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ASSIGNMENT 8: End-of-the Period Adjustments
I. Sonny Tan Bakeshop borrowed P600,000 from the bank on September 1,

2020.
The note carried an 8% annual rate of interest and was set to mature on Feb.
28,2021. Interest and principal were paid in cash on the maturity date.
Required:
1. What was the amount of interest expense paid in cash in 2020?
ANSWER: P 0
2. What was the amount of interest expense recognized on the 2020 income
statement? ANSWER: P 16,000
3. What was the amount of total liabilities shown on the 2020 balance
sheet? ANSWER: P 616,000
4. What was the total amount of cash that was paid to the bank on Feb. 28,
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2021 for principal and interest? ANSWER: P 624,000
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5. What was the amount of interest expense shown on the 2021 income
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statement? ANSWER: P 8,000
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II. Reynaldo San Mateo, an angel investor, decided to invest P1,200,000 excess
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cash in a certificate of deposit on April 1, 2020. The certificate carried an 8%
annual rate of interest and a 1-year term to maturity. Interest will be withdrawn
monthly (disregard tax effects).
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Required:
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1. What amount of income will be recognized for the year ending Dec. 31,
2020? ANSWER: P 72,000
2. What is the effect of the adjusting entry on the accounting equation?
ANSWER: Increase in Asset and Owners Equity (Income)
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3. What amount of cash will be collected for interest revenue in 2020? P

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ANSWER: 72,000
4. What is the amount of interest receivable as of Dec. 31, 2020?
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ANSWER: P 24,000
5. What amount of cash will be collected for interest revenue in 2021?
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ANSWER: P 24,000
6. What amount of interest revenue will be recognized in 2021?
ANSWER: P 24,000
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7. What is the amount of interest receivable as of Dec. 31, 2021?

ANSWER: P 0
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III. The preliminary trial balance of Tagum Traders, owned by Merry Chris Ceniza
as of Dec. 31, 20A showed in part the Accounts Receivable and its related
Estimated Uncollectible Accounts:
Debit Credit
Accounts Receivable P300,000
Estimated Uncollectible Account P 4,000
1. If at the end of the year, the Estimated Uncollectible Account is to be

provided at 3% of its outstanding receivable, what would the amount of
adjustment be? ANSWER: P 5,000
2. What is the required adjusting entry on Dec. 31, 20A?
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Adjusting Entry:
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Uncollectible Accounts 5,000
Estimated Uncollectible Account 5,000
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To record the provision for uncollectible Accounts.
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3. What is the Estimated Realizable value of the Accounts Receivable as of
December 31, 20A? ANSWER: P291,000
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Accounts Receivable 300,000

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Less: Estimated Uncollectible Accounts 9,000

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NET REALIZABLE VALUE P291,000
4. If the Estimated Uncollectible Account should be “increased by” 2% of

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the outstanding receivable account, what should be the adjusting entry needed?
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Adjusting Entry:
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Estimated Uncollectible Accounts 6,000
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To record the provision for uncollectible Accounts.
5. If the Estimated Uncollectible Account should be “increased to” 2% of the

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outstanding receivable account, what should be the adjusting entry needed?

Adjusting entry:
Estimated Uncollectible Accounts 2,000
To record the provision for uncollectible accounts.
IV. The following property and equipment were acquired on different dates by
Samar Manufacturing Company, a business owned and managed by Christine
Carpeso.
Required:
1. Compute the amount of depreciation expense for each asset at the end of its
fiscal year on June 30, 20B:
Property and Dates Acquisition Scrap Life in Depreciation
Equipment Acquired Cost Value Years Expense
Store Equipment Oct. 1, 20A P 150,000 P 20,000 8 P 12,187.50
Delivery Truck Jan. 1, 20B 500,000 None 5 P 50,000
Building Nov. 30,20A 950,000 50,000 10 P 52,500
2. Prepare the adjusting entries to recognize the depreciation expense for each
asset on June 30, 20B.
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Adjusting entry:
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June 30, 20B Depreciation Expense 12,187.50
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Accumulated Depreciation- Store Equipment 12,187.50
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To record depreciation expense for 20B.
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Adjusting entry:
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June 30, 20B Depreciation Expense 50,000

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Accumulated Depreciation- Delivery Truck 50,000

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Adjusting entry:
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June 30, 20B Depreciation Expense 52,500

Accumulated Depreciation- Building 52,500
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3.Determine the “net book value” of the above property and equipment as at
fiscal year on June 30 , 20B.
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Store Equipment 150,000.00

Less: Accumulated Depreciation 12,187.50
NET BOOK VALUE – June 30, 20B 137,812.50
Delivery Truck 500,000
Less: Accumulated Depreciation 50,000
NET BOOK VALUE – June 30, 20B 450,000
Building 950,000
Less: Accumulated Depreciation 52,500
NET BOOK VALUE – June 30, 20B 897,500
V. The following errors were discovered by Joseph Refugio in his examination

of the books of accounts of Dipolog Glass Factory, owned and managed by
Nathalyn A. Lopez, just before closing of books on December 31, 20A.
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Reconstruct the wrong entries prepared, the correct entries that should be made,
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the would-be correcting entries. Utilize the space provided.
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1. Cash received from a bank loan of the business in the amount of P80,000
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was erroneously credited to Capital account instead of Notes Payable.
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Wrong Entry Correct Entry Correcting Entry
Cash 80,000 Cash 80,000 Lopez, Capital 80,000
Lopez, Capital 80,000 Notes Payable 80,000 Notes Payable 80,000
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# # #
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2. Payment of rental expense in the amount of P30,000 was erroneously recorded

at P 20,000.
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Rent Expense 20,000 Rent Expense 30,000 Rent Expense 10,000

Cash 20,000 Cash 30,000 Cash 10,000
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# # #
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3. Collection from customer’s account was erroneously credited to Service

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Income instead of Accounts Receivable , P16,000.

Cash 16,000 Cash 16,000 Service Income 16,000
Service Income 16,000 Accounts Receivable 16,000 Accounts Receivable 16,000
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# # #
4. Purchase of office supplies in the amount of P20,000 was erroneously credited

to Accounts Receivable instead of Accounts Payable. The amount was also
erroneously recorded at P30,000.
Office Supplies 30,000 Office Supplies 20,000 Accounts Receivable 30,000
Accounts Receivable 30,000 Accounts Payable 20,000 Office Supplies 10,000
# # Accounts Payable 20,000
#
 4–
VI. Prepare the adjusting entry for each of the following situations. The last day of
the accounting period is Dec. 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 has now
expired.
Adjusting Entry:
Insurance Expense 9,500
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Prepaid Insurance 9,500
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To record the expired (expense) portion of insurance premium.
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b. All employees earn a total of P10,000 per day for a five-day week beginning
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on Monday and ending on Friday. They were paid for the workweek ending
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Dec. 26. They worked on Monday, Dec. 29, Tuesday, Dec. 30 and
Wednesday, Dec. 31.
Adjusting Entry:
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Salaries Expense 30,000

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Accrued Salaries Expense 30,000

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To record unpaid salary of an employee.
c. The Supplies account had a balance of P4,480 on Jan. 1. During the year,
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P11,000 of supplies were bought. A year-end inventory showed that P6,400

worth of supplies are still on hand.
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Adjusting Entry:
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Office Supplies Expense 9,080

Unused Office Supplies 9,080
To record the used portion of the office Supplies.
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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.
Adjusting entry:
December 31 Depreciation Expense 101,600

Accumulated Depreciation- Equipment 101,600
To record depreciation expense for the year.
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ASSIGNMENT 8: End-of-the Period Adjustments

I. Sonny Tan Bakeshop borrowed P600,000 from the bank on September 1,

3. What amount of cash will be collected for interest revenue in 2020? P

7. What is the amount of interest receivable as of Dec. 31, 2021?

1. If at the end of the year, the Estimated Uncollectible Account is to be

Accounts Receivable 300,000

Less: Estimated Uncollectible Accounts 9,000

NET REALIZABLE VALUE P291,000

4. If the Estimated Uncollectible Account should be “increased by” 2% of

Uncollectible Accounts 6,000

To record the provision for uncollectible Accounts.

5. If the Estimated Uncollectible Account should be “increased to” 2% of the

outstanding receivable account, what should be the adjusting entry needed?

June 30, 20B Depreciation Expense 50,000

Accumulated Depreciation- Delivery Truck 50,000

To record depreciation expense for 20B.

June 30, 20B Depreciation Expense 52,500

Store Equipment 150,000.00

V. The following errors were discovered by Joseph Refugio in his examination

2. Payment of rental expense in the amount of P30,000 was erroneously recorded

Rent Expense 20,000 Rent Expense 30,000 Rent Expense 10,000

3. Collection from customer’s account was erroneously credited to Service

Income instead of Accounts Receivable , P16,000.

4. Purchase of office supplies in the amount of P20,000 was erroneously credited

Salaries Expense 30,000

Accrued Salaries Expense 30,000

To record unpaid salary of an employee.

P11,000 of supplies were bought. A year-end inventory showed that P6,400

Office Supplies Expense 9,080

December 31 Depreciation Expense 101,600

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