SAMSON, EIZZEL MARIE C.

AC 301 MWF 2-3:00PM

Atlas Retail Company Analysis of Prepaid Expense Account: Adjusting Journal Entries
1.
Unexpired fire insurance 250
Insurance Expense 250

The unexpired fire insurance is debited in order to increase the amount by P250 pesos
because the entire P1, 000 of fire insurance is not covered according to the policy of the
insurance company. Meanwhile, the insurance expense is credited in order to decrease it by P250
because the entire P1, 000 pesos of fire insurance as of December 31,20x7 is still regarded as
part of an asset.

2.

Insurance Expense 150

Unexpired Liability Insurance 150

The insurance expense is debited in order to increase the amount by P150 pesos since the
insurance that was already covered on December 31, 20x7 is P4, 750. Meanwhile, the unexpired
liability insurance is credited to in order to reduce the amount by P150. This is done to address
the overstated unexpired liability insurance of P4, 900 from the company’s prepaid expense
analysis.

3.

Utility deposits 2,000

Prepaid utility deposit 2,000

The utility deposits is regarded as current assets in the event that it is relied upon to be
returned by a utility company within the year. Moreover, the deposit account of prepaid utility is
credited on the grounds that it isn't fit to be incorporated as a part of the prepaid expenses of the
organization as of December 31, 20x7 and lastly, the utility deposit is considered as a deferred
charge.
4.

Advances to Officers 500

Loan to officers 500

The advances to officers is charge to debit account in order to increase the amount by
P500 whereas, the loan to officers is charge to the credit account since it is a non-trade receivable
and it is not included as part of the prepaid expenses of the company.

5.

Office Equipment 800

Purchase of postage meter, one 400
half of invoice price
Account Payable 400

The Office equipment is charge to the debit account by P800 because of the purchase of
postage meter the increase in the supplies of office equipment should be recorded. The recorded
postage meter is said to be only half billed the price so it should be multiplied by 2. Meanwhile,
the purchase of postage meter is charge to the credit account since it is not appropriate to record
the account as a prepaid expense because it is a purchasing account rather than a prepaid
expense. Additionally, the P400 pesos accounts payable is charge to the credit account as well to
realize the increase of the payable for purchasing the postage meter at half of the price of the
invoice.

6.

Discounts on bonds payable 3,000

Bond discount 3,000

Those that are recognize as discount bonds are bonds that are traded below the par value.
The scenario in the Atlas Company is that they issued a bond at a discount and mistakenly
recorded it as part of the prepaid expense. Moreover, the discounts on the bonds payable is
charge to the debit account by P3, 000 pesos to express the increase of the bonds payable
discounts. Meanwhile, the one charge in the credit account is the bond discount because the
account is not regarded as part of the prepaid expense of the company. Also, the discounts made
on the bonds reduces its value and it is deducted from the amount of bonds payable, therefore, it
is not considered as prepayment but a contra- liability account.

7.

Accounts receivable-others 2,700

Advertising Expense 1,150
Advertising of store opening 3,850

The advertisements of the store opening needs to be adjusted as the input in the original
document is higher than actual transaction, they record P9,600 pesos instead of P6,900 which has
a remaining excess of P2,700, which means that there is an increase in the advertising agency
accounts receivable. Meanwhile, there will be a decrease on the advertising of the store opening.
Nevertheless, the expense is already incurred for 6 months, P6, 900/6 is equals to P1, 150 and the
P1, 150 pesos is the total expense for the advertisement.

8.

Accounts receivable-others 700

Amount due for overpayment on 700
purchase of fixtures

The scenario here is that there is an overpayment with regards to the purchased of
fixtures by the company. Therefore, the receivables is charge to the debit account to record the
overpayment of P700 pesos accounts receivable of the company. Meanwhile, overpayments due
to the purchased of fixtures is charge to the credit account since it is not regarded as a prepaid
expense and the overpayment of purchases is not the same as prepaid expense.
9.

Loss on obsolete inventory 8,300

Unsalable inventory –entered 8,300
June 30, 20x5

Those losses on the obsolete inventory is charged to the debit account to record the losses
of the company because of the presence of an obsolete inventory. Meanwhile, unsalable
inventory is charge to the credit account since it is not regarded as part of prepaid expense of the
company, this inventories are already obsolete and not considered as prepaid.

10.

Machinery for sale 550

Book value of obsolete machinery 550
held for resale

The machinery that is already obsolete is charge to the credit account because it is held
for resale and not consider as prepaid expense but regarded as a part of inventory of the
company. Meanwhile, the machinery for sale that is still part of the inventory but it is already
considered as obsolete and it is being sold on its book value. Thus, it is charge to the debit
account to record the increase of machinery for sale.

11.

Deposit on Contracts 1,000

Funds delivered to New Stores 1,000
with purchase offer

The deposit on contract is charge to the debit account since it a bilateral agreement
relating to the reservation fee for the sale of particular product or property. As proof of good
faith, it is debited in order to identify the amount paid made by the Atlas Company when
purchasing New Store to be held in escrow. Meanwhile, the money sent to the New store in a
purchase offer is charged to the credit account because it is not regarded as prepaid expenses of
the company. Hence, it is only considered as fund and purchase offer by the Atlas Company to
secure the purchase of New Store.

12.

Unused postage stamps 700

Postage and telephone expense 700

The unused postage stamp is charged to the debit account in order for the asset account to
increase because it was incorrectly recorded as part of expense. In addition, the postage and
telephone expense are charged to the credit account in order to correct the misstated account of
unused postage stamps and record it as an expense at the time the purchase is made.