UNIVERSITY OF CEBU – LAPULAPU AND MANDAUE

COLLEGE OF BUSINESS AND ACCOUNTANCY

NAME: Rich Angelie S. Muñez ACCTG. 111

CLASS SCHEDULE: MW 2:00pm-3:00pm MRS. C. PANIMDIM, MSBA, CPA

ADJUSTING ENTRIES AND PROMISSORY NOTES

I.IDENTIFICATION:

Accrued Expense 1. An expense that is already incurred by the business but not
yet paid when the accounting period ends.
Nominal Accounts 2. Refers to income and expense accounts.
Net Realizable Value 3. The difference between Accounts Receivable and the related
allowance for doubtful accounts.
Real Accounts 4. Refers to balance sheet accounts.
Net Book Value 5. The difference between cost of asset and its related valuation
account.
Periodicity Concept 6. Another term for Time-period assumption.
Adjusting Entry 7. An entry that splits the nominal and real accounts from a
mixed account.
Mixed Account 8. An account which contains both nominal and real accounts.
Prepaid Expense 9. An expense that is already paid but not yet incurred.
Accrued Income 10. An income that is already earned but not yet received or
collected.
Depreciation Expense 11. An expired cost of a fixed asset that is charged to expense.
Matching Principle 12. Combined principle of revenue and expense recognition.
Pre-collected Income 13. An income that is already received but not yet earned.
Cut-off Period 14. Segregation of all elements or accounts belonging to a
particular date only.
Uncollectible Account Expense 15. Provision for doubtful accounts without passing the
Principal 16. Refers to the face value of the note.
Maker 17. A person or business entity who makes the promissory note
and makes payment of the said note as it falls due.
Interest 18. Refers to the charge for a borrowed money.
Payee 19. A person or business entity to whom the promise is given
and receive the payment of the said note as it falls due.
Maturity Value 20. Refers to the total amount due upon its maturity date which
comprise of the principal amount and the interest earned.
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II. Determine the maturity date , interest and maturity value of the following
notes. ( Date of issue: August 1, 2020)

Maturity date Interest Maturity value

1.A P70,000, 6 ¾% , 60-day note Sept. 30, 2020 787.50 70,787.50

2.A P50,000, 5 ¼%, 90-day note Oct. 31, 2020 656.25 50,656.25

3. A P200,000, 8 ½%, 120-day note Nov. 30,2020 5,666.67 205,666.67

III.
A. From the following independent adjustment items at calendar year-end
(2020), present adjusting journal entries. Show computations in good form.
( Use account titles which you think are appropriate under the
circumstances.)

1. Accrued interest on notes:

Note to a supplier, 12%, 90-day, dated November 1, 2020, P150,000.

Note from a customer, 6%, 120-day, dated October 1, 2020, P200,000

Supplier :
I = Prt
I = (150,000)(. 12)(90/360)
= 4500 ×60 / 90
= P 3,000

Adjusting entry :
Dec 31 2020 Interest Expense 3,000
Accrued Interest Expense 3,000
To record unpaid interest to a supplier

Customer :
I = Prt
I = (200,000)(.06)(120/360)
= 4000 × 90 / 120
= P 3,000

Adjusting entry :

Dec 31 2020 Accrued Interest Income 3,000

Interest Income 3,000
To record income earned but not yet collected

2. A collection of P80,000 from a client was previously credited to

Unearned Service Income. ½ of the collection is estimated to have been
earned.

80,000 × ½ = 40,000

Adjusting entry :
Unearned Service Income 40,000
Service Income 40,000
To record the earned portion of the service income

3. A cash drawing of P20,000 by the owner, Dr. Pilapil was erroneously

debited to Salaries Expense.

Wrong entry :
Salaries Expense 20,000
Cash 20,000
Correct entry :
Pilapil, Drawing 20,000
Cash 20,000

Adjusting entry :
Pilapil, Drawing 20,000
Salaries Expense 20,000

4. A payment for telephone bills of P1,895 was erroneously recorded as

follows: Utilities Expense 1,985
Cash 1,985

Correct Entry
Utilities Expense 1,895
Cash 1,895

P 1,985 – P 1,895 = P 90

Adjusting entry:
Cash 90
Utilities Expense 90

5. Unused office supplies – P1,475. The original amount was P2,000.

P 2,000 – P 1,475 = P 525

Adjusting entry :
Office Supplies Expense 525
Unused Office Supplies 525
To record cost of supplies used
 6. The company drew a one year insurance policy on its building on May 1,
2020, the entry being: Insurance Expense 15,000
Cash 15,000

May 1, 2020 – May 1, 2021 in the amount of 15,000

15,000/12 mos. = 1,250/mo
May 1, 2020 – Dec 31, 2020 = 8 months (expense portion)
1,250 × 8 months = 10,000 (expense portion)
Jan 1, 2021 – May 1, 2021 = 4 months (asset portion)
1,250 × 4 months = 5,000 (asset portion)

Adjusting entry:

Prepaid Insurance 5,000

Insurance Expense 5,000
To record the unexpired portion of the insurance premium paid

7. The following property and equipment were on the records of the

enterprise:
Scrap Estimated Date
Cost Value Life Acquired

Store Equipment P150,000 P 5,000 5 years 4/01/2020

Office Equipment 140,000 10,000 10 years 6/01/2019
Furnitures 60,000 8,000 4 years 10/01/2020

Store Equipment 150,000 – 5,000 / 5 / 12 × 9 = 21,750

Adjusting entry :
Depreciation Expense 21,750
Accumulated Depreciation 21,750
Store Equipment
To record the depreciation expense for 2020

Office Equipment 140,000 – 10,000 / 10 = 13,000

Adjusting entry :
Depreciation Expense 13,000
Accumulated Depreciation 13,000
Office Equipment
To record the depreciation expense for 2020

Furnitures 60,000 – 8,000 / 4 / 12 / × 3 = 3,250

Adjusting entry :
Depreciation Expense 3,250
Accumulated Depreciation 3,250
Furnitures
To record the depreciation expense for 2020

8. The business has an outstanding Accounts Receivable of P200,000 and

has already provided an Allowance for Doubtful Accounts in the amount
of P10,000. The Allowance for Doubtful Accounts should be increased
by P 10,000.

Adjusting entry :
Doubtful Accounts 10,000
Allowances for Doubtful 10,000
Accounts
To record the provision for uncollectible accounts

9. Salaries of employees were unpaid, P 26,000.

Adjusting entry :
Salaries Expense 26,000
Accrued Salaries Expense 26,000
To record unpaid salaries of employees

10.Rental collection was received in advance, P18,400. An income account

was credited. At the end of the period, P2,400 is not yet earned.
Adjusting entry :
Rental Income 2,400
Unearned Rental Income 2,400
To record the unearned portion of rental income collected in advance

11. Paid an insurance premium amounting to P20,000. Asset method was

used. At the end of the period, P4,000 has actually expired.

Adjusting entry :
Insurance Expense 4,000
Prepaid Insurance 4,000
To record the expense portion of the insurance premium paid

12.An interest on Notes Receivable was received in advance in the amount

of P4,200. Liability account was credited. At the end of the period,
P1,200 is actually earned.

Adjusting entry :
Unearned Interest Income 1,200
Interest Income 1,200
To record the earned portion of the interest from notes receivable

13.A purchase of supplies was debited to an expense account, P6,800.

P1,400 cost of supplies were actually on hand when the period ended.

Adjusting entry :
Supplies 1,400
Supplies Expense 1,400
To record the unexpired portion of supplies

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 14.An interest that has been accrued from customer’s borrowed money,
P15,000.

Adjusting entry :
Accrued Interest Income 15,000
Interest Income 15,000
To record income earned but not yet collected

15.The business showed in part the Accounts Receivable and its related
Allowance for Doubtful Accounts as follows:
DR. CR.

Accounts Receivable 150,00

Allowance for Doubtful Accounts 15,000

The provision for doubtful accounts should be increased to 12% of the

outstanding accounts receivable balance.

150,000 × 12% = 18,000

18,000 – 15,000 = 3,000

Adjusting entry :
Doubtful Accounts 3,000
Allowances for Doubtful Accounts 3,000
To record the provision for uncollectible accounts

16.Cash received from customer for services rendered was not recorded in
the book. This is covered by Cash Invoice No. 0145 dated December 31,
2020 in the amount of P8,000.

Cash 8,000
Service Income 8,000