JOURNAL ENTRIES

DATE PARTICULARS DEBIT CREDIT

Instruction: Prepare Journal entries on the date of the transactions using asset and expense method and
income and liability method if deferral and its adjusting entries on December 31,2017.

1.     On November 1, 2017, the business borrowed P 850,000 at 8 % payable 1 year after. The interest was deducted in advance .
JOURNAL ENTRY ASSET METHOD EXPENSE METHOD
CASH 782,000 CASH 782,000
PREPAID INTEREST 68,000 INTEREST EXPENSE 68,000
NOTES PAYABLE 850,000 NOTES PAYABLE

INTEREST = PRINCIPAL X INTEREST RATE X TIME = 850,000 X 8% X 12/12 = 68,000

2.     Purchased supplies amounted to P 30,000. On December 31,2017, P 3,500 of supplies were unused.
ASSET METHOD EXPENSE METHOD
SUPPLIES 30,000 SUPPLIES EXPENSE 30,000
CASH 30,000 CASH

3.     Unearned rent account has a balance of P 250,000 as of December 31, 2017. An amount of P 120,000 is applicable for January, 2
LIABILITY METHOD INCOME METHOD
CASH 250,000 CASH 250,000
UNEARNED RENT INCOME 250,000 RENT INCOME

UNEARNED RENT INCOME = DECREASED BY 130,000 = DR UNEARNED RENT INCOME = INCREASED BY 12

RENT INCOME = INCREASED BY 130,000 = CR RENT INCOME = DECREASED BY 120,000 = DR
ADJUSTING ENTRY ADJUSTING ENTRY
UNEARNED RENT INCOME 130,000 RENT INCOME 120,000
RENT INCOME 130,000 UNEARNED RENT INCOME

4.     The business received a 24 months, 10% note from customer on April 1, 2017 amounting to P 150,000 for services rendered.

5.     August 1, 2017, borrowed P 380,000 from a multipurpose cooperative on a 24-months, 8% per annum note payable.
The principal plus interest is payable at the end of the term.

6.     Weekly payroll is P 120,000, paid every day Friday for a five -day workweek. Assume December 31,2017,
falls on a Wednesday so the employees will not be paid until Friday.

7.     On Sunday,January 1, 2018, the company, which is on a six- day workweek, will pay its regular salaried employees P 350,000.

8.     Invested P 250,000 cash in a certificate of deposit that paid 10% annual interest.
The certificate was issued on June 1 and carried a 18 months term to maturity.
9.     Rental collection was received in advance, P85, 000. At year end 60% was earned.

JOURNAL ENTRY LIABILITY METHOD JOURNAL ENTRY INCOME METHOD

CASH 85,000 CASH 85,000
UNEARNED RENT INCOME 85,000 RENT INCOME

UNEARNED RENT INCOME = DECREASED BY 51,000 = DR UNEARNED RENT INCOME = INCREASED BY 34

RENT INCOME = INCREASED BY 51,000 = CR RENT INCOME = DECREASED BY 34,000 = DR
ADJUSTING ENTRY ADJUSTING ENTRY
UNEARNED RENT INCOME 51,000 RENT INCOME 34,000
RENT INCOME 51,000 UNEARNED RENT INCOME

10.  Paid an insurance premium amounting to P 60,000. At the end of the period, P 25,000 is expired.
JOURNAL ENTRY ASSET METHOD JOURNAL ENTRY EXPENSE METHOD
PREPAID INSURANCE 60,000 INSURANCE EXPENSE 60,000
CASH 60,000 CASH

PREPAID INSURANCE = DECREASED BY 25,000 = CR PREPAID INSURANCE = INCREASED BY 60,000 =

INSURANCE EXPENSE = INCREASED BY 25,000 = DR INSURANCE EXPENSE = DECREASED BY 60,000
ADJUSTING ENTRY ADJUSTING ENTRY
INSURANCE EXPENSE 25,000 PREPAID INSURANCE 60,000
PREPAID INSURANCE 25,000 INSURANCE EXPENSE

11.  Office equipment was acquired on February 1, 2017 that cost P 120,000. It is estimated that it will last for

12.  Refer to number 11, what is the amount of depreciation expense on December 31,2018?
 PAID 68,000/12 5667 EXPENSE MONTHLY
s deducted in advance . 12 MONTHS 68,000 PAID
EXPENSE METHOD ASSET METHOD 1 ASSET 10 MONTHS X 5667
PREPAID INTEREST 68,000 2 EXPENSE 2 MONTHS X 5667
12 MONTHS
850,000 EXPENSE METHOD
INTEREST EXPENSE 68,000
ASSET METHOD
CORRECT AMOUNT SUPPLIES = DECREASED BY 26,500
EXPENSE METHOD SUPPLIES 3500 ASSET SUPPLIES EXPENSE = INCREASED BY 26,500
SUPPLIES EXPENSE 26,500 EXPENSE
30,000 PAYMENT 30,000 ADJ.
SUPPLIES EXPENSE 26,500
SUPPLIES 26,500
is applicable for January, 2018.
INCOME METHOD CORRECT AMOUNT EXPENSE METHOD
UNEARNED RENT INCOME 120,000 SUPPLIES = INCREASED BY 3500
250,000 RENT INCOME 130,000 SUPPLIES EXPENSE = DECREASED BY 3500
250,000
OME = INCREASED BY 120,000 = CR
EASED BY 120,000 = DR

120,000

for services rendered.

SUPPLIES 3500
SUPPLIES EXPENSE 3500
note payable.

ed employees P 350,000.
 INCOME METHOD CORRECT AMOUNT
UNEARNED RENT INCOME 34,000
85,000 RENT INCOME 51,000
85,000
OME = INCREASED BY 34,000 = CR
EASED BY 34,000 = DR

34,000

EXPENSE METHOD CORRECT AMOUNT

PREPAID INSURANCE 60,000
60,000 INSURANCE EXPENSE 25,000
85,000
= INCREASED BY 60,000 = DR
= DECREASED BY 60,000 = CR

60,000
 ADJUSTING ENTRIES
ENSE MONTHLY
CORRECT ASSET METHOD INTEREST EXPENSE 11,333
56,667 PREPAID PREPAID INTEREST = DECREASED BY11,333 PREPAID INTEREST
11,333 EXPENSE INTEREST EXPENSE = INCREASED BY 11,333
68,000
PREPAID INTEREST INTEREST EXPENSE
68,000 11,333 11,333

56,667 11,333
SED BY 26,500 ADJUSTING ENTRIES
EXPENSE METHOD

INTEREST EXPENSE = DECREASED BY 56,667 PREPAID INTEREST 56,667

PREPAID INTEREST= INCREASED BY 56,667 INTEREST EXPENSE

SED BY 3500 PREPAID INTEREST INTEREST EXPENSE

56,667 68,000 56,667

56,667 11,333
11,333

56,667