ADJUSTMENTS

ILLUSTRATIVE CASE 1:
ACCRUED EXPENSE
The accountant of XYZ Laundry Company
is preparing financial statements for the month of
August. Assume that employees of the company are
paid on the last day of the workweek, Saturday,
while the end of a particular month falls on a
Tuesday. Assume that the total payroll for a
workweek is Php 35,000.00.
 ILLUSTRATIVE CASE 1:
ACCRUED EXPENSE
The accountant of XYZ Laundry Company is preparing financial statements for the month of
August. Assume that employees of the company are paid on the last day of the workweek, Saturday,
while the end of a particular month falls on a Tuesday. Assume that the total payroll for a workweek is
Php 35,000.00.
ILLUSTRATIVE CASE 2:
ACCRUED EXPENSE
On August 1, 2023, XYZ Laundry Company
borrowed Php 40,000.00 from BDO by issuing an
interest-bearing note payable. This loan is to be
repaid in three months along with interest at 9% per
annum. Prepare an adjusting entry if financial
statements are to be prepared as of August 31, 2023.
 ILLUSTRATIVE CASE 2:
ACCRUED EXPENSE
On August 1, 2023, XYZ Laundry Company borrowed Php 40,000.00 from
BDO by issuing an interest-bearing note payable. This loan is to be repaid in three
months along with interest at 9% per annum. Prepare an adjusting entry if financial
statements are to be prepared as of August 31, 2023.
ILLUSTRATIVE CASE 3:
ACCRUED REVENUE
XYZ Laundry Company sublets a portion of
their premises to a newspaper and magazine store at
Php 3,000.00 a month. At the end of August, rental
for the months of July and August have not been
received and accordingly, no entries have been
made for this income.
 ILLUSTRATIVE CASE 3:
ACCRUED REVENUE
XYZ Laundry Company sublets a portion of their premises to a newspaper and
magazine store at Php 3,000.00 a month. At the end of August, rental for the months of
July and August have not been received and accordingly, no entries have been made
for this income.
ILLUSTRATIVE CASE 4:
ACCRUED REVENUE
Assume that on July 15, 2023, a customer of
XYZ Laundry signed a 30-day, 6% promissory note
for Php 2,000.00. This represents the amount owed
by the customer to XYZ for laundry services that
have not been settled. At the end of August, the
company is preparing its financial statements.
 ILLUSTRATIVE CASE 5A:
DEFERRED EXPENSE – ASSET METHOD

Suppose XYZ Laundry Company prepays three months

rent on July 1, 2023 amounting to Php 60,000.00. What adjusting
entry should be made on August 31, 2023
 ILLUSTRATIVE CASE 5B:
DEFERRED EXPENSE – EXPENSE METHOD

Suppose XYZ Laundry Company prepays three months

rent on July 1, 2023 amounting to Php 60,000.00. What adjusting
entry should be made on August 31, 2023
 ILLUSTRATIVE CASE 6A:
DEFERRED EXPENSE – ASSET METHOD

On August 1, 2023, XYZ Laundry Company paid cash of Php

2,000.00 for laundry supplies. At the end of August, an inventory count was
conducted and found out that only worth Php 500.00 is left of the supplies
 ILLUSTRATIVE CASE 6B:
DEFERRED EXPENSE – EXPENSE METHOD

On August 1, 2023, XYZ Laundry Company paid cash of Php

2,000.00 for laundry supplies. At the end of August, an inventory count was
conducted and found out that only worth Php 500.00 is left of the supplies
 ILLUSTRATIVE CASE 7A:
DEPRECIATION
An office equipment was purchased on January 01, 2015
for Php 80,000.00. The estimated useful life is 10 years and the
estimated scrap value at the end of its useful life is Php 8,000.00
- How much is the Annual Depreciation?
 ILLUSTRATIVE CASE 7B:
DEPRECIATION
An office equipment was purchased on January 01, 2015
for Php 80,000.00. The estimated useful life is 10 years and the
estimated scrap value at the end of its useful life is Php 8,000.00
- How much is the Accumulated Depreciation at the beginning of 5 th year?
 ILLUSTRATIVE CASE 7C:
DEPRECIATION
An office equipment was purchased on January 01, 2015
for Php 80,000.00. The estimated useful life is 10 years and the
estimated scrap value at the end of its useful life is Php 8,000.00
- How much is the Carrying Value at the end of the 5th year?
 ILLUSTRATIVE CASE 7D:
DEPRECIATION
An office equipment was purchased on January 01, 2015
for Php 80,000.00. The estimated useful life is 10 years and the
estimated scrap value at the end of its useful life is Php 8,000.00
- How much is the Carrying Value at the end of its useful life?
 ILLUSTRATIVE CASE 7E:
DEPRECIATION
An office equipment was purchased on January 01, 2015
for Php 80,000.00. The estimated useful life is 10 years and the
estimated scrap value at the end of its useful life is Php 8,000.00
- Record the adjusting entry
 ILLUSTRATIVE CASE 8A:
DEPRECIATION
Furniture and Fixtures purchased on July 1, 2023 costing
Php 50,000.00 will be depreciated at the rate of 10% a year. The
asset has no expected scrap value.
- How much is the annual depreciation?
 ILLUSTRATIVE CASE 8B:
DEPRECIATION
Furniture and Fixtures purchased on July 1, 2023 costing
Php 50,000.00 will be depreciated at the rate of 10% a year. The
asset has no expected scrap value.
- How many years is the useful life of the asset?
 ILLUSTRATIVE CASE 8C:
DEPRECIATION
Furniture and Fixtures purchased on July 1, 2023 costing
Php 50,000.00 will be depreciated at the rate of 10% a year. The
asset has no expected scrap value.
- At the end of 2023, how much will be the depreciation expense?
 ILLUSTRATIVE CASE 8D:
DEPRECIATION
Furniture and Fixtures purchased on July 1, 2023 costing
Php 50,000.00 will be depreciated at the rate of 10% a year. The
asset has no expected scrap value.
- At the end of 2024, how much will be the depreciation expense?
 ILLUSTRATIVE CASE 8D:
DEPRECIATION
Furniture and Fixtures purchased on July 1, 2023 costing Php
50,000.00 will be depreciated at the rate of 10% a year. The asset has no
expected scrap value.
- At the end of 2025, how much will be the accumulated depreciation and
carrying value of the asset?
 ILLUSTRATIVE CASE 9:
DEFERRED INCOME – LIABILITY METHOD

On August 1, 2023, XYZ Laundry Company, received Php 15,000.00 from

a sub-lessee representing advance payment for 3 months rent. What is the entry to
record the transaction, and the corresponding adjusting entry at the end of August.
 ILLUSTRATIVE CASE 9:
DEFERRED INCOME – INCOME METHOD

On August 1, 2023, XYZ Laundry Company, received Php 15,000.00 from

a sub-lessee representing advance payment for 3 months rent. What is the entry to
record the transaction, and the corresponding adjusting entry at the end of August.
 ILLUSTRATIVE CASE 10:
DEFERRED INCOME – LIABILITY METHOD

On August 30, 2023, XYZ Laundry Company received

Php 2,000.00 as advance payment from a customer for the laundry
services to be rendered on September 01, 2023.
 ILLUSTRATIVE CASE 10:
DEFERRED INCOME – INCOME METHOD

On August 30, 2023, XYZ Laundry Company received

Php 2,000.00 as advance payment from a customer for the laundry
services to be rendered on September 01, 2023.
 ILLUSTRATIVE CASE 11A:
ADJUSTMENT FOR UNCOLLECTIBLE ACCOUNTS

Assuming at the end of the period, the balance of Accounts Receivable is

Php 80,000.00. Analysis of accounts in customers’ ledger indicates that 10%
will be uncollectible. The allowance for doubtful account has Php 0 balance.
 ILLUSTRATIVE CASE 11B:
ADJUSTMENT FOR UNCOLLECTIBLE ACCOUNTS

Assuming at the end of the period, the balance of Accounts Receivable is

Php 80,000.00. The allowance for doubtful accounts has a credit balance of Php
2,000.00, and 10% of the accounts receivable cannot be collected.
 ILLUSTRATIVE CASE 11C:
ADJUSTMENT FOR UNCOLLECTIBLE ACCOUNTS

Assuming at the end of the period, the balance of Accounts Receivable is Php
80,000.00. The allowance for doubtful account has Php 3,000.00 debit balance due to
recovery of previously considered uncollectible accounts. 10% 10% of the accounts
receivable cannot be collected