NATIONAL UNIVERSITY
Manila, Philippines
College of Business & Accountancy
Department of Accountancy
SY 2021 -2022
BAINTE1X: Integrated Accounting Fundamentals
ACTIVITY 6: Adjusting Entries and Worksheet Preparation
1. Based on the following information taken on December 31, identify the accounts to be
adjusted, whether to be debited (DR) or credited (CR). Indicate if it goes to the statement of
financial position account (SFP) or to the income statement account (IS).
Example: Company
bills a tenant for
December rent
Account Title
DR or CR
IS or SFP
Rent Receivable
Debit
SFP
Rent Income
Credit
IS
1. Meralco bills the
company for
December light
service
2. Prepaid Insurance
has expired
3. Equipment has a
useful life of 10 years
4. Customer’s 5%
one-year note was
received on
December 1
5. One month of the
advance rent of
tenant has been
earned
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2. Make the entry to record the following adjustments at the end of the accounting period.
a. Accrued commission income of P10,000
b. Accrued utility expense of P5,000
c. Bad debts of P1,500 under the allowance method
d. Bad debts of P2,000 under the direct write-off method
e. Depreciation of equipment for P3,500
f. Expired insurance of P4,000 under the liability method
g. Earned rental of P6,000 under the liability method.
3. Refer to Problem 2 f) and g)
a. What will be the entry if this is under the expense method? Total payment was P12,000
b. What will be the entry if this is under the income method? Total collection was P10,000
4. Dr. Patty Ocampo, a consultant, employs one college student every summer to help her in her
research work. As researcher, the student works five weekdays (Monday to Friday) for P450 per
day and is paid every Saturday. The last three days of May will be paid on June 3. The calendar
from May 21 to June 3 is reproduced below. Dr. Ocampo uses the fiscal period during May 31.
Required: Prepare the adjustment for accrued salary on May 31.
Sun
21
28
Mon
22
29
Tues
23
30
Wed
24
31
Thurs
25
1
Fri
26
2
Sat
27
3
5. On September 15, Bert Motor Service Center issued a 45-day, 18% note for P10,000 for a loan
from a friend. The service uses the fiscal accounting period ending September 30.
Required: Entries on date of issue, end of September and on maturity date.
6. Shaina Montes started a magazine publication called The Good Life. A subscriber pays P100
for one issue. Fifty subscribers made a one-year payment on March 1 and another 100
subscribers on August 1 which Montes credited to Advances from Subscribers. She sends the
magazine to each of these subscribers every month.
Required:
a. Make the entry to record collections received on March 1 and August 1.
b. Assuming no changes in subscribers, compute for the Subscription Revenue that she should
report at the end of December and prepare the journal entry to adjust the liability to a revenue
account.
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7. Master Architect designs houses for various clients. Its unadjusted trial balance as at
December 31, 2016 showed, among others, Unearned Professional Fess Income of P350,000
representing two accounts collected in advance: November 10 Monson account, P200,000 and
December 15 Samson account, P150,000. It takes 50 days for a design to be finished and
delivered.
Required:
a. Prepare the entry to adjust the unearned revenue and recognize Professional Fees Income
b. Make postings to the general ledger accounts appearing below.
c. Extract the balances and show the correct amounts to be reported in the income statement and
in the statement of financial position.
Date
2016
Nov. 10
Dec. 15
Dec. 31
Date
2016
Dec. 31
Unearned Professional Fees
Explanation
Ref
Debit
GJ 11
GJ 12
AE
Credit
404
Balance
200,000
150,000
200,000
350,000
?
Professional Fees
Explanation
Ref
Debit
Total services
GJ 12
rendered
AE 2
Credit
?
702
Balance
1,000,000
?
8. KC Modeling Agency gave to De Leon Realty an advance payment for rent which was good
for six months. Ledger postings appear below.
Rent Expense
Debit
Credit
Prepaid Rent
Debit
Credit
Required:
a. Make the entry to adjust the ledger accounts affected as at December 31, ends of its
accounting period. Post your entry
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b. How much should be reported in the income statement and in the statement of financial
position.
9. The unadjusted trial balance of The Spa showed, among others, Medical Supplies P72,000 and
Medical Supplies Expense P0. On December 31, end of the accounting period, P15,500 are still
on hand.
Medical Supplies
Debit
Credit
Jan. 1 11,500
June 4 35,000
Dec. 1 25,500
Medical Supplies Expense
Debit
Credit
a. Make the entry on December 31 to adjust for the medical supplies on hand. Post the entry.
b. Determine the adjusted balances to be presented in the financial statements.
10. Leonard Company purchased a building on August 1, 2015 for P2,960,000 plus prepaid
insurance for one-year P12,000. The building has an estimated useful life of ten years and a
P200,000 residual value.
a. Give the entry for the purchase of the building
b. Give the entry to record the payment for prepaid insurance.
c. Give the entry to adjust for depreciation on December 31, 2015.
d. From the entries, present the assets properly classified as current or non-current
f. From the entries, present the operating expenses.
11. Refer to no. 10. For the year 2016.
a. Post to T-accounts the balance of building (start with 2016 January 1 balance), the
accumulated depreciation (start with January 1, 2016 balance)
b. Make the adjusting entry for 2016, and post.
c. What is the depreciation expense in the income statement?
d. What is the book value of the building in the statement of financial position?
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12. Global Advertising Company handles the advertising and promotion of various clients all on
credit term of 180 days. Its unadjusted trial balance on December 31, 2015, end of its first year
of operation, showed among others: Accounts Receivable, P1,250,000 and Professional Fees,
P4,500,000.
Among its transactions for the year 2016 are the following:
a. Professional services reduced on account, P5,500,000
b. Total collection of previous and current accounts, P3,500,000
c. The accountant adopted a policy of providing for doubtful accounts based on 5% of the
outstanding accounts receivable at the end of the year.
Required:
a. Make T-Accounts for Accounts Receivable, Allowance for Doubtful Accounts and Doubtful
Accounts Expense. Enter Jan. 1 balance, post 2016 entries, and extract balances.
b. What is the net realizable value of the accounts receivable?
c. How much is doubtful accounts expense in the income statement at the end of 2016?
13. Continue with Problem 12. Among its transactions for the year 2017 are the following:
a. Professional services rendered on account, P5,500,000
b. Total collection of previous and current accounts, P3,500,000
Required:
a. Make three T-accounts for Accounts Receivable, Allowance for Doubtful accounts and
Doubtful Accounts Expense. Enter the beginning balance for 2017.
b. Post the beginning balances and entries for 2017 and extract the balances at year end.
c. What is the net realizable value of the accounts receivable at December 31, 2017?
d. How much is the doubtful accounts expense in the income statement at the end of 2017?
14. Atty. Timothy began business on January 1, 2015. Below is the unadjusted trial balance for
the first year. The following data for adjustments were collected. (Thousands omitted to simplify
the problem).
a. The balance in the notes receivable is for a single P60 note from a customer dated December
16, 2015. Then note, due February 14, 2016, carries an interest rate of 20%.
b. A count of the office supplies showed P12 still on hand as at December 31.
c. Bad accounts should be written off amounting to P7, representing past due account of an
insolvent client.
d. Atty. Timothy invested P35 of the furniture and fixtures when the clinic was opened on
January 1. It is estimated to have a useful life of 5 years and a residual value of P5. The balance
of P30 was acquired on July 1 and has an estimated useful life of five years, no scrap value.
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e. The office equipment was purchased on February 28 for P280. It has an estimated useful life
of five years and a residual value of P40.
f. Only P7 shown in the Unearned Legal Fees Revenue have not been earned.
Timothy Law Office
Unadjusted Trial Balance
December 31, 2015
(Thousands omitted)
Account No.
101
102
103
104
201
202
301
302
401
402
501
601
603
603
Account Title
Cash
Accounts Receivable
Notes Receivable
Office Supplies
Furniture and Fixtures
Office Equipment
Accounts Payable
Unearned Legal Fees
Atty. Timothy, Capital
Atty. Timothy, Personal
Legal Fees Revenue
Rent Expense
Taxes and Licenses
Utilities Expense
Total
Debits
P191
27
60
39
65
280
P5
17
175
16
658
93
15
69
P855
Required:
Prepare a six column working paper up to adjusted trial balance.
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Credits
P855