ADJUSTING JOURNAL ENTRIES FOR PRACTICE:

Instruction: Prepare the necessary adjusting entries on the following items on December 31, 2020:

1. On December 31 before adjustment, the Accounts Receivable account has a debit balance of
P140,000 and the allowance for doubtful accounts has a credit balance of P5,000. The
accounting records also show that the Service Income account has a credit balance of P450,000.
It is estimated that doubtful accounts for the period is 5% of accounts receivable.

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2. On December 31 before adjustment, the Accounts Receivable account has a debit balance of
P140,000 and the allowance for doubtful accounts has a credit balance of P5,000. The
accounting records also show that the Service Income account has a credit balance of P450,000.
It is estimated that doubtful accounts for the period is 1% of service income.

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3. Paid advertising on August 1, 2020 amounting to P24,000 for a 2-year coverage contract. Asset
account was debited upon payment.

4. A machinery was acquired on Oct. 1, 2020 for P280,000. The asset is estimated to be useful for 5
years after which, it can be sold for P20,000.

5. Received cash as advance payment from customer amounting to P48,000 for a 2 year period.
The rent will start on September 1, 2020. At the time of cash receipt, Rent Income was credited.

6. Interest earned on notes receivable amounting to P5,000 was not yet collected.
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7. Unrecorded service income realized, P25,000
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8. A 60-day, 15% note was issued to supplier of office supplies amounting to P80,000 on December
15, 2020.
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9. Rent income account has balance of P370,000 as of December 31, 2019. An amount of P12,000
is applicable for January 2020.
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10. The rent expense account has balance of P180,000 on December 31, 2019 for three years
advance rental starting April 1, 2019.
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