BMSH2003

NAME: SECTION: SCORE:

ACTIVITY ON ADJUSTING ENTRIES

Instructions: Analyze the transactions below. Prepare the required initial and/or adjusting entries. (13 items x
2 points) Write your answers on the space provided.

A. DEFERRALS

1. Prepaid expenses
On August 1, 201A, ABC Company paid an advance rental on a space of a building it occupies in the amount
of P120,000. The amount covers one (1) year rent paid in advance beginning month of August.

The entry on August 1, 201A to record the advance payment of rental is:

Asset Method Expense Method

Prepare adjusting entry on December 31, 201A.

Asset Method Expense Method

2. Deferred Revenue
On September 1, 201A, ABC Dormitory received P120,000 from a tenant. The amount represents a one-year
rental beginning the month of September.

The entry on September 1, 201A to record the advance payment of rental is:
Liability Method Revenue Method

Prepare adjusting entry on December 31, 201A.

Liability Method Revenue Method

B. ACCRUALS

1. Accrued Income/Revenues
a. At the end of the current year, P25,000 fees have been earned but have not been billed to clients.
Journalize the adjusting entry to record the accrued fees.

Journal entry at year-end is:

01 Activity 2 *Property of STI

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b. On May 1, 201A, a company received a 15%, 90-day note for P50,000 from a customer on an
overdue account. Interest on such note will be collected together with the principal on the maturity
date. Because interest accrues over time, interest has already been earned from May 1, 201A through
June 30, 201A. June 30 is the end of the company’s fiscal year. (Assume a 360-day year)

Adjusting journal entry on June 30, 201A is:

2. Accrued Expenses
Assume that a company with a five-day workweek pays wages of its daily-wage workers every Friday.
The average weekly payroll amounts to P15,000 and the last wage payment for the company’s fiscal year
ending June 30 was Friday, June 25. The adjusting entry at June 30 is:

Adjusting journal entry on June 30, 201A is:

C. DEPRECIATION

ABC Company acquired office equipment on May 1, 201A for P250,000. The equipment has an estimated
salvage value of P10,000 at the end of its estimated useful life of five (5) years. The company uses the
straight-line method and computes depreciation to the nearest month.
Adjusting journal entry on December 31, 201A is:

D. Uncollectible Accounts
Assume that a company had the following account balances at December 31, 201A.

Accounts Receivable P900,000

Allowance for Uncollectible Accounts
(before adjustment) P16,000

Based on the assessment of the collectability of accounts receivable, it is determined that only 95% are
collectible.

Adjusting journal entry on December 31, 201A is:

01 Activity 2 *Property of STI

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