Exercise 1

Prepare the adjusting entry for each of the following for year ended December 31, 2010.
1. Paid Trio Insurance Co. P 33,000 one year car insurance to commence August 1, 2010. The amount of
premium was debited to Prepaid Insurance.
2. Borrowed P 200,000 from Metro Bank issuing a one-year note with 12% annual interest on April 30,
2010.
3. Bought P 20,000 equipment with five-year estimated life and a salvage value of P 2,000. Depreciation
is computed on a straight line basis.
4. Received P 51,000 cash advance from a customer for one year services to be rendered starting June
30, 2010. The amount was credited to Unearned Service Income.
5. Purchased P 7,100 supplies at the beginning of the year. Supplies remaining at the end of the year
amounted to P 2,900. Use the asset method.
6. Accounts receivable has a balance of P 130,000. It is estimated that P 5,000 of this is uncollectible.

Solutions:
2010
1 Insurance Expense 13,750
Prepaid Insurance 13,750
(P 33,000/12 x 5 = P 13,750)

2 Interest Expense 16,000

Accured Interest Payable 16,000
(P 200,000 x .12 x 8/12 = P 16,000)

3 Depreciation Expense 3,600

Accumulated Depreciation 3,600

Cost 20,000
Depreciable cost 18,000
Annual Depreciation 3,600

4 Unearned Service Income 25,500

Service Income 25,500
(P 51,000 x 6/12 = P 25,500)

5 Supplies Expense 4,200

Supplies 4,200
(P 7,100 - 2,900 = P 4,200)

6 Bad Debts Expense 5,000

Allowance for Bad Debts 5,000

Exercise 2

Prepare the adjusting entry for each of the following for year ended December 31, 2010.
1. Received P 63,000 cash advance from a customer for one year services to be rendered starting June
1, 2010. The amount was credited to Unearned Service Income.
2. Paid one year rent in the amount of P 180,000 to commence August 31, 2010. The amount of premium
was debited to Prepaid Rent
3. Purchased P 5,900 supplies at the beginning of the year. Supplies used for the year amounted to P
1,750. Use the Asset Method.
4. Received an 18% P 120,000 note on May 1, 2010. Interest will be paid together with the principal on
maturity date.
5. Bought P 42,000 equipment with five-year estimated life and a salvage value of P 3,000. Depreciation
is computed on a straight line basis.
6. Accounts receivable has a balance of P 50,000. It is estimated that 5% of this is uncollectible.
Allowance for Bad Debt has a balance of P 1,500.

2010
1 Unearned Service Income 36,750
Service Income 36,750
(P 63,000 x 7/12 = P 36,750)

2 Rent Expense 60,000

Prepaid Rent 60,000
(P 180,000 x 4/12 = P 60,000)

3 Supplies Expense 1,750

Supplies 1,750

4 Interest Receivable 14,400

Interst Income 14,400
(P 120,000 x .18 x 8/12 = P 14,400)

5 Depreciation Expense 7,800

Accumulared Depreciation 7,800

Less: Salvage Value 3,000

Depreciable cost 39,000
Annual Depreciation 7,800

6 Bad Debts Expense Allowance 1,000

Allowance for Bad Debts 1,000

Required Allowance
P 50,000 x .05 P 2,500
Less: Credit balance of Allowance 1,500
Bad Debts Expense for the year P 1,000

Exercise 1

L. Ching Company presented the following information pertaining to accounts to be adjusted.

1. On September 30, L. Ching Co. paid 6 months insurance premium P 21,000. (Use Asset Method)
2. Office Supplies account shows a balance of P 10,000 at the beginning of the year. A count of office supplies at the
 end of the year amounted to P 3,800.
3. On December 1, L. Ching Co. received P 39,000 for services to be rendered for the next 3 months starting on
December 1. This was credited to Unearned Service Income.
4. L. Ching Co. acquired office equipment on January 1, 2010 worth P 40,000. The equipment is expected to be
used for 5 years after which it is expected to be worthless.
5. Estimated doubtful accounts for the year is P 4,000. Allowance for Doubtful accounts has a balance of P 1,000.
6. On December 31, accrued salaries amounted to P 27,000. This will be paid on January 5, 2011.

Solution:
2010
1 Insurance Expense 10,500
Prepaid Insurance 10,500
(P 21,000/6 x 3 = P 10,500)

2 Supplies Expense 6,200

Supplies 6,200
(P 10,000 - 3,800 = P 6,200)

3 Unearned Service Income 13,000

Service Income 13,000
(P 39,000/3 x 1 = P 13,000)

4 Depreciation Expense 8,000

Accumulated Depreciation 8,000

Cost 40,000
Less: Salvage Value 0
Depreciable cost 40,000
Annual Depreciation 8,000

5 Doubtful Accounts Expense 3,000

Allowance for Doubtful Accounts 3,000

Esitmated Doubtful Accounts 4,000

Less: Credit Balance of Doubtful Accounts 1,000
Doubtful Accounts Expense 3,000

6 Salaries Expense 27,000

Salaries Payable 27,000

Exercise 2

Flora Company presented the following information pertaining to accounts to be adjusted.

1. On July 30, Flora Co. paid 6 months rent, P 48,000.This was debited to Prepaid Rent.
2. Office Supplies account shows a balance of P 13,000 on Jan. 1, 2010. A count of office supplies on Dec. 31
showed supplies balance of P 4,200.
3. On November 1, Flora Co. received P 54,000 for services to be rendered for the next 3 months starting November
1. This was credited to Unearned Service Income.
4. Flora Co. acquired office equipment on January 1 , 2010 for P 60,000. The equipment is expected to be used for 6
 years after which it is expected to be worthless.
5. Estimate doubtful accounts for the year is P 1,500.
6. On December 31, received utility bill for the month in the amount of P 5,600. This will be paid on January 3, 2011.

Solutions:
2010
1 Rent Expense 40,000
Prepaid Rent 40,000
(P 48,000/6 x 5 = P 40,000)

2 Supplies Expense 8,800

Supplies 8,800
(P 13,000 - 4,200 = P 8,800)

3 Unearned Service Income 36,000

Service Income 36,000
(P 54,000/3 x 2 = P 36,000)

4 Depreciation Expense 10,000

Accumulated Depreciation 10,000

Cost 60,000
Less: Salvage Value 0
Depreciable cost 60,000
Annual Depreciation 10,000

5 Bad Debts Expense 1,500

Allowance for Bad Debts 1,500

6 Utilities Expense 5,600

Utilities Payable 5,600

Assignment 1

Presented is the year-end unadjusted trial balance of Look New Repair Shop

Look New Repair Shop

Trial balance
December 31, 2016

Cash P 50,000
Accounts Receivable 59,000
Prepaid Rent 78,000
Equipment 127,000
Accumulated Depreciation-Equipment P 25,000
Accounts Payable 66,000
L, Capital 100,000
L, Withdrawal 50,000
Repair Income 320,000
Rent Expense 75,000
Salaries Expense 45,000
Utilities Expense 27,000
P 511,000 P 511,000

Year-end adjustments:
a) Rent Expense for the year is P 28,000.
b) Depreciation Expense for Equipment is P 25,000.
c) Allowance for Bad Debts is P 3,000.
 Look New Repair Shop
Worksheet
For Year Ended December 31, 2010
No. Account Title Trial Balance Adjustments Adjusted Trial Balance Income Sta

Debit Credit Debit Credit Debit Credit Debit

110 Cash P 50,000 P 50,000
120 Accounts Receivable 59,000 59,000
130 Prepaid Rent 78,000 1) 28,000 50,000
140 Equipment 127,000 127,000
150 Accumulated P 25,000 2) 25,000 P 50,000
Depreciation
210 Accounts Payable 66,000 66,000
280 L, Capital 100,000 100,000
290 L, Drawing 50,000 50,000
310 Repair Income 320,000 320,000
410 Rent Expense 75,000 75,000 P 75,000
420 Salaries Expense 45,000 45,000 45,000
430 Utilities Expense 27,000 27,000 27,000
Totals P 511,000 P 511,000

Rent Expense 1) 28,000 28,000 28,000

Depreciation Expense 2) 25,000 25,000 25,000
Bad Debts Expense 3) 3,000 3,000 3,000
Allowance for Bad Debts 3) 3,000 3,000
P 56,000 P 56,000 P 539,000 P 539,000 P 203,000
Net Income 117,000
P 320,000