Name _________________________________________________________ Section ____________________

A. The following transactions have been erroneously journalized and posted.

1. Collection from customers on account for P 20,000 has been recorded by a debit to Accounts receivable and
credit to Cash.

2. Payment to current month’s electric bill for P 15,000 has been recorded by a debit to Repairs expense
P 1,500 and credit to cash P 1,500.

3. P 6,500 cash withdrawn by the owner for personal use was debited to Owner’s Capital and credit Cash.

4. Payment to suppliers on account for P 13, 456 was recorded as a credit to cash for P 3,456 and debit to
accounts receivable for P 3,456.

5. Notice of telephone bill received for the current month for P 5,800 was debited to Accounts receivable for
P 5,800 and credit Cash for P 5,800.

6. Supplies purchased on account for P 1,750 was recorded by debiting Prepaid insurance.

7. Cash received from a customer on account for P 48,000 was erroneously recorded as P 84,000.

8. Services rendered for cash for P 10,000 was recorded as a credit to Owner’s Capital for P 10,000.

9. Additional cash investment by the owner for P 125,000 has been recorded as debit to cash for P 12,500 and
credit to Owner’s Drawing for P 12,500.

10 Payment to creditors on account for P 9,580 has been recorded by a debit to Cash and credit to Accounts
. payable.

11 Payment of one fourth of the P 100,000 notes payable was recorded as P 35,000.
.

12 Utilities expense for the month but payable next month for P 3,590 was recorded as Rent expense for P 359
. and credit cash P 359.
Name _____________________________________________________ Section ___________________

Prepare the adjusting entries based on the given independent situations as of December 31, 2014, the end of the
annual accounting period. Show all supporting computations after EACH entry.

1. The Insurance Expense account has a general ledger balance of P 85,120 as of December 31, 2014, detailed
as follows:

Premium Effectivity Period Policy Covered

P 19,200 November 1, 2014 12 mos. Building
24,800 December 1, 2014 5 mos. Delivery Truck
26,880 April 1, 2014 24mos. Merchandise
14,240 October 1, 2014 4 mos Equipment

2. Supplies account has a balance of P 4,000 on January 1, 2014. During the year additional supplies purchased
amounted to P 16,000 and were debited to the Supplies account. At the end of the year, unused supplies
were reported at P 3,000

3. Notes Receivable has a balance of P 20,000 dated November 16, 2014. The note is interest bearing at 12%
and is a 120-day note. No accrued interest has been recorded as of year end. (Use 360 days in a year).

4. Equipment has a balance per general ledger of P 167,200 on December 31, 2014 of which P 28,000 was
purchased on October 1, 2014. All equipment has a depreciation rate of 10%.

5. Interest due on mortgage loan payable is P 10,500 as of December 31, 2014.

6. Advertising Expense account has a balance of P 32,000 of which P 12,000 is still unexpired as of year end.

7. Machinery account has a balance of P 100,000 on December 31, 2014. This asset was purchased and
installed on June 1 and has an estimated salvage value of P 10,000 and estimated life of six years.

8. Fees Earned Collected in Advance account has a general ledger balance of P 380,200 as of year end. As of
the same time, only 90% of fees collected is said to be realized and earned.

9. ASB Company has a five day work week. The company pays his five sales clerks every Friday. Every sales
clerk earns P 900 a day. December 26 is the last payday of the month.

10 Rent Revenue has a balance of P 124,000. This was received from a tenant on March 1, 2014 and this covers
. lease contract for 16 months.

11 Supplies Expense has a balance of P 5,580 of which P 1,080 are to be used for the year 2015.
.

12 Notes Payable has a balance of P 42,000 issued on November 16, 2014. This is a 180-day note with interest
. of 15% per annum. (Use 360 days in a year).

B. Knicks Service Company prepares adjusting entries at year end. Assuming the following data were not properly
recorded at year end, indicate the effect of each unrecorded adjustment data on the major elements of the
financial statements. Use the following symbols for your answer: (+) increase; (-) decrease; (NE) no effect.

Assets Liabilities Capital Revenue Expense Net Income

1. Accrued Expense _____ _____ _____ _____ _____ _____
2. Accrued revenue _____ _____ _____ _____ _____ _____
3. Depreciation _____ _____ _____ _____ _____ _____
4. Prepaid Expense (asset method) _____ _____ _____ _____ _____ _____
5. Unearned income (revenue method) _____ _____ _____ _____ _____ _____
6. Prepaid Expense (expense method) _____ _____ _____ _____ _____ _____
7. Unearned income (liability method) _____ _____ _____ _____ _____ _____
8. Unrecorded electric bill received _____ _____ _____ _____ _____ _____
9. Accrued interest on Notes payable _____ _____ _____ _____ _____ _____
10 Accrued interest on Notes Receivable _____ _____ _____ _____ _____ _____
.