Problem 3-1

GENERAL JOURNAL
Page Number
Date
01

2020 Descriptions PR Debit Credit

12/31/2020 NO ENTRY

Retained Earnings Php 450,000

Estimated Liabilty for Income Tax Php 450,000
to record the probable payment of income tax for 2019

Accounts Receivable - Sunrise Company 420,000

Loss on Guarantee 280,000
Notes Payable - PNB 700,000
to record the probable payment of guarantee obligation

Problem 3-2

GENERAL JOURNAL
Page Number
Date
01
2020 Descriptions PR Debit Credit
Unearned Subscriptions Revenue Php 1,050,000
Subscriptions Revenue Php 1,050,000
to record the subscriptions revenue for 2020

Loss on Lawsuit 2,250,000

Estimated Liability on Lawsuit 2,250,000

to record the probable payments on charges for breach of contract

Loss on Lawsuit 1,500,000

Estimated Liability for Lawsuit 1,500,000
to record the probable payments on charges for industrial
espionage
Problem 3-3

Amount of provisions to be recognized on December 31, 2020.

Estimated long service leave owing to employees in respect of past services liabilities Php 3,600,000

* While the cost of relocation of the employee and the cost of the overhauling machine is just an estimation, it
does not qualify as a provision because they are both scheduled for a definite time and it is this uncertainty that
distinguishes a provision from other liabilities. The amounts that are owed to another company has a definite
time scheduled for payment and amount because it is an accrued liability.