Prepaid Insurance

8,000
c. Supplies account had a year balance
of P4,480
on Jan. 1. During the year, P11,000 of
supplies
were bought. A year-end inventory
showed that
6,400 worth of supplies are still on
hand.
Normal Entry
Adjusting Entry
Supplies Expense 9,080
Supplies
9,080
d. Equipment costing P588,000 has a
useful life
of five years with a P80,000 salvage
value at the
end of five years. Record the
depreciation for the
year.
Normal Entry
Equipment 588,000
Cash 588,000
Adjusting Entry
Depreciation Expense-Equipment
101,600
Accumulated Depreciation
101,600

a. Paid P24, 000 for a 1-year

fire insurance
policy to commence on Sept. 1. The
amount of
premium was debited to Prepaid
Insurance.
Normal Entry
Prepaid Insurance 24,000
Cash 24,000
Adjusting Entry
Insurance Expense 8,000
Prepaid Insurance
8,000
b. Borrowed P100, 000 by issuing a 1-
year note
with 7% annual interest to Century
Savings Bank
on Oct. 1, 2019.
Normal Entry
Cash 100,000
Notes Payable 100,000
Adjusting Entry
Interest Expense 1,750
Interest Payable
1,750
c. Paid P160,000 cash to purchase
a delivery
van (surplus) on Jan. 1. The van was
expected to
have a 3-year life and a 10,000
salvage
value. Depreciation is computed on a
straight-
line basis.
Normal Entry
Delivery Van 160,000
Cash 160,000
Adjusting Entry
Depreciation Expense-Delivery Van
50,000
Accumulated Depreciation
50,000
d. Received an P18,000 cash
advance for a
contract to provide services in the
future. The
contract required a 1-year
commitment, starting
April 1.
Normal Entry
Cash 18,000
Unearned Revenue
18,000
Adjusting Entry
Unearned Revenue 13,500
Service Revenue
13,500
e. Purchased P6,400 of supplies on
account. At
year’s end, P750 of supplies remained
on hand.
Normal Entry
Supplies 6,400
Accounts Payable
6,400
Adjusting Entry
Supplies Expense 5,650
Supplies
5,650
f. Invested 90,000 cash in a certificate
of deposit
that paid 4% annual interest. The
certificate was
acquired on May 1 and carried a 1-
year term to
maturity.
Normal Entry
Cash 90,000
Notes Payable 90,000
Adjusting Entry
Interest Receivable 2,400
Interest Income
25,400
g. Paid P78, 000 cash in advance on
Sept. 1 for
a 1-year lease on office space.
Normal Entry
Prepaid Rent 78,000
Cash 100,000
Adjusting Entry
Rent Expense 26,000
Prepaid Rent 26,000
a. The payment of the P19,000
insurance
premium for two years in advance was
originally
recorded as Prepaid Insurance. One
year of the
policy has now expired.
Normal Entry
Prepaid Insurance 19,000
Cash 19,000
Adjusting Entry
Insurance Expense 8,000
Prepaid Insurance
8,000
b. All employees earn a total of
P10,000 per day
for five-day week beginning on
Monday and
ending Friday. They were paid for the
workweek
ending Dec. 26. They worked on
Monday, Dec.
29, Tuesday, Dec. 30 and Wednesday,
Dec. 31.
Normal Entry
Prepaid Insurance 24,000
Cash 24,000
Adjusting Entry
Insurance Expense 8,000
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Prepaid Insurance
8,000
c. Supplies account had a year balance
of P4,480
on Jan. 1. During the year, P11,000 of
supplies
were bought. A year-end inventory
showed that
6,400 worth of supplies are still on
hand.
Normal Entry
Adjusting Entry
Supplies Expense 9,080
Supplies
9,080
d. Equipment costing P588,000 has a
useful life
of five years with a P80,000 salvage
value at the
end of five years. Record the
depreciation for the
year.
Normal Entry
Equipment 588,000
Cash 588,000
Adjusting Entry
Depreciation Expense-Equipment
101,600
Accumulated Depreciation
101,600