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PROBLEM 3: ADJUSTING ENTRIES

Your business uses a calendar year accounting period. Th following were among your transactions during the year:

1. Your business issued a 14%, P300,000, one-year, note payable on April 1, 20x1. Both the principal and interest on the note are due at maturity date. What is the adjusting entry on December 31, 20x1?

2. Your business received billing of P32,000 on December 29, 20x1 for utilities used in December 20x1. Your business paid the bill on January 4, 20x2. What is the adjusting entry December 31, 20x1?

3. Your business is renting a space for a monthly rental of P22,000. As of December 31, 20x1, your business has paid the December rent. What is the adjusting entry December 31, 20X1? (Hint: 'Rent payable')

4. Your business is sub-leasing (renting out) a portion of the space referred to in #3 above to a tenant for a monthly rental of P4,000. As of December 31, the tenant has not yet paid the rent for the months of November and December. What is the adjusting entry on (Hints: 'Rent income'; 'Rent receivable)

5. Your business has total accounts receivable of P400,000 as of December 31, 20x1. Of that amount, 5% is doubtful of collection and should be expensed. What is the adjusting entry on December 31, 20x1?

6. Your business acquired a building on May 1, 20x1 for a total cost of P15,000,000. The building has an estimated useful life of 20 years. Your business records depreciation only at year-end. What is the adjusting entry on December 31, 20x1? (Hint: Depreciation normally starts from the acquisition date of an asset.)

7. Your business collected royalty* income of P720,000 in advance on November 1, 20x1. As of December 31, 20x1, P560,000 of the advanced collection is earned.

Requirements:

a. Provide the journal entry to record the collection on November 1, 20x1 under each of the following methods:

i. Liability method

ii. Income method (Hints: 'Royalty income'; 'Unearned income')

b. Provide the adjusting entries on December 31, 20x1 under each of the methods listed above.

Royalty income is the income you earn if you have invented something, wrote a book, composed a song, made a YouTube video and have it copyrighted, or other artistic or literary work, and you let another party use/publish/exploit your work in exchange for money. It is like renting out your work to another party.

8. Your business paid one-year fire insurance of P360,000 on October 31, 20x1.

Requirements:

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a. Provide the journal entry to record the prepayment on October 31, 20x1 under each of the following methods.

i. Asset method

ii. Expense method

b. Provide the adjusting entries on December 31, 20x1 under each of the methods listed above.

PROBLEM 4: ADJUSTING ENTRIES

Your business uses a calendar year accounting period. following were among your transactions during the year:

1. Your business received a 14%, P400,000, one-year, note from a customer on June 1, 20x1. Both the principal and interest on the note are due at maturity date. What is the adjusting entry on December 31, 20x1? (Round-off amounts to two decimal places)

2. Your employees earned P46,000 compensation during the lg week of December 20x1. The salaries were paid on the first week of January 20x2. What is the adjusting entry December 31, 20x1?

3. Your business received its electricity bill for the period amounting to P16,000. What is the entry to record the of the bill prior to its payment?

4. Your business is renting a space. The monthly rent is P120,000. On December 31, 20x1, the rent for the months of November and December 20x1 were not yet paid. What is adjusting entry?

5. On February 1, 20x1, your business acquired computer equipment for P360,000. You expect to use the computer over the next 3 years. What is the adjusting entry on December 31, 20x1 to take up depreciation expense?

6. Your business has accounts receivable of P300,000. You estimated that out of that amount, 10% is doubtful of collection and needs to be charged to expense. What is the adjusting entry to record the doubtful accounts?

7. Your business is renting out properties. On June 1, 20x1, your business receives one-year advanced rent of P360,000 from one of your tenants. The advanced rent covers the months of June 1, 20x1 to May 31, 20x2.

Requirements:

i. Liability method

ii. Income method

b. Provide the adjusting entries on December 31, 20x1 under each of the methods listed above.