Scribd Logo
Upload

Welcome to Scribd!

  • 10K views

    Activity 7 Adjusting Entries and Accounting Policy

    Uploaded by

    Blesh Macusi
    1. Mr. Clean Services would record the following adjusting entries on Dec. 31, 2019: - Cleaning Supplies Expense of P50,000 - Unearned Cleaning Revenues of P25,000 - Rent Expense of P60,000 2. Mr. Clean Services would record the following adjusting entries on Dec. 31, 2019: - Cleaning Supplies Expense of P50,000 - Cleaning Revenues of P25,000 - Rent Expense of P60,000

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Activity 7 Adjusting Entries and Accounting Policy

    Uploaded by

    Blesh Macusi
    10K views6 pages
    1. Mr. Clean Services would record the following adjusting entries on Dec. 31, 2019: - Cleaning Supplies Expense of P50,000 - Unearned Cleaning Revenues of P25,000 - Rent Expense of P60,000 2. Mr. Clean Services would record the following adjusting entries on Dec. 31, 2019: - Cleaning Supplies Expense of P50,000 - Cleaning Revenues of P25,000 - Rent Expense of P60,000

    Original Title

    Activity-79

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1. Mr. Clean Services would record the following adjusting entries on Dec. 31, 2019: - Cleaning Supplies Expense of P50,000 - Unearned Cleaning Revenues of P25,000 - Rent Expense of P60,000 2. Mr. Clean Services would record the following adjusting entries on Dec. 31, 2019: - Cleaning Supplies Expense of P50,000 - Cleaning Revenues of P25,000 - Rent Expense of P60,000

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    10K views6 pages

    Activity 7 Adjusting Entries and Accounting Policy

    Uploaded by

    Blesh Macusi
    1. Mr. Clean Services would record the following adjusting entries on Dec. 31, 2019: - Cleaning Supplies Expense of P50,000 - Unearned Cleaning Revenues of P25,000 - Rent Expense of P60,000 2. Mr. Clean Services would record the following adjusting entries on Dec. 31, 2019: - Cleaning Supplies Expense of P50,000 - Cleaning Revenues of P25,000 - Rent Expense of P60,000

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6

    Activity 7

    Adjusting Entries and Accounting Policy

    The following are some of the transactions made by Mr. Clean Services during
    2019:

    Apr. 1 Acquired cleaning supplies in the amount of P160,000. A count of


    the supplies on Dec. 31, 2019 amounted to P110,000.
    P160,000
    P110,000 (ASSET)
    P160,000 –P110,000 = P50,000 (EXPENSE)

    ASSET METHOD
    April 1 Cleaning Supplies 160,000
    Cash 160,000

    Adjusting Entry:
    Dec 31 Cleaning Supplies Expense 50,000
    Cleaning Supplies 50,000

    Cleaning Supplies Cleaning Supplies Expense


    April 1 160,000 Dec 31 50,000 Dec 31 50,000
    110,000

    EXPENSE METHOD
    April 1 Cleaning Supplies Expense 160,000
    Cash 160,000
    Adjusting Entry:
    Dec 31 Cleaning Supplies 110,000
    Cleaning Supplies Expense 110,000

    Cleaning Supplies Cleaning Supplies Expense


    Dec 31 110,000 Apr 1 160,000 Dec 31 110,000
    50,000
    Aug. 1 Received P180,000 from Producers Bank for cleaning janitorial
    uniforms over the next 3 years.

    P180,000/3 years = P60,000 per year


    P60,000/12 mos = P5,000 per month

    Aug 1 – Dec 31 = 5 mos x P5,000 = P25,000 (INCOME)


    OR P180,000 x 5/36 = P25,000

    31 mos x P5,000 = P155,000 (LIABILITY)

    LIABILITY METHOD
    Aug 1 Cash 180,000
    Unearned Cleaning Revenues 180,000
    Adjusting Entry:
    Dec 31 Unearned Cleaning Revenues 25,000
    Cleaning Revenues 25,000

    Unearned Cleaning Revenues Cleaning Revenues


    Dec 31 25,000 Aug 1 180,000 Dec 31 25,000
    155,00

    INCOME METHOD
    Aug 1 Cash 180,000
    Cleaning Revenues 180,000
    Adjusting Entries:
    Dec 31 Cleaning Revenues 155,000
    Unearned Cleaning Revenues 155,000

    Cleaning Revenues Unearned Cleaning Revenues


    Dec 31 155,000 Aug 1 180,000 Dec 31 155,000
    25,000

    Nov. 1 Paid P360,000 for annual rent.


    P360,000 / 12 mos = P30,000 per month
    2 mos x P30,000 = P60,000 (EXPENSE) or P360,000 x 2/12
    10 mos x P30,000= P300,000 (ASSET) or P360,000 x 10/12 or P360,000-P60,000
    ASSET METHOD
    Nov 1 Prepaid Rent 360,000
    Cash 360,000
    Adjusting Entry:
    Dec 31 Rent Expense (IS) 60,000
    Prepaid Rent (BS) 60,000

    EXPENSE METHOD
    Nov 1 Rent Expense
    Cash
    Adjusting Entry:
    Dec 31 Prepaid Rent 300,000
    Rent Expense 300,000

    Required:
    1. Assume that Mr. Clean Services records these transactions using the following accounts,
    record the adjusting entries on Dec. 31, 2019:
    Cleaning Supplies ASSET
    Prepaid Rent ASSET
    Unearned Cleaning Revenues LIABILITY
    2. Now, assume that Mr. Clean Services records these transactions using the following
    accounts, what will be the adjusting entries on Dec. 31, 2019?
    Cleaning Supplies Expense EXPENSE
    Rent Expense EXPENSE
    Cleaning Revenues INCOME
    Activity 9
    Preparing Adjusting Entries

    Prepare the adjusting entry for each of the following for the year ending Dec. 31,
    2020:
    Deferred Expense
    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. 24,000
    Adjusting Entry:
    Dec 31 Insurance Expense 8,000
    Prepaid Insurance 8,000
    24,000 x 4/12 =8,000
    24,000/12 x 4mos = 8,000

    EXPENSE METHOD
    Dec 31 Prepaid Insurance 16,000
    Insurance Expense 16,000

    Accrual of Expense
    b. Borrowed P200,000 by issuing a 1-year note with 7% annual interest to ISU
    Credit Cooperative on Oct. 1, 2020.

    I (interest) = P (principal) x r (rate of interest) x T (time)


    = P200,000 x .07 x 3/12
    = P3,500

    Adjusting Entry:
    2020
    Dec 31 Interest Expense 3,500
    Interest Payable 3,500

    2021
    Oct 1 Interest Expense 10,500
    Interest Payable 3,500
    Notes Payable 200,000
    Cash 214,000
    P200,000 x .07 x 9//12 = P10,500
    c. Paid P260,000 cash to purchase a delivery van (surplus) on Jan. 1. The van
    was expected to have a 3-year life and a P10,000 salvage value. Depreciation
    is computed on a straight-line basis.

    Adjusting Entry:
    Dec 31 Depreciation Expense-Delivery Van 83,333
    Accumulated Depn-Delivery Van 83,333

    P260,000-P10,000=P250,000 ÷ 3 years = 83,333

    Deferred Income
    d. Received an P30,000 cash advance for a contract to provide services in the
    future. The contract required a 1-year commitment, starting April 1.

    P30,000 ÷ 12 = 2,500 x 9 mos = P22,500 (INCOME)

    Adjusting Entry:
    Dec 31 Unearned Service Revenues 22,500
    Service Revenues 22,500

    INCOME METHOD
    Dec 31 Service Revenues 7,500
    Unearned Service Revenues 7,500

    e. Purchased P64,000 of supplies on account. At year's end, P8,000 of supplies


    remained on hand.

    Adjusting Entry:
    Dec 31 Supplies Expense 56,000
    Supplies 56,000

    EXPENSE METHOD
    Supplies 8,000
    Supplies Expense 8,000
    Accrual of Revenue

    f. Invested P100,000 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.

    P100,000 x .04 x 8/12 = P2,667

    Adjusting Entry:
    Dec 31 Interest Receivable 2,667
    Interest Income 2,667

    g. Paid P90,000 cash in advance on Sept. 1 for a 1-year lease on office space.

    P90,000 x 4/12 = P30,000 (EXPENSE)


    P90,000 x 8/12 = P60,000 (ASSET)

    Adjusting Entry:
    Dec 31 Rent Expense 30,000
    Prepaid Rent 30,000

    EXPENSE METHOD
    Prepaid Rent 60,000
    Rent Expense 60,000

    You might also like