ADJUSTING ENTRIES

PROBLEM 1

Jan. 3, 2019 Issues P20,000 shares of common stock for cash

Jan. 5, 2019 Purchases equipment on account for P3,500, payment due within the month

Jan. 9, 2019 Receives P4,000 cash in advance from a customer for services not yet rendered

Jan. 10, 2019 Provides P5,500 in services to a customer who asks to be billed for the services

Jan. 12, 2019 Pays a P300 utility bill with cash

Jan. 14, 2019 Distributed P100 cash in dividends to stockholders

Jan. 17, 2019 Receives P2,800 cash from a customer for services rendered

Jan. 18, 2019 Paid in full, with cash, for the equipment purchase on January 5

Jan. 20, 2019 Paid P3,600 cash in salaries expense to employees

Jan. 23, 2019 Received cash payment in full from the customer on the January 10 transaction

Jan. 27, 2019 Provides P1,200 in services to a customer who asks to be billed for the services

Jan. 30, 2019 Purchases supplies on account for P500, payment due within three months

On January 31, 2019, Printing Plus makes adjusting entries for the following transactions.
1. On January 31, Printing Plus took an inventory of its supplies and discovered that P100 of
supplies had been used during the month.
2. The equipment purchased on January 5 depreciated P75 during the month of January.
3. Printing Plus performed P600 of services during January for the customer from the January 9
transaction.
4. Reviewing the company bank statement, Printing Plus discovers P140 of interest earned during
the month of January that was previously uncollected and unrecorded.
5. Employees earned P1,500 in salaries for the period of January 21–January 31 that had been
previously unpaid and unrecorded.
ANSWER/SOLUTION TO PROBLEM 1

1.

2.

3.

4.

5.

PROBLEM 2
The following transactions occurred on December 31, 2016, for the Falwell Company.
1. A three-year fire insurance policy was purchased on July 1, 2016, for P15,120. The company debited
insurance expenses for the entire amount.
2. Depreciation on equipment totaled P14,250 for the year.
3. Employee salaries of P21,000 for the month of December will be paid in early January 2017.
4. On November 1, 2016, the company borrowed P280,000 from a bank. The note requires principal
and interest at 12% to be paid on April 30, 2017.
5. On December 1, 2016, the company received P4,800 in cash from another company that is renting
office space in Falwell's building. The payment, representing rent for December and January, was
credited to deferred rent revenue.
Prepare the necessary adjusting entries for each of the above situations. Assume that no financial
statements were prepared during the year and no adjusting entries were recorded.

ANSWER/SOLUTION TO PROBLEM 2

PROBLEM 3 TRUE OR FALSE

 1. A ledger is where the company initially records transactions and selected other
events.

2. Nominal (temporary) accounts are revenue, expense, and dividend

accounts and are periodically closed.

3. Real (permanent) accounts are revenue, expense, and dividend accounts and
are periodically closed.

4. An example of an internal event would be a flood that destroyed a portion of a

company's inventory.

5. All liability and stockholders’ equity accounts are increased on the credit
side and decreased on the debit side.

6. In general, debits refer to increases in account balances, and credits refer to

decreases.

7. The first step in the accounting cycle is the journalizing of transactions and
selected other events.

8. One purpose of a trial balance is to prove that debits and credits of an equal
amount are in the general ledger.

9. A general journal chronologically lists transactions and other events,

expressed in terms of debits and credits to accounts.

10. If a company fails to post one of its journal entries to its general ledger, the
trial balance will not show an equal amount of debit and credit balance
accounts.

11. Adjusting entries for prepayments record the portion of the prepayment that
represents the expense incurred or the revenue earned in the current
accounting period.

12. An adjustment for wages expense, earned but unpaid at year end, is an
example of an accrued expense.

13. The book value of any depreciable asset is the difference between its cost and
its salvage value.

14. The ending retained earnings balance is reported on both the retained
earnings statement and the balance sheet.

15. The post-closing trial balance consists of asset, liability, owners' equity,
revenue and expense accounts.

ANSWER/SOLUTION TO PROBLEM 3

Item Ans Item Ans Item Ans Ite Ans.

. . . m
1. F 5. F 9. T 13. F
2. T 6. F 10. F 14. T
3. F 7. F 11. T 15. F
4. F 8. T 12. T

PROBLEM 4
 Present, in journal form, the adjustments that would be made on July 31, 2013, the end
of the fiscal year, for each of the following.
1. The supplies inventory on August 1, 2012 was P7,350. Supplies costing P22,150
were acquired during the year and charged to the supplies inventory. A count on
July 31, 2013 indicated supplies on hand of P8,810.
2. On April 30, a ten-month, 6% note for P20,000 was received from a customer.
*3. On March 1, P12,000 was collected as rent for one year and a nominal account was
credited.

ANSWER/SOLUTION TO PROBLEM 4

1. Supplies Expense ...................................................................... 20,690

Supplies .......................................................................... 20,690

2. Interest Receivable .................................................................... 300

Interest Revenue ............................................................. 300

*3. Rent Revenue ............................................................................ 7,000

Unearned Rent Revenue ................................................ 7,000

PROBLEM 5

Reed Co. wishes to enter receipts and payments in such a manner that adjustments at
the end of the period will not require reversing entries at the beginning of the next
period. Record the following transactions in the desired manner and give the adjusting
entry on December 31, 2012. (Two entries for each part.)
1. An insurance policy for two years was acquired on April 1, 2012 for P12,000.
2. Rent of P15,000 for six months for a portion of the building was received on
November 1, 2012.

ANSWER/SOLUTION TO PROBLEM 5

1. Prepaid Insurance ......................................................................

12,000
Cash ............................................................................... 12,000
Insurance Expense ..................................................................... 4,500
Prepaid Insurance .......................................................... 4,500

2. Cash ......................................................................................... 15,000

Unearned Rent Revenue ................................................ 15,000
Unearned Rent Revenue ............................................................ 5,000
Rent Revenue ................................................................ 5,000

PROBLEM 6
Selected amounts from Trent Company's trial balance of 12/31/12 appear below:

1. Accounts Payable P 160,000

2. Accounts Receivable 150,000
3. Accumulated Depreciation—Equipment 200,000
4. Allowance for Doubtful Accounts 20,000
5. Bonds Payable 500,000
6. Cash 150,000
7. Common Stock 60,000
8. Equipment 900,000
9. Insurance Expense 30,000
10. Interest Expense 10,000
11. Inventory 300,000
12. Notes Payable (due 6/1/13) 200,000
13. Prepaid Rent 180,000
14. Retained Earnings 818,000
15. Salaries and Wages Expense 328,000

All of the above accounts have their standard or normal debit or credit balance.
Prepare adjusting journal entries at year end, December 31, 2012, based on the following
supplemental information.

ANSWER/SOLUTION TO PROBLEM 6

a. Depreciation Expense (P900,000 – 0)  15 ..................................... 60,000

Accumulated Depreciation—Equipment .............................. 60,000

b. Interest Expense .............................................................................. 15,000

Interest Payable ................................................................... 15,000

c. Prepaid Insurance ............................................................................ 5,000

Insurance Expense (P30,000 - P25,000) ............................. 5,000

d. Rent Expense (P180,000  6) ........................................................... 30,000

Prepaid Rent ......................................................................... 30,000

e. Salaries and Wages Expense .......................................................... 22,000

Salaries and Wages Payable ............................................... 22,000

PROBLEM 7
 Data relating to the balances of various accounts affected by adjusting or closing entries
appear below. (The entries which caused the changes in the balances are not given.)
You are asked to supply the missing journal entries which would logically account for
the changes in the account balances.

1. Interest receivable at 1/1/12 was P1,000. During 2012 cash received from debtors
for interest on outstanding notes receivable amounted to P5,000. The 2012 income
statement showed interest revenue in the amount of P7,400. You are to provide the
missing adjusting entry that must have been made, assuming reversing entries are
not made.

2. Unearned rent at 1/1/12 was P5,300 and at 12/31/12 was P8,000. The records
indicate cash receipts from rental sources during 2012 amounted to P55,000, all of
which was credited to the Unearned Rent Revenue Account. You are to prepare the
missing adjusting entry.

3. Accumulated depreciation—equipment at 1/1/12 was P230,000. At 12/31/12 the

balance of the account was P290,000. During 2012, one piece of equipment was
sold. The equipment had an original cost of P40,000 and was 3/4 depreciated when
sold. You are to prepare the missing adjusting entry.

4. Allowance for doubtful accounts on 1/1/12 was P50,000. The balance in the
allowance account on 12/31/12 after making the annual adjusting entry was P65,000
and during 2012 bad debts written off amounted to P30,000. You are to provide the
missing adjusting entry.

5. Prepaid rent at 1/1/12 was P9,000. During 2012 rent payments of P120,000 were
made and charged to "rent expense." The 2012 income statement shows as a
general expense the item "rent expense" in the amount of P135,000. You are to
prepare the missing adjusting entry that must have been made, assuming reversing
entries are not made.

6. Retained earnings at 1/1/12 was P130,000 and at 12/31/12 it was P210,000. During
2012, cash dividends of P50,000 were paid and a stock dividend of P40,000 was
issued. Both dividends were properly charged to retained earnings. You are to
provide the missing closing entry.

ANSWER/SOLUTION TO PROBLEM 7
PROBLEM 8
The following trial balance was taken from the books of Fisk Corporation on December 31, 2012.

Account Debit Credit

Cash P 9,000
Accounts Receivable 40,000
Notes Receivable 10,000
Allowance for Doubtful Accounts P 1,800
Inventory 44,000
Prepaid Insurance 4,800
Equipment 110,000
Accumulated Depreciation--Equip. 15,000
Accounts Payable 10,800
Common Stock 44,000
Retained Earnings 75,000
Sales Revenue 260,000
Cost of Goods Sold 126,000
Salaries and wages Expense 50,000
Rent Expense 12,800
Totals P406,600 P406,600

At year end, the following items have not yet been recorded.

a. Insurance expired during the year, P2,000.

b. Estimated bad debts, 1% of gross sales.
c. Depreciation on equipment, 10% per year.
d. Interest at 6% is receivable on the note for one full year.
e. Rent paid in advance at December 31, P5,400 (originally charged to expense).
f. Accrued salaries and wages at December 31, P5,800.

Prepare the necessary adjusting entries.

ANSWER/SOLUTION TO PROBLEM 8

(a) Adjusting Entries

a. Insurance Expense .................................................................. 2,000
Prepaid Insurance ........................................................... 2,000
b. Bad Debt Expense ................................................................... 2,600
Allowance for Doubtful Accounts .................................... 2,600
c. Depreciation Expense .............................................................. 11,000
Accumulated Depreciation--Equip. ................................. 11,000
d. Interest Receivable .................................................................. 600
Interest Revenue ............................................................. 600
e. Prepaid Rent ............................................................................ 5,400
Rent Expense ................................................................. 5,400
f. Salaries and Wages Expense ................................................. 5,800
Salaries and Wages Payable ......................................... 5,800