Assignment 5

Adjusting the accounts

Instruction: Prepare the answers in written form using a clean paper (e.g. Yellow pad, bond paper,
notebook etc.) and submit a snapshot in CANVAS.

M. Legend company’s annual accounting period ends on December 31, 2019. The following information
concerns the adjusting entries as of that date.

a. The office supplies account started the year with P5,000. During 2019, the company purchased
supplies for P15,000 which was added to the office supplies account. The inventory of supplies available
on December 31, 2019 totaled P3,000.

b. An analysis of the company’s insurance policies provided the following facts. The total premium for
each policy was paid in full (for all months) at the purchase date, and the Insurance expense account
was debited for the full cost.

POLICY DATE OF PURCHASE MOS. OF COVERAGE COST

A April 1, 2019 24 P50,000
B May 1, 2019 36 P100,000
C August 31, 2019 12 P20,000

c. On October 1, 2019 the company rented space to a tenant for P3,000 per month. The tenant paid five
months in advance on that date. The collection was recorded by the company to unearned rent revenue
account.

d. Since the company is not large enough to occupy the entire building it owns, it rented space to
another tenant starting November 1, 2019. The tenant paid in advance amounting to P60,000 for one
year rental. The collection was initially recorded by the company as income from rentals.

e. The company has a P10,000 bank loan on October 1, 2019 with 8% interest per annum. The company
will pay the interest and principal in cash after 6 months.

f. Wages expenses of P5,000 have been incurred but not paid as of December 31.

g. The company has earned P300 interest revenue from investments for the year ended December 31.
The interest revenue will be received on January 15 following the company’s year-end.