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    Laisan Santos
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    The document provides examples of adjusting journal entries for various accounts at the end of an accounting period: 1) Prepaid rent is adjusted to expense the portion used within the period. Deferred revenue is adjusted to recognize the portion earned within the period. 2) Accrued revenues and expenses are adjusted to record income and liabilities incurred but not yet billed or paid, such as accrued interest, wages, and fees. 3) Depreciation expense is adjusted for the portion of asset cost allocated to the period. 4) An adjustment is made to the allowance for uncollectible accounts to estimate bad debts based on accounts receivable balances and expected collectability.

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    The document provides examples of adjusting journal entries for various accounts at the end of an accounting period: 1) Prepaid rent is adjusted to expense the portion used within the period. Deferred revenue is adjusted to recognize the portion earned within the period. 2) Accrued revenues and expenses are adjusted to record income and liabilities incurred but not yet billed or paid, such as accrued interest, wages, and fees. 3) Depreciation expense is adjusted for the portion of asset cost allocated to the period. 4) An adjustment is made to the allowance for uncollectible accounts to estimate bad debts based on accounts receivable balances and expected collectability.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    136 views4 pages

    01 Activity 2

    Uploaded by

    Laisan Santos
    The document provides examples of adjusting journal entries for various accounts at the end of an accounting period: 1) Prepaid rent is adjusted to expense the portion used within the period. Deferred revenue is adjusted to recognize the portion earned within the period. 2) Accrued revenues and expenses are adjusted to record income and liabilities incurred but not yet billed or paid, such as accrued interest, wages, and fees. 3) Depreciation expense is adjusted for the portion of asset cost allocated to the period. 4) An adjustment is made to the allowance for uncollectible accounts to estimate bad debts based on accounts receivable balances and expected collectability.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 4

    BMSH2003

    NAME: Santos, Laisan Shayne T. SECTION: ABM-2A SCORE:

    ACTIVITY ON ADJUSTING ENTRIES

    Instructions: Analyze the transactions below. Prepare the required initial and/or adjusting entries. (13 items x
    2 points) Write your answers on the space provided.

    A. DEFERRALS

    1. Prepaid expenses
    On August 1, 201A, ABC Company paid an advance rental on a space of a building it occupies in the amount
    of P120,000. The amount covers one (1) year rent paid in advance beginning month of August.

    The entry on August 1, 201A to record the advance payment of rental is:

    Asset Method Expense Method


    201A 201A
    Aug. 1 Prepaid Rent P120,000 Aug. 1 Rent Expense P120,000
    Cash P120,000 Cash P120,000
    To record payment of prepaid rent To record payment of prepaid rent

    Prepare adjusting entry on December 31, 201A.

    Asset Method Expense Method


    201A 201A
    Dec. 31 Rent Expense P50,000 Dec. 31 Prepaid Rent P70,000
    Prepaid Rent P50,000 Rent Expense P70,000
    To adjust for the 5-month expense To adjust for the 7 months unused
    prepaid rent

    2. Deferred Revenue
    On September 1, 201A, ABC Dormitory received P120,000 from a tenant. The amount represents a one-year
    rental beginning the month of September.

    The entry on September 1, 201A to record the advance payment of rental is:
    Liability Method Revenue Method
    201A 201A
    Sept. 31 Cash P120,000 Sept. 31 Cash P120,000
    Unearned Revenue P120,000 Rent Income P120,000
    To record advance receipt of service To record advance receipt of service
    fees fees

    Prepare adjusting entry on December 31, 201A.


    Liability Method Revenue Method
    201A 201A
    Dec. 31 Unearned Revenue P40,000 Dec. 31 Rent Income P80,000
    Rent Income P40,000 Unearned Revenue P80,000
    To adjust for earned income for To adjust for earned income for
    December 201A December 201A

    01 Activity 2 *Property of STI


    Page 1 of 2
    BMSH2003

    B. ACCRUALS

    1. Accrued Income/Revenues
    a. At the end of the current year, P25,000 fees have been earned but have not been billed to clients.
    Journalize the adjusting entry to record the accrued fees.

    Journal entry at year-end is:

    201A
    Accounts Receivable P25,000
    Professional Fees P25,000
    To record income

    b. On May 1, 201A, a company received a 15%, 90-day note for P50,000 from a customer on an
    overdue account. Interest on such note will be collected together with the principal on the maturity
    date. Because interest accrues over time, interest has already been earned from May 1, 201A through
    June 30, 201A. June 30 is the end of the company’s fiscal year. (Assume a 360-day year)

    Adjusting journal entry on June 30, 201A is:

    201A
    June 30 Interest Receivable P1,250
    Interest Revenue P1,250
    Accrue interest

    2. Accrued Expenses
    Assume that a company with a five-day workweek pays wages of its daily-wage workers every Friday.
    The average weekly payroll amounts to P15,000 and the last wage payment for the company’s fiscal year
    ending June 30 was Friday, June 25. The adjusting entry at June 30 is:

    Adjusting journal entry on June 30, 201A is:

    201A
    June 30 Wages Expense P15,000
    Wages Payable P15,000
    To adjust entry for accrued wages

    C. DEPRECIATION

    ABC Company acquired office equipment on May 1, 201A for P250,000. The equipment has an estimated
    salvage value of P10,000 at the end of its estimated useful life of five (5) years. The company uses the
    straight-line method and computes depreciation to the nearest month.
    Adjusting journal entry on December 31, 201A is:

    201A
    Dec. 31 Depreciation Expense P32,000
    Accumulated Depreciation- Office Equipment P32,000
    To record depreciation

    01 Activity 2 *Property of STI


    Page 2 of 2
    BMSH2003

    D. Uncollectible Accounts
    Assume that a company had the following account balances at December 31, 201A.

    Accounts Receivable P900,000


    Allowance for Uncollectible Accounts
    (before adjustment) P16,000

    Based on the assessment of the collectability of accounts receivable, it is determined that only 95% are
    collectible.

    Adjusting journal entry on December 31, 201A is:

    201A
    Dec. 31 Bad Debts Expense P29,000
    Allowance for Bad Debts P29,000
    To record estimate of uncollectible accounts for 201A based on 5%
    of uncollectability

    01 Activity 2 *Property of STI


    Page 3 of 2
    BMSH2003

    01 Activity 2 *Property of STI


    Page 4 of 2

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