Exercises (use the answer sheet provided):
1. Didy Co. rented a warehouse from 3M Realty from May 1, 2020 to April 30, 2022.
On April 1, 2020, Didy paid P360,000. It included a cleaning fee of P10,000, 2
months advanced rental, and a rental deposit equivalent to a 3 month’s rent. Didy
Co. uses the asset method in recording its pre-payment of expenses. Prepare
journal/adjusting entries:
a. made on April 1, 2020
b. on April 30, 2020, the end of the company’s reporting period.
2. Diloy Co. that uses expense method, paid a 3-year insurance premium of
P720,000 at the beginning of its fiscal year. Prepare adjusting entries at the
end of the fiscal year.
3. The financial year of Dondon Co. ends on December 31 every year and it uses
income method prepare in recording deferrals. On May 30, 2020, the company
received an annual service fee of P600,000 from a customer for a service
commencing on June 1, 2020. Prepare journal/adjusting entries
a. made on May 30, 2020
b. at the end of the company’s reporting period.
4. Papat Realty pays commissions to its sales staff at the rate of 3% of net sales. Sales
staff are not paid salaries but are given monthly advances of P15,000. Advances are
charged to commission expense, and reconciliations against commissions are
prepared quarterly. Net sales for the year ended March 31, 2020 were P15,000,000.
The unadjusted balance in the commissions expense account on March 31, 2020
was P400,000. March advances were paid on April 3, 2020. Prepare adjusting
entries at year-end.
5. Summary of non-current assets acquisition of Mickey Co. , that follows the
calendar year as its reporting period, is as follows:
Assets
Date of Acquisition
Amount
Estd. Useful Life
Scrap Value
Building
September 30, 2018
P3,000,000
25 years
20%
Tables
August 1, 2020
75,000
5 years
10%
Furniture
January 1, 2016
20,000
5 years
10%
Prepare adjusting entries for the year ended December 31, 2020.
6. It is estimated that of 2% of its P340,000 accounts receivable at the end of the
year is deemed uncollectible. The balance of Allowance for Uncollectible
accounts amounted to P1,000 as of January 1, 2020. Prepare adjusting entries at
year-end.
7. A loan was taken from the bank last August 1, 2020 in the amount of P500,000,
interest of 18% of which, was deducted in advance. As mentioned in item #2
above, the company uses the expense method. Reporting period ends on December
31, 2020.
Item #
/letter
1. a)
Account Title
Debit
Cleaning Fee
10,000
Prepaid Rent
140,000
Rent Deposit
210,000
Cash
b)
2.
360,000
No adjusting entries
Insurance Expense
240,000
Prepaid Insurance
3. a)
Credit
Cash
240,000
600,000
Service Income
b)
Service Income
600,000
250,000
Unearned Income
4.
Commissions Expense
250,000
50,000
Commissions Payable
5.
Depreciation Expense-Building
50,000
96,000
Accumulated Depreciation-Building
Depreciation Expense-Tables
96,000
5,625
Accumulated Depreciation-Tables
Depreciation Expense-Furniture
5,625
3,600
Accumulated Depreciation-Furniture
6.
Bad Debts Expense
3,600
5,800
Allowance for Uncollectible Accounts
7.
Interest Expense
Interest Payable
5,800
90,000
90,000