PAMANTASAN NG LUNGSOD NG PASIG

ALCALDE JOSE, PASIG 1600 METRO MANILA

SCHOOL YEAR- 2020
BY: PROF. COMBO
ADJUSTING ENTRIES
ASSIGNMENT 2

PROBLEM 1
Use the following information for the next four questions: Entity A is preparing its December 31,
20x1 financial statements. Provide the year-end adjusting entries for the following:
1. Entity A entered into a 1-year contract for a billboard advertising on August 1, 20x1. The

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monthly rent for the billboard is P200,000, payable at the start of each month. Entity A

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has paid the rentals for the months of August to November 20x1.

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Dec. 31,20x1 Advertising Expense- Billboard 200,000

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Advertising Payable 200,000
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To record the billboard advertising expense.
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2. Entity A received a 10%, P180,000, one-year, note receivable from a customer on
October 31, 20x1. Both the principal and interest on the note are due on November 1,
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20x2.
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Dec. 31,20x1 Interest Receivable 3,000

Interest Income 3,000
To accrue interest income earned but not yet
collected.
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3. Entity A acquired a machine on November 30, 20x1 for P420,000. The machine has an
estimated useful life of 8 years.
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Dec. 31,20x1 Depreciation Expense 4,375 4,375

Accumulated Depreciation
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To record the depreciation expense for the

period.

4. Entity A has total accounts receivable of 890,000 as of December 31, 20x1. Of that
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amount, P45,000 were estimated to be doubtful of collection.

Dec. 31,20x1 Bad Debts Expense 45,000

Allowance for Bad Debts 45,000
To record the bad debts expense for the period.

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 Splitting of mixed accounts
5. On May 1, 20x1, Entity B received one-year advanced rent of P480,000 from one of its
tenants. The advanced rent covers the months of May 1, 20x1 to April 30, 20x2.
Requirements:
a. Provide the journal entry to record the collection on May 1, 20x1 under each of
the following Methods:
i.Liability method
ii.Income Method
Liability Method Income Method
May 1,20x1 May 1,20x1
Cash 480,000 Cash 120,000
Unearned Rent. 480,000 Rent Income 120,000
To record the receipt of 1 year rent in advance. To record the receipt 1-year rent in advance.

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b. Provide the adjusting entries on December 31, 20x1 under each of the methods

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listed above.

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Liability Method Income Method
Dec 31,20x1 Dec 31,20x1

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Unearned Rent 320,000 Unearned Rent 160,000
Rent Income rs e
320,000 Rent Income 160,000
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To recognize the earned portion of rent income. To recognize the portion of the 1 year rent in
advance unearned the 1 year rent in advance.
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6. On August 1, 20x1, Entity C paid one-year insurance of P360,000.

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Requirements:
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a. Provide the journal entry to record the prepayment on August 1, 20xl under each
of the following Methods:
i. Asset method
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ii. Expense method

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Asset Method Expense Method

Aug. 1,20x1 Aug. 1,20x1
Prepaid Insurance 360,000 Insurance Expense 360,000
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Cash 360,000 Cash 360,000

To record the paid insurance for the year. To record the insurance expense.
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b. Provide the adjusting entries on December 31, 20x1 under each of the methods
listed above.
Asset Method Expense Method
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Dec. 31,20x1 Dec. 31,20x1

Insurance Expense 360,000 Prepaid Insurance m 360,000
Prepaid Insurance 360,000 Insurance Expense 360,000
To recognize the used portion of the insurance To recognize the unused insurance in the end
in the end of the period. of the period.

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 PROBLEM 2
1. Entity A has 100 employees, each earning an average daily rate of P600. Entity A's last
salary payment date in 20x1 was on December 27, 20x1. However, 25 employees were
required to render overtime work during the last three days of December 20x1. The
compensation for the overtime work, which was considered "double-time pay," was paid
during the first week of January 20x2. What is the adjusting entry on December 31,
20x1?
Dec. 31, 20x1 Salaries Expense 45,000
Salaries Payable 45,000
To accrue salaries expense

2. Entity A received a 10%, P1,000,000, one-year, note from a customer on August 1, 20x1.
Both the principal and interest on the note are due at maturity date. What is the adjusting
entry on December 31, 20x1? (Round-off amounts to two decimal places).

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Dec. 31, 20x1 Interest Receivable 41,666.67

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Interest Income 41,666.67

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To accrue interest income earned but not yet

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collected.

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3. Entity A issued a 12%, P350,000, one-year, note payable on May 1, 20x1. Entity A uses
a calendar year period. The principal and interest on the note are due on May 1, 20x2.
What is the adjusting entry on December 31, 20x1?
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Dec. 31, 20x1 Interest Expense 28,000

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Interest Payable 28,000 28,000

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To accrue interest income earned but not yet

collected

4. Entity A received billing for mobile charges and internet fees for the month of December
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20x1 totaling P13,000. Prior to payment, what is the entry to record the receipt of the
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billing?
Dec. 31, 20x1 Utilities Expense 13,000
Utilities Payable 13,000
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To accrue unpaid utilities

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5. On March 31, 20x1, Entity A acquires a pickup truck for P1,600,000. The truck has an
estimated useful life of 5 What is the adjusting entry on December 31, 20x1 to take up
depreciation expense?
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Dec. 31, 20x1 Depreciation Expense 240,000

Accumulated depreciation 240,000
To record the depreciation expense for the
period.

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 6. Entity A's unadjusted trial balance as of December 31, 20x1 shows "Prepaid supplies" of
P34,000. The year-end physical count of supplies revealed unused supplies amounting
toP8,000. What is the adjusting entry?
Dec. 31, 20x1 Supplies expense 26,000
Prepaid Supplies 26,000
To record the prepaid supplies

7. Entity A's unadjusted trial balance as of December 31, 20x1 shows "Supplies expense"
of P34,000. The year-end physical count of supplies revealed unused supplies
amounting to P8,000. What is the adjusting entry?
Dec. 31, 20x1 Supplies Expense 34,000
Prepaid Supplies 8,000
Accounts Payable 26,000
To record the supplies expense.

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8. Entity A's unadjusted trial balance as of December 31, 20x1 shows accounts receivable
of P340,000 and no allowance for bad debts. Entity A estimates that 3% of the accounts

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are doubtful of collection. What is the adjusting entry?

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Dec. 31, 20x1 Bad Debts 10,200

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Allowance for bad debts 10,200
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To credit the bad debts expense.
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