal entries using the
additional information as follows:

•Additional Information:

a. A review of the insurance policies showed that P4,000 had expired at the end of the period.

b. An inventory of supplies revealed a balance of P8,350 were still unused.

c. Estimated depreciation on the equipment for the year is P25,000

d. Accrued interest on the loans payable is P8,000.

e. On Dec. 1, the entity signed a contract with an event organizer in Davao city which is effective immediately, to be
the official hair dresser and make-up artist in all events sponsored by the organizer for P50,000. The organizer
paid for five months service in advance.

f. Salaries are paid on Saturdays. The weekly payroll is P15,000. Assume that Dec. 31 falls on a Thursday and the
entity has a six-day pay week.

• Take note of the accounting period, it ends on Dec. 31, 2019 (as reflected in the trial balance).
a. Insurance expense 4,000
Prepaid insurance 4,000
To record the expense portion of the insurance.

b. Parlor Supplies expense 66,650

Parlor Supplies 66,650
To record the supplies used for the period.

c. Depreciation expense 25,000

Accumulated Depreciation 25,000
To record the depreciation for the period.
D. Interest expense 8,000
Interest Payable 8,000
To record the unpaid interest for the period.

E. Unearned revenue 10,000

Service Income 10,000
To record the earned portion of unearned revenue.

F. Salaries Expense 10,000

Salaries payable 10,000
To record unpaid salaries for the year.
Account titles Trial Balance Adjust- ments Adjusted Adjusted TB
Debit Credit Debit Credit Debit Credit

Cash 186,960 186,960

Accts. Rec. 65,000 65,000

Prepaid insurance 12,000 a. 4,000 8,000

Parlor supplies 75,000 b. 66650 8,350

Equipment 580000 580,000

Accum dep. 50,000 c. 25,000 75,000

Accts payable 13,000 13,000

Unearned 50,000 e. 10000 40,000

revenue

Loans payable 250,000 250,000

C. Capital 250,000 250,000

C. Drawing 50,000 50,000

Account titles Debit Credit Debit Credit Debit Credit

Insurance exp a. 4000 4000

Parlor supp. expe b. 66650 66650

Depreciation exp c. 25000 25000

Interest payable d. 8000 8000

Salaries payable F. 10000 10,000

TOTAL 1,793,300 1793300 123,650 123,650 1836300 1836300

The Financial Statements

Charisma Beauty Parlor

Income Statement

For the year ended Dec. 31, 2019

Service Income 1,190,300

Less: Expenses
Salaries expense 560,000
Rent expense 72,000
Transpo Exp. 22,000
Interest expense 118,000
Other exp 70,340
Iinsurance expense 4,000
Parlor supp. Expe 66,650
Depreciation exp 25,000937,990
252,310