ADJUSTING ENTRIES

Accrued Income
P1,200,000 Bonds Receivable with 10% interest was issued on October 1.
Adjusting entry for December 31 is? Paid on September 30 of next year.

Accrued Expense
Employees are paid P100,000 per 5-day week, and payment is done every Friday.
December 31 falls on a Wednesday. What is the adjusting entry for salaries?

Prepayments/Deferred Expense
Payment of P120,000 was made to Sunstar Co. on October 1 for advertising
good for one year. What are the original and adjusting entries?

Asset Method: Prepaid Advertis

Expense Method: Advertising Expe

Deferrals/Deferred Income
Cash worth P120,000 was received on October 1 for rentals
good for one year. What are the original and adjusting entries?

Liability Method Cash

Income Method Cash

Doubtful Accounts
Accounts Receivable = P500,000
Allowance for Doubtful Accounts = P5,000 credit balance
Sales = P500,000

Based on Sales (Rate 1.5%)

 Based on Accounts Receivable (Rate 1.5%)

Based on Aging of Accounts Receivable (Aging Table = 14,000)

Depreciation

Purchased Equipment worth P1,200,000 on January 1. Life of the equipment is Equipment

10 Years. What is the entry for depreciation on December 31.

Purchased Equipment worth P1,200,000 on October 1. Life of the equipment is Equipment

10 Years. What is the entry for depreciation on December 31.

Following the first entry for depreciation, what is the entry if the equipment was sold for Accumulated De
P500,000 on January 1 of the 6th Year. Cash
Loss on Sale

Following the first entry for depreciation, what is the entry if the equipment was sold for Accumulated De
P700,000 on January 1 of the 6th Year. Cash
 ORIGINAL ENTRY
Particulars PR Debit Credit Particulars

Interest Receivable
Interest Income

Salaries Expense
Salaries Payable

Prepaid Advertising 120,000.00 Advertising Expense

Cash 120,000.00 Prepaid Advertising

Advertising Expense 120,000.00 Prepaid Advertising

Cash 120,000.00 Advertising Expense

Cash 120,000.00 Unearned Rent Revenue

Unearned Rent Revenue 120,000.00 Rent Revenue

Cash 120,000.00 Rent Revenue

Rent Revenue 120,000.00 Unearned Rent Revenue

Doubtful Accounts Expense

Allowance for Doubtful Acc
 Doubtful Accounts Expense
Allowance for Doubtful Acc

Doubtful Accounts Expense

Allowance for Doubtful Acc

Equipment 1,200,000.00 Depreciation Expense - Equipm

Cash 1,200,000.00 Accumulated Depreciation

Equipment 1,200,000.00 Depreciation Expense - Equipm

Cash 1,200,000.00 Accumulated Depreciation

Accumulated Depreciation - Equipment 600,000.00

Cash 500,000.00
Loss on Sale 100,000.00
Equipment 1,200,000.00

Accumulated Depreciation - Equipment 600,000.00

Cash 700,000.00
Equipment 1,200,000.00
Gain on Sale 100,000.00
 ADJUSTING ENTRY Payment (Ne
Particulars PR Debit Credit

Interest Receivable 30,000.00 Sept. 30 Cash

Interest Income 30,000.00

Salaries Expense 60,000.00 Jan. 2 Salaries Paya

Salaries Payable 60,000.00 Salaries Expe

Advertising Expense 30,000.00

Prepaid Advertising 30,000.00

Prepaid Advertising 90,000.00

Advertising Expense 90,000.00

Unearned Rent Revenue 30,000.00

Rent Revenue 30,000.00

Rent Revenue 90,000.00

Unearned Rent Revenue 90,000.00

Doubtful Accounts Expense 7,500.00 *Discuss write-off and recovery for both d
Allowance for Doubtful Accounts 7,500.00
Doubtful Accounts Expense 2,500.00
Allowance for Doubtful Accounts 2,500.00

Doubtful Accounts Expense 9,000.00

Allowance for Doubtful Accounts 9,000.00

Depreciation Expense - Equipment 120,000.00 *Discuss entries for sale of equipment

Accumulated Depreciation - Equipment 120,000.00

Depreciation Expense - Equipment 30,000.00 DEC 31 NP Depreciation

Accumulated Depreciation - Equipment 30,000.00
 Payment (Next Period)

Cash 120,000
Interest Receivable 30,000
Interest Income 90,000

Salaries Payable 60,000

Salaries Expense 40,000
Cash 100,000

nd recovery for both direct and allowance method

sale of equipment

Depreciation Expense - Equipment 120,000

AD 120,000
The books reveal a total balance of P500,000 for Accounts Receivable.
The ages of the accounts are given as follows:
0-30 days P200,000
31-60 days P150,000
61-90 days P120,000
beyond 90 days P30,000
P500,000

The doubtful accounts rates are as follows:

0-30 days 1%
31-60 days 2%
61-90 days 5%
beyond 90 days 10%

Total Allowance of Doubtful Accounts at the end of the period is

AGE RECEIVABLES AMOUNT RATE ALLOWANCE AMOUNT

0-30 days P200,000 1% P2,000 If Allowance for
31-60 days P150,000 2% P3,000
61-90 days P120,000 5% P6,000 Doubtful Accou
beyond 90 days P30,000 10% P3,000
P14,000
If Allowance for Doubt Accounts has a debit balance of P5,000, entry would be:

Doubtful Accounts Expense 19,000

Allowance for Doubtful Accounts 19,000
 TRANSACTIONS Allowance Method
Particulars PR
1. Allowance of P5,000 was made. Doubtful Accounts Expense
Allowance for Doubtful Accounts

2. Accounts Receivable worth P10,000 Allowance for Doubtful Accounts

was written off Accounts Receivable

3. Accounts worth P7,000 was recovered Accounts Receivable

Allowance for Doubtful Accounts
Method Direct Writeof
Debit Credit Particulars PR Debit
5000 NO ENTRY
5000

10000 Bad Debts Expense 10000

10000 Accounts Receivable

7000 Accounts Receivable 7000

7000 Bad Debts Expense
Credit

10000

7000