PROBLEMS CHAPTER 1

Required: What entries are required to bring the account up to date?

1. In analyzing the accounts of Loz Corp, the adjusting data listed below are (Ignore income tax consequences).
determined on December 31, 2020, the end the accounting period.
3. The following accounts were taken from the trial balance of Ciara Love Co.
a. The prepaid insurance account shows a debit of P360,000, representing cost as of December 31, 2020. Given the information below, make the necessary
of a 2-year fire insurance policy dated July 1, 2020. adjusting entries: Sales Revenue, P90,000; Interest Revenue, P5,000;
b. On Sept. 1, 2020, Rent Revenue was credited for P375,000 representing Equipment, P46,000; Accumulated Depreciation-Equipment, P12,000; Mdse
revenue from sub rental for a 5-month period beginning on that date. Inventory beginning, P20,000; Advertising expense, P2,000; Selling expense,
c. Advertising materials purchased for P24,750 during the year was recorded P6,000 and Interest expense, P1,000.
in the advertising expense account. On Dec. 31, advertising materials
costing P2,750 are on hand. a. The equipment has an estimated useful life of 5 years and a salvage value
d. On November 1, P30,000 was paid on rent for a 6-month period beginning of P1,000. Depreciation is calculated using the straight-line method.
on that date. The rent expense account was debited. b. Ending Mdse Inventory is P28,000.
e. Miscellaneous Office Expense was debited for office supplies of P13,500 c. P1,000 of the selling expense has been paid in advance.
purchased during the year. On Dec. 31, office supplies of P3,200 are on d. Interest of P500 has accrued on notes receivable
hand. e. P400 of advertising expense was incorrectly debited to selling expense
f. Interest of P352 is accrued on notes payable.
4. On May 16, 2020, Liza paid insurance for a 3-year period beginning June 1.
Required: Give the adjusting entry for each item. She recorded the payment as follows:
Prepaid Insurance 12,240
2. Upon inspecting the books and records of Muchoy Corp. for the year ended Cash 12,240
December 31, 2020, you find the following data. a. What adjustment is required on December 31? What reversing entry, if
any, would you make?
a. A receivable of P3,800 from Corky is determined to be uncollectible. The b. What nominal account could be debited instead of Prepaid Insurance?
company maintains an allowance for doubtful accounts for such losses. What adjusting entry would be needed under these circumstances? What
b. A creditor, ESQ Co. has just been awarded damages of P22,000 as a result of reversing entry, if any, would you make?
breach of contract during the year by Muchoy Co. Nothing appears on the
books in connection with this matter. 5. The data listed below were obtained from an analysis of the accounts of N
c. A fire destroyed part of a branch office. Furniture and fixtures that cost Co. as of March 31, 2020, in preparation of the annual report. N records
P102,000 and had a book value of P78,000 at the time of the fire were current transactions in nominal account and does not reverse adjusting
completely destroyed., The insurance company agreed to pay P65,000 entries. What are the appropriate adjusting entries?
under the provision of the fire insurance policy.
d. Advances of P11,500 to salespersons have been previously recorded as sales a. Prepaid Insurance has a balance of P141,000. N has the following policies in
salaries expense. force
e. Machinery at the end of the year shows a balance of P186,000. It is Policy Date Term Cost Coverage
discovered that additions to this account during the year totaled P4,460, but A 1/1/20 2 years P36,000 Shop Equipment
of this amount P8,000 should have been recorded as repairs. Depreciation B 12/1/19 6 months 18,000 Delivery Equipment
is to be recorded at 10% on machinery owned throughout the year, but at C 7/1/19 3 years 12,000 Buildings
one half this rate on machinery purchased or sold during the year.
b. Unpaid subscription revenue has a balance of P562,250. The following account at the end of the fiscal year. Give the remaining entries to close the
subscription were collected in the current year. There are no other books assuming:
unexpired subscription.
a. The business is a sole proprietorship: The owner, DHL, has made
Inception Amount Term withdrawals of P14,000 during the year.
July 1, 2019 ……………………………………. P270,000 1 year b. The business is a partnership: the owners, DHL and BLO share profits 5:3,
October 1, 2019 ……………………………… 222,000 1 year they have made withdrawals of P250,000 and P160,0000 respectively, and
January 1, 2020 ……………………………… 288,000 1 year these amounts are reported in drawing accounts.
April 1, 2020 ………………………………….. 207,000 1 year c. The business is a corporation: the ledger reports Additional Paid-in Capital,
P2,500,000; Retained Earnings, P1,000,000; dividends during the year
c. Interest Payable has a balance of P82,500. N owes a 10%, 90-day note for amounting to P325,000 were recorded in a Dividend account.
P450,000 dated March 1, 2020.
d. Supplies has a balance of P21,900. An inventory of supplies revealed a total 8. On Nov. 1, the capital of JH was P850,000 and on November 30 the capital
of P14,100. was P951,000. During the month, H withdrew merchandising costing
e. Salaries Payable has a balance of P97,500. The payroll for the 5-day P50,000 and on November 25 paid a P100,000 note payable of the business
workweek ended April 3 totaled P112,500. with interest of 10% for three months with a check drawn on a personal
checking account. What was H’s net income or loss for the month of
6. CC Co. uses the assets and liability approach in accounting for prepaid November?
expenses and unearned income. Selected account balance t the end of the
current and prior year are presented below. The company does not make 9. The following information is taken from the records of Mario Shop:
reversing entr4ies, and accrued expenses and revenues are adjusted only at
year end. Bal 1/1/20 Bal 12/31/20 Transactions during 2020
Adjusted bal 12/31/19 Adjusted bal 12/31/20 Accruals:
Prepaid rent ……………………………..P48,000 P36,000 Interest Receivable 8,100 9,750
Salaries and Wages Payable …….. 25,000 45,000 Prepaid Rent 16,500 17,250
Unearned Consulting Fees ……… 130,000 64,000 Interest payable 12,000 14,250
Interest Receivable …………………. 12,000 ` 18,000 Cash receipts and payments
Interest on notes receivable ` 18,600
During 2020 CC Co.paid P100,000 for rent and P500,000 for wages, Wages 960,000
P1,080,000 was received for consulting fees and P24,000 was received as Interest on notes payable 139,500
interest.
Compute the interest revenue, the wages expense, and the interest expense
a. Provide the entries that were made at December 20, 2020, to adjust the for the year 2020.
accounts to the year end balance above.
b. Determine the proper amount of Rent Expenses, Salaries and Wages 10. BF Inc. reported the following correct account balances, as shown below:
Expense, Consulting fees revenue and interest revenue to be reported on Jan. 1, 2020` Dec. 31, 2020
the current year income statement Prepaid insurance P64,000 P92,000
Prepaid Rent 14,000 10,000
7. LT shows a credit balance in the Income Statement summary account of Wages Payable 34,000 24,000
P676,000 after the revenue and expense items have been transferred to this Income Taxes Payable 20,000 22,000
The correct expense amounts as reported on the 2020 income statement that
are associated with the above accounts are listed below: Insurance expense,
P88,000; Rent expense, P42,000; Wages Expense, P520,000 and Income tax
expense, P270,000. Determine the amount of cash paid out during the year for
each type of expense.

11. Total accounts receivable for the B Co. were as follows: On January 1,
P60,000; On January 31, P63,000. In January, P95,000 was collected on
accounts, P6,000 was received for cash sales, accounts receivable of P7,000
were written off as uncollectible, and sales allowances of P1,000 were
made. What amount should be reported for gross sales on the income
statement for January?