Financial Accounting and Reporting

Chapter 4
Accounting Cycle of a Service Provider: Journalizing, Posting, Trial Balance, Adjustments and Financial
Statements

Problem 3
Robert Espiritu began operation to provide credit collection services on September 2017. The
Unadjusted trial balance as of September 30, 2017 is as shown below:

Robert Espiritu
Trial Balance
September 30,2017

Cash and Cash equivalent P174,000

Accounts Receivable 96,200
Office Supplies 10,500
Prepaid insurance 24,000
Equipment 300,000
Notes Payable P100,000
Accounts Payable 123,500
Unearned Service Income 50,000
R. Espiritu, Capital 200,000
R. Espiritu, Drawings 6,000
Service income 176,200
Salaries expense 12,000
Transportation expense 13,000
Rent expense 12,000
Miscellaneous Expenses 2,000
------------- --------------
TOTAL P649,700 P649,700
========
=========

Additional data:
a. Unused office supplies on September 30,2017 is P7,500.
b. The Equipment was acquired on September 1, 2017 with useful life of 5 years and
with estimated residual value of P30,000.
c. Interest on the notes payable is 18%. The note was issued on September 1, 2017.
d. The prepaid insurance is for a period of six months taken September 1, 2017.
e. Service income earned but unbilled, P3,800.
f. 60% of the Unearned service income has been earned as of September 30,2017.
g. Aging of the accounts receivable indicates the following;
Age Amount % of Collectability
0 -10 days P55,000 100%
11 -20 days 20,000 90%
21 - 30 days 25,000 70%

Required:
1. Enter the unadjusted trial balance on a worksheet and complete the worksheet.
2. Journalize the adjusting entries.
3. Prepare the adjusted trial balance
4. Prepare the financial statements
a. Statement of Financial Position
b. Statement of Profit or Loss
c. Statement of Changes in Equity
5. Journalize the closing entries.
6. Post the closing entries.
7. Prepare the Post-closing Trial Balance.
8. Prepare the reversing entries.