Professional Documents
Culture Documents
1. On October 1, 20X0, Espree Co. takes out a P10,000 loan and agrees to pay
interest twice each year for the life of the loan: P300 on April 1 and P300 on
October 1. How much interest expense will Espree report on its income
statement for the year ended December 31, 20X0 if:
a. it is on a cash basis?
No interest was paid.
b. it is on the accrual basis?
P150 interest accrued for October, November and December.
2. Near the end of 20X0, JNT Enterprises completes services for a customer and sends
an invoice for P500. As of JNT’s year end, no payment has been received. If JNT
reports 20X0 revenue of P500, it must be using accrual basis accounting.
3. On December 2, 20X1, P&T pays P1,000 to an exterminator for work that will
start in January. If P&T reports on its income statement P1,000 for exterminating
expense for 20X1, it must be using cash basis accounting.
4. For each of the following unrelated scenarios, show how much revenue is
reported on the income statement for 20X0 under the cash basis v. accrual
basis.
5. For each of the following unrelated scenarios, show total expenses reported on
the income statement for 20X0 under the cash basis v. accrual basis.
Cash Basis Accrual Basis
In December 20X0, ByCo runs ads costing
P30,000. ByCo receives the invoice but does P0 P30,000
not pay it until January 20X1.
On December 1, 20X0, KPT pays P2,400 for P2,400 / 12 x
the next 12 months’ property insurance. P2,400 1
= P200
In December 20X0, Andre’s pays P400 to
Homework 1
Mastering Adjusting Entries
Pest Control for 4 months’ service. The first
treatment will be in January 20X1. P400 P0
Homework 2
Mastering Adjusting Entries
Section 2 ACCRUED REVENUE
1. Select the term on the right that best completes the statement on the left.
Terms may be used once, more than once, or not at all.
Failing to make the entry to accrue revenue understate a.
net income. increases
The entry to record accrued revenue increase assets. b. decreases
Accrued revenue is revenue that is earned but not c. overstates
collected
Failing to make the entry to accrue revenue understate d.
assets. understates
The entry to record accrued revenue increase net e. earned
income.
f. unearned
2. Kurtz Rentals rents equipment to Ditka on February 1. Lease terms require Ditka
to make payments to Kurtz of P2,000 each quarter: April 30, July 31, October 31,
and January 31. Kurtz receives payments for April, July, and October.
a. What journal entry should Kurtz record on December 31?
Accrued rent Receivable P 1333.33
Rent Income P 1333.33
b. If this entry is not recorded, how will it affect Kurtz’s financial statements?
Assets will be Understated.
Revenue will be Understated.
Net income will be Understated.
Homework 3
Mastering Adjusting Entries
P 1,575 + P 1,800 = P 3,375
b. If this entry is not recorded, how will it affect Intell’s financial statements?
Assets will be Understated by P 3,600 on the income statement.
Net Profit will be Understated by P 3,600 on the balance sheet.
c. If this entry is not recorded, how will it affect your company’s financial
statements?
Assets will beUnderstated by P 500 on the balance sheet.
Net Profit will be Understated by P 500 on the income
statement.
5. Your company, which has a fiscal year ending October 31, sells scented bars of
soap for a 12% commission. As of October 31, total sales are P400,000. Your
company has received P30,000, which you credited to Revenue.
a. How much additional revenue must you record for the fiscal year?
(P 400,000 x 12% = P48,000 revenue earned- P30,000 revenue booked) =
P18,000
b. What is the journal entry to record the additional revenue?
Accrued Commission Receivable P18,000
Commission Revenue P18,000
d. Explain the impact on the financial statements if this entry is not recorded.
Expense
Net income will be overstated on the income statement.
Liabilities will be understated on the balance sheet.
b. Explain the impact on the financial statements if this entry is not recorded.
e. Explain the impact on the financial statements if this entry is not recorded.
Net income will be overstated on the income statement.
Liabilities will be understated on the balance sheet.
Homework 5
Mastering Adjusting Entries
A P2,000 utility bill booked on October 30, 20X7, was not paid.
Rojo has a P10,000 note payable with a 12% annual interest rate.
Payments are due every six months. The last interest payment was made
on June 30, 20X7.
Rojo’s has 4 salaried employees, each paid P800 a week for a Monday–
Friday workweek. Paychecks are distributed on Fridays. October 31 is a
Thursday.
a. Prepare the adjusting entries required for the year ended October 31, 20X7.
1st bullet: (no need to record because it is already booked)
Utilities Expense P 2,000
Accrued Utilities Payable P 2,000
2nd Bullet:
Interest Expense P 400
Accrued Interest Payable P 400
P 10,000 x 12% = P1,200 annual interest / 12 x 4 months = P 400
3rd Bullet:
Salaries Expense 2,560
Accrued Payable 2,560
P 800 x 4 = P3,200 weekly salaries/ 5 x 4 = P 2,560
b. What Rojo’s net income for 20X7?
Revenue: P 200,000
Interest Expenses: (P 400 )
Salaries Expenses: ( P 2,560)
Net Income P 195,040
Homework 6
Mastering Adjusting Entries
Section 4 REVENUE COLLECTED IN ADVANCE (UNEARNED
REVENUE)
1. At year end, Bijou records an adjusting entry for unearned revenue.
a. If the adjusting entry increases liabilities, what journal entry was recorded
when the cash was received?
AJE increases liabilities:
Revenue xxx
Unearned Revenue xxx
Original Entry:
Cash xxx
Revenue xxx
b. If the adjusting entry increases revenues, show the journal entry that was
recorded when the cash was received.
AJE increases revenue:
Unearned Revenue xxx
Revenue xxx
Original Entry:
Cash xxx
Unearned Revenue xxx
2. WyCo’s fiscal year ends September 30. On September 10, it collects P30,000 for a
painting job and credits Unearned Painting Revenue. As of September 30, 60% of
the work has been done. What adjusting entry must WyCo record on September
30?
Unearned Painting Revenue P18,000
Painting Revenue P18,000
Homework 7
Mastering Adjusting Entries
Original entry:
Cash P12,000
Revenue P 12,000
December 31: P12,000 / 24 x 5 = P2,500.
Remaining: P9,000 = P12,000 – P2.500 transferred to Unearned Revenue.
4. On November 1 ATD enters a 1-year contract to provide security for CorpCo’s
warehouses for P12,000 a year and receives the first 3 months’ payment at signing.
a. If ATD books the payment as revenue, what adjusting entry must it record at
year end? How will its financial statements be misstated if the entry is not
recorded?
Original Entry:
Cash P 3,000
Revenue P 3,000
P 12,000 / 12 x 3 = P 3,000
Adjusting Entries for Revenue:
Revenue P 1,000
Unearned Revenue P 1,000
b. If ATD books the payment as a liability, what adjusting entry must it record at
year end? How will its financial statements be misstated if the entry is not
recorded?
Original Entry:
Cash P 3,000
Unearned Revenue P 3,000
Adjusting Journal Entry:
Unearned Revenue P 2,000
Revenue P 2,000
Homework 8
Mastering Adjusting Entries
5. The following table shows subscription revenue for three unrelated companies:
Company
I II III
Beginning balance in Unearned Subscription P P P
Revenue 2,400 3,000 4,500
Payments received during the year 40,000 25,000 P22,50
0
Ending balance in Unearned Subscription Revenue P3,400 4,000 2,000
Subscription revenue earned during the year 39,000 P24,00 25,000
0
a. Fill in the missing amounts.
I. P 2,400 + P 40,000 = P 42,000 – P 39,000 = P 3,400
II. P 3,000 + P 25,000 = P 28,000 – P 4,000 = P 24,000
III. P 25,000 + P 2,000 = P 27,000 – P 4,500 = P 22,500
b. Ignoring dollar amounts, what journal entries may have recorded the
payments?
payments are recorded as liability:
Cash xxx
Unearned Revenue xxx
6. On February 1, Alta’s collects P60,000 for a job and credits Revenue. As of April 30,
Alta’s year end, 45% of the work is completed. What adjusting entry does Alta record
on April 30?
Revenue P 33,000
Unearned Revenue P 33,000
P 60,000 X 45% = P 27,000 then, P 60,000 – P 27,000 = P 33,000
Homework 9
Mastering Adjusting Entries
As of December 31, 1 month insurance has used. So, ending balance must be
360 / 12 months = P 300.
B. Show the adjusting entry on December 31, 20X7, if the P3,600 payment
was recorded in Insurance Expense.
Prepaid Insurance P 3,300
Insurance Expense P 3,300
As of December 31, 1 month insurance has used. So, ending balance must be
360 / 12 months = P 300. This requires transferring P 3,300 = P 3,600 – P
300 to Prepaid Insurance.
2. GilCo pays P900 for office supplies in April and debits Office Supplies. On May
31, GilCo’s year end, a physical count, finds P200 in supplies.
a. What is the adjusting entry?
Supplies Expense P 700
Supplies P 700
P 900 was purchased less P 200 supplies the are available equals to P 700
supplies are only used.
c. If this entry is not recorded, how will it affect GilCo’s financial statements?
Net income will be overstated.
Assets will be overstated.
Homework 10
Mastering Adjusting Entries
4. On September 1, BarCo signs a 2-year rental agreement paying P6,000 rent in advance.
a. If the prepayment was booked as prepaid rent, what is the year-end adjusting
entry?
Rent Expense P 1,000
Prepaid Rent P 1,000
P 6,000 / 24 months x 4 months = P 1,000
B. If the prepayment was booked as rent expense, what is the year-end adjusting
entry?
Prepaid Rent P 5,000
Rent Expense P 5,000
P 5,000 / 24 months x 4 months =P 1,000 of rent was used during the year. So,
P 5,000 prepaid rent was available for future use.
5. In August, JemCo, which has an October 31 year end, pays P1,200 for office supplies
and records it in Supplies Expense. On October 31, a physical count reveals P440 of
supplies unused.
a. What adjusting entry must JemCo record on October 31?
Supplies P 440
Supplies Expense P 440
P 440 supplies are not used. So, the Adjusting Journal Entry must be transfer P
440 of Supplies Expense to Supplies account.
B. If this entry is not recorded, how will it affect JemCo’s financial
statements?
Supplies expense will be Overstated by P 440
Net income will be understated by P 440
Assets will be understated by P 440
1. GoCo purchases a building for P350,000. If the building has an estimated life of
30 years and a residual value of P50,000, what is the adjusting entry in the year
of purchase?
Depreciation Expense- Building P 10,000
Accumulated Depreciation- Building P 10,000
P 350,000- P 50,000 / 30 years = P 10,000
2. For 20X9, PyCo has credit sales of P200,000. Based on past experience, Pylo
estimates that 3% of credit sales will be uncollectible. At year end, the balance in
Allowance for Doubtful Accounts is P4,000. What is the adjusting entry to record
20X9 bad debt expense?
Bad Debt Expense P 6,000
Allowance for Doubtful Accounts P 6,000
P 200,000 x 3 % = P 6,000
Homework 11
Mastering Adjusting Entries
c. What is the term for the difference between the closing balances in Accounts
Receivable and Allowance for Doubtful Accounts?
4. Match the terms in the lefthand column below with the descriptions on the right.
1. Percentage of credit a. Required to recognize bad debt under GAAP
sales method
2. Direct write-off b. Estimate of bad debt expense based on the
method age of outstanding receivables
3. Allowance method c. Estimate of bad debt based on credit sales
4. Percentage of d. Required to recognize bad debt under tax
accounts receivable law
method
1. C
2. D
3. A
4. B
Homework 12
Mastering Adjusting Entries
a. What do the debits to the Allowance account represent? Show the three journal
entries that led to the three debits in the Allowance account.
1st Journal Entry:
Allowance for Doubtful Accounts P 200
Account Receivable P 200
2nd Journal Entry:
Allowance for Doubtful Accounts P 100
Account Receivable P 100
3rd Journal Entry:
Allowance for Doubtful Accounts P 400
Account Receivable P 400
b. Pruco uses the percentage of credit sales method. If it estimates that 2% of its
P250,000 in credit sales will not be collected, what adjusting entry does PruCo
record to recognize bad debt expense for the year?
Bad Debt Expense P 5,000
Allowance for Doubtful Accounts P 5,000
P 250,000 x 2% = P 5,000
c. Now assume that Pruco uses the percentage of accounts receivable method.
If it estimates that P4,000 of its receivables will not be collectable, what
adjusting entry does PruCo record to recognize bad debt expense for the year?
Bad Debt Expense P 3,450
Allowance for Doubtful Accounts P 3,450
Homework 13
Mastering Adjusting Entries
Section 7 FROM UNADJUSTED TRIAL BALANCE TO FINANCIAL STATEMENTS
1. For each account listed below, fill in the normal balance as “debit” or “credit.”
Homework 14
Mastering Adjusting Entries
2. Shown below, in alphabetical order, are the accounts of A-Plus, Inc. Use the
worksheet on the following page to set up a trial balance for the fiscal year
ending June 30, 20X7.
Homework 15
Mastering Adjusting Entries
A-Plus, Inc.
Trial balance
June 30, 20X7
Debit Credit
Cash P
155,000
Short-term Investments 27,000
Supplies 2,700
Prepaid Insurance 4,000
Equipment 72,000
Accumulated Depreciation- Equipment P33,000
Building 110,000
Accumulated Depreciation- Building 75,000
Land 75,000
Accounts Payable 49,000
Interest Payable 9,000
Rent Payable 3,400
Wages Payable 11,700
Property Taxes Payable 9,000
Unearned Professional Fees 500
Long-term Notes Payable 107,000
J.Crow, Capital 193,900
J. Crow, Withdrawals 49,000
Professional Fees 142,000
Depreciation Expense- Building 4,000
Deppreciation Expense -Equipment 5,000
Interest Expense 1,100
Insurance Expense 1,000
Rent Expense 35,000
Supplies Expense 3,400
Postage Expense 200
Repairs Expense 18,900
Telephone Expense 900
Utilities Expense 1,300
Wages Expense 68,000 _________
TOTALS: 633,500 633,500
Homework 16
Mastering Adjusting Entries
certification exam requires presentation of the financial statements, but only
through the adjusted trial balance. Recommended: Focus on the adjustments and
adjusted trial balance.
3. Below is the adjusted trial balance for Shady’s Illusions. Use this information to
prepare Shady’s income statement and balance sheet for the year.
Homework 17
Mastering Adjusting Entries
Shady’s Illusions
Income Statement
For the year ended December 31, 20X4
Revenue:
Entertainment Revenue P 228,000
Expense:
Rent Expense P26,800
Gas and Oil Expense 3,000
Wage Expense 105,000
Depreciation Expense- Equipment 12,500
Legal Expense 11,400
Total Expenses: (158,700)
Net Income P 69,300
___________________________________________________________________________
Shady’s Illusions
Balance Sheet
December 31, 20X4
Assets:
Cash P158,000
Office Supplies 25,000
Equipment 36,000
Total Assets: P 219,000
Liabilities:
Accounts Payable P 33,000
Wages Payable 12,000
Equity:
S.Shady, Capital* P 174,000
Total Liabilities and Equity: P 219,000
Homework 18
Mastering Adjusting Entries
Important—the following question is optional: Neither certification nor the
certification exam requires presentation of the financial statements, but only
through the adjusted trial balance. Recommended: Focus on the adjustments and
adjusted trial balance.
1. Using Thorne’s unadjusted trial balance below and facts ah, complete the
following worksheet by filling in the adjustments, adjusted trial balance and
financial statements.
Thorne Construction
Unadjusted trial balance
For the year ended July 31, 20X8
Debit Credit
Cash 12,50
0
Accounts Receivable 40,000
Allowance for Doubtful Accounts 2,000
Office Supplies 1,850
Prepaid insurance 6,500
Prepaid Rent
Equipment 154,00
0
Accum. Depreciation Equipment 38,500
Accounts Payable 23,000
Interest Payable
Wages Payable
Long-term Notes Payable 30,000
W. Thorne, Capital 82,300
W. Thorne, Drawing 25,000
Constuction Revenues 112,00
0
Bad Debt Expense
Depreciation Expense–Equipment
Wage Expense 29,400
Interest Expense 900
Insurance Expense
Rent Expense 10,800
Office Supplies Expense
Repairs Expense 100
Utilities Expense 6,75
0
Totals 287,80 287,80
0 0
a. A physical count of office supplies as of July 31, 20X8 shows P800 in supplies on
hand.
Supplies Expense P 1,050
Office Supplies P1,050
P1,850 – P 800 unused supplies = P 1,050
b. On March 1, 20X7, Thorne Construction prepaid P9,000 for an 18-month
insurance policy of which 5 months (P2,500) was used up during fiscal year 20X7.
Insurance Expense P6,000
Homework 19
Mastering Adjusting Entries
Prepaid Insurance P 6,000
P9,000 / 18 months = P500 a month x 12 months = P 6,000
c. The equipment has a 28-year life and no salvage value. Thorne uses straight-line
depreciation.
Depreciation Expense – Equipment P 5,500
Accumulated Depreciation – Equipment P
5,500
P 154,000 / 28 years = P 5,500
d. July’s eletric bill for P420 is not included because it arrived after the worksheet was
prepared.
Utilities Expense P 420
Utilities Payable P 420
e. There are P1,800 of accrued wages as of the fiscal year end.
Wages Expense P 1,800
Wages Payable P 1,800
f. Thorne’s rent of P800 a month is payable quarterly, in advance. Its most recent
payment was P2,400 on June 30, 20X8 to cover July, August, and September
20X8.
Prepaid Rent P 1,600
Rent Expense P 1,600
P 800 x 2 months = P 1,600
g. Thorne estimates bad debt at 2% of credit sales.
Bad Debt Expense P 2,240
Allowance for Doubtful Accounts P 2,240
P 112,000 x 2% = P 2,240
h. The long-term note payable bears interest at 1% a month payable by the 10 th of
the following month. The interest for July has neither been paid nor recorded.
Interest Expense P 300
Interest Payable P 300
P 30,000 x 1% = P 300
Homework 20
Homework 21
Mastering Adjusting Entries
Homework 22
Mastering Adjusting Entries
Utilities Expense 6,75 420 ______ ______ ______ 7,170 _____ ______ ____
0
Totals 287,80 287,80 18,91 18,910 298,06 298,060 63,660 112,00 234,40 186,06
0 0 0 0 0 0 0
Net Income 48,34 48,34
0 0
112,00 112,00 234,40 234,40
0 0 0 0
Homework 23
B. PROBLEMS FOR SECTIONS 1–8
1. Danza Inc. reported income of P440,000 for the year ended June 30, 20X8. However,
the records show that at year end, the following items had not been recorded:
On May 1, 20X8, Danza received a P12,000 advance for a six-month job and
credited Revenue for P12,000.
Interest on a P12,000 note payable bearing a 10% interest rate is paid
quarterly. The last payment was made at the end of May 20X8.
Danza’s payroll is 14 salaried employees, each earning P900 a week for a 5-
day workweek. Friday is payday. June 30 was a Tuesday.
a. Prepare the adjusting entries necessary for the year ended June 30, 20X8.
1st Bullet:
Revenue P 8,000
Unearned Revenue P 8,000
P 12,000 / 6 months = P 2,000 per month x 2 = P 4,000 (earned )
P 12,000 – P 4,000 = P 8,000 (unearned as of June 30, 20X8)
2nd bullet:
Interest Expense P 100
Interest Payable P 100
P 12,000 x 10% = P 1,200 annual interest / 12 months = P 100 per month
3RD bullet:
Salaries Expense P 5,040
Salaries Payable P 5,040
P 900 x 14 employees = P 12,600 weekly salaries
P 12,600 / 5 x 2 = P 5,040
2. Mikado Co. reported income of P224,000 for the year ended December 31, 20X9.
However, a review of the books shows the following items unaccounted for at year
end:
On August 1, 20X9, Mikado received a P27,000 advance for a 9-month job,
recording the payment in Unearned Revenue.
Interest on a P20,000 note payable with a 12% interest rate is paid every 3
months, the last interest payment having been at the end of June 20X9.
Mikado’s payroll is 7 salaried employees, each earning P1,000 a week for a
Monday–Friday workweek. Payday is Friday. December 31 was a Thursday.
Mastering Adjusting Entries
a. Prepare the adjusting entries for the year ended June 30, 20X8.
1st Bullet:
Revenue P 15,000
Unearned Revenue P 15,000
P 27,000 / 9 months = P 3,000 per month x 5 = P 15,000 (revenue for 20X9)
2nd bullet:
Interest Expense P 1,200
Interest Payable P 1,200
P 20,000 x 12% = P 2,400 annual interest / 12 months x 6 months = P 1,200 per
month
3RD bullet:
Salaries Expense P 5,600
Salaries Payable P 5,600
P 1,000 x 7 employees = P 7,000 weekly salaries
P 12,600 / 5 x 4 = P 5,600
b. What is Mikado’s net income for 20X9?
Homework 25
Mastering Adjusting Entries
Depreciation Expense—Equipment -0-
Salaries Expense 24,800
Insurance Expense -0-
Rent Expense 5,500
Supplies Expense -0-
Advertising Expense 6,000
Utilities Expense 6,400 _______
Totals 155,800 155,800
Using the data below, complete the worksheet on the following page by filling in the
adjustments and adjusted trial balance for Champion for the year ended December 31,
20X7.
a. 8 employees are paid weekly. At year end, 3 days’ wages have accrued at P120 a
day for each employee.
Salaries Expense P 2,880
Salaries Payable P 2,880
P 120 x 8 employees x 3 days = P 2,880
b. A physical count shows P600 of office supplies on hand at year end.
Supplies Expense P 3,200
Supplies P 3,200
P 3,800 beginning balance – P 600 ending balance = P 3,200 used up during the
year.
c. P2,600 of prepaid insurance coverage has expired.
Insurance Expense P 2,600
Prepaid Insurance P 2,600
d. Annual depreciation on the equipment is P8,450.
Depreciation Expense- Equipment P 8,450
Accumulated Depreciation- Equipment P
8,450
e. On November 1, Champion contracted for a new job for which it is paid P1,000 a
month. It received a 4-month advance and booked it as unearned fees.
Unearned Fees P 2,000
Fees Earned P 2,000
P 1,000 monthly fee x 2 months = P 2,000 (unearned)
f. A client renewed its contract for 3 months at P1,300 a month, starting on
November 1. The first payment is due on February 28 th.
Accounts Receivable P 2,600
Homework 26
Mastering Adjusting Entries
Fees Earned P2,600
g. The balance in Prepaid Rent is December’s rent.
Rent Expense P 500
Prepaid Rent P 500
Homework 27
Mastering Adjusting Entries
Important—the following question is optional: Neither certification nor the
certification exam requires presentation of the financial statements, but only
through the adjusted trial balance. Recommended: Focus on the adjustments
and adjusted trial balance.
4. Using the adjusted trial balance from Problem 3, complete the Income Statement and
Balance Sheet columns of the worksheet for Champion. When the worksheet is
complete, prepare Champion’s financial statements.
Homework 28
Mastering Adjusting Entries
Homework 29
Mastering Adjusting Entries
Homework 30
Mastering Adjusting Entries
5. Below are the 20X8 unadjusted and adjusted trial balances for Olympic
Consulting. Analyze the differences between the unadjusted and adjusted trial
balances, determine each adjustment that Olympic must have made at year
end and insert it in the Adjustments column. Label each adjustment “(a)”, “
(b),” etc., then put the same letter in the corresponding worksheet cell with a
brief explanation of the adjustment.
Olympic Consulting
Trial balance
December 31, 20X8
Unadjusted Adjusted
trial Adjustments trial balance
balance
Dr Cr Dr Cr Dr Cr
Cash 2,500 2,500
Accounts Receivable 10,00 (a)1,00 11,00
0 0 0
Office Supplies 4,000 (b)1,80 2,200
0
Prepaid Rent 1,800 (c)700 1,100
Office Equipment 15,90 15,900
0
Accum. Depreciation (d) 500
— Office Equipment 4,100 4,600
Accounts Payable 4,000 4,000
Salaries Payable 0 (e)600 600
Utilities Payable 0 (f )400 400
Unearned Consulting (a)1,40
Fees 2,200 0 800
Texiera, Capital 30,50 30,50
0 0
Texiera, Withdrawals 2,100 2,100
Consulting Fees 42,00 44,40
Earned 0 (a)2,40 0
0
Depreciation Expense 0 (d) 500 500
—Office Equipment
Salaries Expense 32,00 (e)600 32,600
0
Supplies Expense 0 (b)1,80 1,800
0
Rent Expense 6,700 (c)700 7,400
Utilities Expense 7,80 (f )400 ______ 8,20
0 0
Total 82,80 82,80 6,400 6,400 85,300 85,30
0 0 0
a.
Homework 31
Mastering Adjusting Entries
Accounts Receivable P1,000
Unearned Consulting Fees 1,400
Consulting Fees Earned P 2,400
The firm recorded the adjustment because during the year P1,400 was received
for services not yet performed. The initial entry is Cash debited and Unearned
Consulting Fees credited. So, at the end of the year, P2,400 of consulting services
had been completed, but not recorded. And P1,000 was not yet paid.
When the office supplies were purchased, the initial entry was Office Supplies
debited and Cash credited. So, at end of the year, P2,200 of supplies were on
hand,so Olympic should record an AJE to account for supplies used up during the
year.
Based on the trial balance,Olympic recorded Prepaid Rent debited and Cash
credited. So, at end of the year, P700 of rent had been used up, so Olympic have to
recorded an AJE to reduce the balance in Prepaid Rent by crediting it P700 and
transferring this amount to Rent Expense,which it debited forP700.
Olympic should debit Depreciation Expense- equipment for P500 and credit
Accumulated Depreciation- equipment for P 500 in order to record depreciation
expense on the equipment for the year.
Homework 32