Illustration 1

ABC Enterprises provided you the following information:

Aug 01 – purchased filing cabinet on account amounting to P50,000. Terms: 3/15, n/45

Office Equipment 50,000

Accounts Payable 50,000

03 – Granted a P1,000 reduction from the purchase price due to minor scratches

Accounts Payable 1,000

Office Equipment 1,000

10 – Issued dated check amounting to P24,000 for partial payment

Accounts Payable 24,000

Cash 24,000

15 – Issued dated check for full payment

Accounts Payable 25,000

Cash 23,530
Office Equipment (3% x 49,000) 1,470

Prepare journal entries

Illustration 2

DEF Services provided you the following balances on December 31, 2021:
01/01/21 12/31/21
Accounts Receivable P830,000 P920,000
Allowance for bad debts 83,000 92,000

During the year, the entity write-off bad debts amounting to P23,000. Prepare adjusting entry for
bad debts expense.

Ending = Beginning + Bad Debts Expense – write-off + recovery

92,000 = 83,000 + Expense – 23,000 + 0
92,000 – 83,000 + 23,000 – 0 = Expense
32,000 = Expense

Bad Debts Expense 32,000

Allowance for Bad Debts 32,000

Illustration 3

GHI provided you the following unadjusted balances on June 30, 2021 (fiscal year-end):

Accounts receivable 950,000

Allowance for bad debts 60,000

Entity’s policy regarding allowance for bad debts is 10% of gross accounts receivable.

Ending = Beginning + Expense

95,000 = 60,000 + Expense
95,000 – 60,000 = Expense
35,000 = Expense

1. Prepare adjusting entry regarding bad debts

Bad Debts Expense 35,000

Allowance for Bad Debts 35,000
2. Compute the following:
a. Bad debts expense = 35.000
b. Allowance for bad debts = 95,000

Illustration 4

JKL provided you the following unadjusted balances on June 30, 2021 (fiscal year-end):

Accounts receivable 950,000

Allowance for bad debts (debit) 20,000

Entity’s policy regarding allowance for bad debts is 10% of gross accounts receivable.

Ending = Beginning + Expense

95,000 = (20,000) + Expense
95,000 + 20,000 = Expense
115,000 = Expense

1. Prepare adjusting entry regarding bad debts

Bad Debts Expense 115,000

Allowance for Bad Debts 115,000

2. Compute the following:

a. Bad debts expense = 115,000
b. Allowance for bad debts = 95,000
Illustration 5

MNO provided you the following unadjusted balances on December 31, 2021 (fiscal year-end):

Service Vehicle 900,000

Accumulated Depreciation – service vehicle 22,500
Furniture and Fixtures 150,000

Additional information:
1. Service vehicle was purchased on October 01, 2020
2. Furniture and fixtures were acquired on November 01, 2021 with useful life of eight years

Monthly depreciation of service vehicle = 22,500 / 3 months = 7,500

Annual depreciation on service vehicle = 7,500 x 12 months = 90,000
Useful life of service vehicle = 900,000 / 90,000 = ten years

Annual depreciation of furniture and fixtures = 150,000 / 8 years = 18,750

Depreciation from Nov 01 to December 31 = 18,750 x 2/12 = 3,125

Required:
1. Prepare adjusting entry to record annual depreciation

Depreciation Expense (90,000 + 3,125) 93,125

Accumulated Depreciation – Service Vehicle 90,000
Accumulated Depreciation – Furniture and Fixtures 3,125

2. Compute the accumulated depreciation on December 31, 2021

Beginning balance + annual depreciation = ending balance
22,500 + 93,125 = 115,625
Illustration 6

Jamira provided you the following information:

Aug 16 - Billed John on the services rendered amounting to P200,000

Accounts Receivable 200,000

Service Revenue 200,000

Aug 31 - Received a 12% promissory note in full settlement of the account.

Notes Receivable 200,000

Accounts Receivable 200,00

Sept 30 - Note was fully settled by John

Cash 202,000
Notes Receivable 200,000
Interest income 2,000

Interest income = principal x rate x period

= 200,000 x 12% x 1/12
= 2,000

Prepare journal entries

Illustration 7

On June 30, 2020, Ruiz Trading had the following balances of supplies:
06/30/20 06/30/19
Unused office supplies 23,000 16,000

During the year, the entity purchased store supplies amounting to P65,000.

Prepare adjusting entry if the entity uses:

1. Asset method

Unused office supplies 65,000

Cash 65,000

Unused Office Supplies

beginning – 16,000
58,000
Purchases - 65,000

Ending = 23,000

Office Supplies Expense 58,000

Unused Office Supplies 58,000
2. Expense method

Office Supplies Expense 65,000

Cash 65,000

Unused Office Supplies

beginning – 16,000

7,000

Ending = 23,000

Unused Office Supplies 7,000

Office Supplies Expense 7,000

Illustration 8

The trial balance of 123 Trading on December 31, 2020 includes prepaid insurance with unadjusted
balance of P24,000. The coverage of the insurance is from October 01, 2020 to September 30, 2021.
Prepare adjusting entry on December 31, 2020.

How much is the unadjusted insurance expense? 0

How much should be the insurance expense? 6,000
Monthly insurance expense = 24,000 / 12 months = 2,000
Insurance expense from Oct 01 to Dec 31 = 2,000 x 3 months = 6,000

Insurance Expense 6,000

Prepaid insurance 6,000

Insurance Expense
beginning – 0

6,000

Ending = 6,000

Illustration 9
The trial balance of 123 Trading on December 31, 2020 includes rent expense with unadjusted
balance of P60,000. The coverage of the rent is from November 01, 2020 to April 30, 2021. Prepare
adjusting entry on December 31, 2020.

How much is the unadjusted rent expense? 60,000

How much should be the rent expense? 20,000
Monthly rent expense = 60,000 / 6 months = 10,000
Rent expense from Nov 01 to Dec 31 = 10,000 x 2 = 20,000

Rent Expense
beginning – 0
40,000
payment – 60,000

Ending = 20,000

Prepaid Rent 40,000

Rent Expense 40,000

Illustration 10

On January 12, Reighjon purchased office equipment amounting to P60,000 with credit terms of
5/10, 1/18, n/40. Assuming the entity made payment on January 29, prepare journal entry.

Jan 12
Office Equipment 60,000
Accounts Payable 60,000
Jan 29
Accounts Payable 60,000
Cash 59,400
Office Equipment (1% x 60,000) 600

Illustration 11
On September 16, 2021, Marixen issued dated check amounting to P90,000 for six-month rent of
the building starting November 01, 2021. Prepare adjusting entry on December 31, 2021 assuming
the entity used

1. Asset method

Sept 16
Prepaid Rent 90,000
Cash 90,000

How much is the unadjusted rent expense? 0

How much should be the rent expense? 30,000
Monthly Rent Expense = 90,000 / 6 = 15,000
Rent expense from Nov 01 to Dec 31 = 15,000 x 2 months = 30,000

Rent Expense 30,000

Prepaid Rent 30,000

2. Expense method

Sept 16
Rent Expense 90,000
Cash 90,000

How much is the unadjusted rent expense? 90,000

How much should be the rent expense? 30,000
Monthly Rent Expense = 90,000 / 6 = 15,000
Rent expense from Nov 01 to Dec 31 = 15,000 x 2 months = 30,000

Prepaid Rent 60,000

Rent Expense 60,000