PROBLEM 4

PREPARING THE ADJUSTING ENTRIES AT YEAR-END

A. The Prepaid Insurance account showed the following on November 30:

Beggining Balance P 35,800

July 1 42,000

October 1 72,720

The beggining balance represented the unexpired portion of a one-year policy purchased in September 2018. The july 1 entry represented a new one-year policy, and the Oct 1. Entry is additional coverage in the form of a three-year policy

B. The following table contains the cost and annual depreciation for buildings and equipment all of which the entity purchased before the current year.

Account Cost Annual Depreciation

P 145,000

354,000

Buildings P2,860,000

Equipment 3,740,000

C. On September 1, the entity completed negotiation with a client and accepted an advance of P 168,000 for services to be performed next year. The P168,000 was credited to Unearned Service Revenues.

D. The entity calculated that as of Novemver 30, it had earned P40,000 on an P110,000 contract that would be completed and billed in January.

E.Among the liabilities of the entity is a note payable in the amount of P3,000,000. On November 30, the accrued interest on this note amounted to P150,000

F. Assume that on, December 3, a saturday the entity, which is workweek,will pay its regular salaried employees P123,000.

G. On November 29, the entity completed negotiations and signed a contract to provide services to a new client at an annual rate of P175,000