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Prepare the adjusting entry for Christine Gamba Company under each of the following transactions for the year ending
December 31, 2017.
1. Paid P24,000 for a 1-year insurance fire policy to commence on Sept. 1. The amount of premium was debited to
Insurance Expense.
2. Purchased P 6,400 of supplies on account. At year’s end, P 5,000 worth of supplies was used during the
operation.
3. The entity purchased a delivery van worth P 500,000 and a market value of P 480,000. The delivery van was used
for the operation of the business. The estimated depreciation on the vehicle for the year was P 128,000.
Adjusting Entries:
Exercises:
a. The balance in the ledger account Office Supplies amounted to P 32,000. A count of the Office Supplies on Dec.
331, 2017 totaled P 12,800.
b. On Oct. 1, Gloria Diaz Company paid P 10,800 for 6-months’ rent. Prepare the adjusting entry on Dec. 31, 2017.
c. The entity acquired Office Equipment costing P352,800 on May 1, 2017. The equipment is expected to last 5
years after which it will be worthless. Compute for the depreciation expense as of Dec. 31, 2017.
d. Gloria Diaz received P 22,800 on Nov. 1 from a customer for service to be rendered during the months of
November to February. On December 31, 2 months’ worth of service is already done.
Answers:
Office Supplies Expense 19,200
Office Supplies 19,200
a. Borrowed P 100,000 by issuing a 1-year note with 7% annual interest to BPI on Oct. 1, 2017.
b. Salary is paid on Saturdays. The weekly payroll is P 25,200. December 31 falls on Thursday. The company has a
six-day pay per week. The company has only one employee.
c. On December 31, Lipa Motors completed repairs on one of the trucks at a cost of P 8,000; the amount is not yet
recorded on Dec. 31, and by agreement it will be paid during Jan. 2018.
d. Received P 90,000 note in a certificate of deposit that paid 4% annual interest. The certificate was received by
the entity on May 1 and carried a 1-year term before maturity.
Answers:
Exercises:
a. Three-days’ salaries are unpaid as at December 31. Salaries are P75,000 for a five-day work week.
b. In December 31, a real property tax assessment for P16,000 on land owned during 2017 was received from the
BIR. The taxes, which are unpaid and unrecorded, are already due but the company intends to pay them on
January 15, 2018.
c. The P900,000 note payable was issued on October 31, 2017. It will be repaid in 12 months together with an
interest at an annual rate of 24%.
d. The entity has P2,000,000 sales and P4,500,000 sales on account for the year. It is estimated that 5% of the
credit sales are uncollectible at year-end.
Answers:
Salaries Expense 45,000
Salaries Payable 45,000