Holy Trinity University

College of Business and Accountancy

Puerto Princesa City, Palawan

ACGA 504 - General Accounting Part 2

Jaboli, Christian Jay B.
Bachelor of Science in Accountancy
2nd Trimester, A.Y. 2021-2022
EXERCISES 3
1. Given below are adjustments made in December 31, 2021. Provide the original
entries
Prepaid Rent 18,000
Rent Expense 18,000
Solution:
Annual rent expense is paid in advance every August 31. Hence, at the end of
the reporting period, Dec. 31, 2021, 4 months has been used for prepaid rent and there
are 8 months left.

18,000
= 2,250 rent expense every month x 12 months
8 𝑚𝑜𝑛𝑡ℎ𝑠 𝑟𝑒𝑚𝑎𝑖𝑛𝑖𝑛𝑔
= 27,000 annual payment for rent expense
Original Entry:
Rent Expense 27,000
Cash 27,000

2. Given below are adjustments made in December 31, 2021. Provide the original
entries
Rent Income 9,000
Unearned Rent Income 9,000
Solution:
Annual rent income is received in advance every October 31. Hence, at the end
of the reporting period, Dec. 31, 2021, rent income earned for 2 months (Nov-Dec) while
unearned rent income is 10 months.
9,000
= 4,500 rent income every month x 12 months
2 𝑚𝑜𝑛𝑡ℎ𝑠 𝑒𝑎𝑟𝑛𝑒𝑑
=54,000 annual rent income
Original Entry:
Cash 54,000
Rent Income 54,000
 3. Given below are adjustments made in December 31, 2021. Provide the original
entries
Prepaid Advertising 17,000
Advertising Expense 17,000
Solution:
Monthly advertising expense is paid at one time for year starting March 31.
Hence, at the end of the reporting period Dec. 31, 2021, the prepaid adverting used for
9 months while 3 moths had been left.
17,000
= 5,666.67 Monthly advertising expense x 12 months
3 𝑚𝑜𝑛𝑡ℎ𝑠 𝑢𝑛𝑢𝑠𝑒𝑑 𝑓𝑜𝑟 𝑝𝑟𝑒𝑝𝑎𝑖𝑑 𝑎𝑑𝑣𝑒𝑟𝑡𝑖𝑠𝑖𝑛𝑔
=68,000 annual advertising expense
Original Entry:
Advertising Expense 68,000
Cash 68,000

4. Given below are adjustments made in December 31, 2021. Provide the original
entries
Prepaid Insurance 1,500
Insurance Expense 1,500
Solution:
Yearly insurance is payable on June 30. Hence, at the end of the reporting
period, Dec. 31, 2021, 6 months used for prepaid insurance while 6 month is
unused.
1,500
= 3,000 Annual payment for insurance expense
50%(ℎ𝑎𝑙𝑓 𝑦𝑒𝑎𝑟)
Original Entry:
Insurance Expense 3,000
Cash 3,000

5. Given below are adjustments made in December 31, 2021. Provide the original
entries
Office Supplies 5,000
Office Supplies Expense 5,000
Solution:
Office supplies purchased, 6,500; unused P1,500. Therefore original entry for
this transaction is the acquisition cost of the office supplies.
Original Entry:
Office Supplies Expense 6,500
Cash 6,500
 6. Given below are adjustments made in December 31, 2021. Provide the original
entries
Salaries Expense 6,000
Advances to Employees 6,000
Solution:
Workers actual work was offset against employee salary advances.
Entry:
Advance to Employees 6,000
Cash 6,000

Problem 7-15 Accrued Expense

On September 1, 200A, X Co. issued a 6-month note to a supplier amounting to
P300,000, 12% interest. Also, there was an unpaid and unrecorded salaries at the end
of the year dated Dec 31, 200A amounting to P25,000. Give the adjusting entries.
Adjusting Entries:
Interest Expense 24,000
Interest Payable 24,000

Salaries Expense 25,000

Salaries Payable 25,000

Problem 7-16 Prepayment

X Co. purchased a two-year insurance policy on August 1, 200A for P28,800.
Give the adjusting entries as of December 31, 200A assuming the company uses:
a. Asset Method
b. Expense Method
Expense Method Asset Method
Prepaid Insurance 22,800 Insurance Expense 6,000
Insurance Expense 22,800 Prepaid Insurance 6,000
24 mons – 5 28,800/24 mons =
mons= 19 mons x 1,200 x 5 mons =
1,200 = 22,800 6,000
 Problem 7-17 Pre-collection
X Co. is engaged in constructing and renting office space to various businesses.
On September 1, 200A one tenant gave P240,000 cash for six month’s rent. Give the
adjusting entries as of December 31, 200A assuming the company uses:
a. Liability method
b. Revenue method
Liability Method Revenue Method
Unearned Rent Income 160,000 Rent Income 80,000
Rent Income 160,000 Unearned Rent Income 80,000
240,000/6 40,000 x 2 mons = 80,000
mons = 40,000
x 4 mons=
160,000

Problem 7-18 Depreciation

X Co. acquires a building on January 1, 200A at a cost of P5,500,000. The
building has an estimated useful life of 40 years and an estimated salvage value of
P500,000. Record the provision for depreciation for year 200A.

Solution: Cost –Salvage Value= Depreciable amount/ useful life= Annual Depreciation
P5,500,000 – 500,000 = 5,000,000 depreciable amount / 40 years
=125,000 annual depreciation amount.
Depreciation Expense-Building 125,000
Accumulated Depreciation-Building 125,000