Problem 1

Prepare the adjusting entries for Christine Tan Cargo under each of the following for the year ending
December 31, 2019

a. Paid P24,000 for a 1-year insurance policy to commence on September 1. The amount of was
debited to Prepaid Insurance.
b. Borrowed P100,000 by issuing a 1-year note with 7% annual interest to Century Savings Bank on
October 1, 2019.
c. Pai P160,000cash to purchase a delivery van on January 1. The van was expected to have a 3-
year life and a P10,000 salvage value. Depreciation is computed using straight-line method.
d. Received on P18,000 cash advance for a contract to provide services in the future. The contract
required a 1-year commitment, starting April 1
e. Purchased P6,400 of supplies on account. At year’s end, P750 of supplies remained on hand.
f. Invested P90,000 cash in a certificate of deposit that paid 4% annual interest. The certificate was
acquired on May 1 and carried a 1-year term to maturity.
g. Paid P78,000 cash in advance on Sept. 1 for a 1-year lease on office space.

Problem 2

Prepare the adjusting entry for each of the following situations. The last day of the accounting period is
December 31.

a. The payment of the P19,000 insurance premium for two years in advance was originally
recorded as Prepaid Insurance. One year of the policy is now expired.
b. All employees earn a total of P10,000 per day for a five-day week beginning on Monday and
ending Friday. They were paid for the workweek ending December 26. They worked on Monday,
December 29, Tuesday, December 30, and Wednesday, December 31.
c. The supplies account had a balance of P4,480 on January 1. During the year, P11,000 of supplies
were bought. A year-end inventory showed that P6,400 worth of supplies are still on hand.
d. Equipment costing, P588,000 has a useful life of five years with an P80,000 salvage value at the
end of five years. Record the depreciation for the year.
Problem 3

On June 30, 2019, the end of fiscal year, the following information is available to Noel Lim’s accountant
for making adjusting entries:

a. Among the liabilities of the entity is a P2,400,000 mortgage payable. On June 30, the accrued
interest on this mortgage amounted to P120,000
b. Assume than on July 2, a Friday, the entity, which is on a five-day workweek and pays employees
weekly, paid its regular salaried employees P192,000.
c. On June 29, the entity completed negotiations and signed a contract to provide services to a
new client at an annual rate of P36,000.
d. The supplies account showed a beginning balance of P16,150 and purchases during the year of
P37,660. The year-end inventory revealed supplies on hand of P11,860.
e. The Prepaid Insurance account showed the following entries on June 30:
Beginning balance P15,300
January 1 29,000
May 1 33,660

The beginning balance represents the unexpired portion of a one-year policy purchased
in April of the previous year. The January 1 entry represented a new one-year policy, and the May 1
entry is the additional coverage of a three-year policy.

f. The following table contains the cost and annual depreciation for buildings and equipment, all of
which were purchased before the current year:
Account Cost Annual Depreciation
Buildings P1,850,000 P73,000
Equipment 2,180,000 218,000

g. On June 1, the entity completed negotiations with another client and accepted an advance of
P210,000 for services to be performed next fiscal year. The P210,000 was credited to the
Deferred Service Revenues.
h. The entity calculated that as of June 30 it had earned P35,000 on a P75,000 contract that will be
completed and billed in August.

Prepare the adjusting entries.