PROBLEMS

P5-1 SHORT PROBLEMS. Solve for the requirements.

1. A small business reported these balances on their Wages Payable account at the beginning of 2012 and end of 2012:

January 1, 2012 P11,000 December 31, 2012 14,000

If wages of P18,500 were paid in cash during the year, what amount would be reported for Wages expense in 2012?

2. On August 1, 2012, IRH Co. collected 8 months’ rent revenue of P142,000 in advance. The Co. debited cash and credited Deferred
Rent. Adjusting entry have to be prepared on December 31, 2012. What is the liability account on December 31, 2012?

3. The Store supplies account had a P12,500 balance at the beginning of the year, P56,000 of store supplies were purchased during the
year, and an inventory of unused store supplies at the end of the year totaled P15,000. How much is the Store Supplies Expense for
the year?

4. The Co’s two office employees earn P350 per day and P400 per day respectively. They were paid every Friday for 5 day work that
begins on Monday. This year, December 31 fell on a Tuesday, and the employees both worked on Monday and Tuesday. How much
salaries should be accrued on December 31?

5. On September 30, 2012, Orange Company paid P180,000 for one year rental covering the period from October 1, 2012 to September
30, 2013. The payment was originally recorded as an expense account. How much rent expense is reported in the statement of
comprehensive income of Orange Company for the year ended December 31, 2012?

6. Tin- Tin Company acquired an equipment costing P480,000 on January 2, 2012. The equipment is being depreciated using straight
line method. It is estimated to have a usefully life of five years and a residual value of P30,000.
a. What is the accumulated depreciation balance that would be shown on December 31, 2013?
b. Assuming the equipment will be sold on April 1, 2014 at P250,000, how much is the gain or loss on sale of equipment?

7. A machinery purchased for P585,000 on April, 2011 was sold on

September 30, 2012 for P355,000. If the machinery has an estimated useful life of 8 years and has a residual value of P25,000. How
is the gain (loss) on the sale of machinery?
 8. Before year-end adjustments are made, the December 31, 2012 Trial Balance of Alba Company contains revenue of P146,000 and
expenses of P85,700, adjustments are necessary for the following items:

Fees earned in Year 2012, not yet billed to customers, P32,000;

Depreciation for Year 2012, P28,000;

Portion of prepaid insurance applicable to Year 2012, P18,400

Portion of fees collected in advance earned in Year 2012, P12,500

c. Compute for the correct revenue.

d. Compute for the correct expenses.
e. Compute for the correct profit for 2012.

9. Miguel Co. prepared an aging of its accounts receivable at December 31, 2012 and determined that the net realizable value of the
receivable at that date is P1,000,000. Additional information is available:

Accounts receivable, 12/31/11 P 960,000

Accounts receivable, 12/31/12 1,080,000

Allowance for doubtful accounts (12/31/11) credit 120,000

Accounts written off as uncollectible during 2012 100,000

f. Compute the doubtful account expense for 2012?

g. How much is the allowance for doubtful account balance?
10. The total accounts receivable of Triple I Co. were as follows: January 1, 2012 P380,000; January 31, 2012 P 470,000. In January
P900,000 was collected on accounts; P70,000 was received from cash sales; accounts receivable of P60,000 was written off as
uncollectible and sales return and allowances amounted to P25,000. Compute the total sales in January.

11. Clark Co. allowance for doubtful accounts had a credit balance of P12,000 at January 1, 2012. Clark accrues doubtful account expense
at 4% of outstanding accounts receivable of P1,500,000. Uncollectible amounting to P48,000 were written off. The aging of accounts
receivable indicated that P50,000 allowance for doubtful accounts was required at December 31, 2012.
h. Compute Clark’s Doubtful account expense for Year 2012.
i. How much is the balance of the allowance account on December 31, 2012?
 12. The following data were taken from the books of Aimee Co.

Rent paid during the period P187,000

Accrued rent expense, January 1, 2012 28,000

Accrued rent expense, December 31, 2012 15,000

Using the above data, how much would be the amount of rent that must be reported in Year 2012.

13. ABC receives a 90-day, 6 percent note receivable from a client for the repair of a computer for P20,000. The repair was done on Sept.
16. ABC’s accounting period ends on September 30. How much is the accrued interest income ?

14. A Rental Company reported these two different balances in their Unearned Rent account at the beginning and end of Year 2012:

Jan. 1, 2012 =P26,000

Dec. 31, 2012 = P32,000

If rent revenue for Year 2012 was P263,000, how much cash was received by the company as advance payments for rent due in Year 2012?

15. On October 1, 2012, An investment bank loaned P300,000 to a small business payable within 9 months at 12 percent. The bank’s
accounting period ends on December 31, 2012. What amount would be reported in the bank's 2012 statement of comprehensive
income as Interest Revenue?

P5-2 REQUIRED: Prepare the adjusting journal entries based on the given
independent situations as of December 31, 2012:

16. The Prepaid Insurance account had a debit balance on December 31 of P36,000 representing premium for a 12 month fire insurance
policy effective September 1, 2012;

17. On December 31 there is a 60 day 6% note payable to ABC Company issued on November 12, 2012 for P120,000. No interest has
been taken on this note;
 18. Commissions Income account showed a credit balance of P 26,000 per general ledger as of yearend. Of this only 40% has been
actually earned during the current year;

19. The following accounts are given as of yearend:

Accounts Receivable P360,000

Allowance for doubtful accounts 30,000

It was agreed that uncollectible accounts are estimated to be equivalent to 18% of outstanding accounts receivable.

20. Depreciation of Equipment acquired on May 1 with a cost of P76,000 had not been recorded in the books. Estimated life of
equipment is 5 years with scrap value of P P1,800;

21. Unearned rent income was credited for P48,000 on November 1, representing 6 months’ rent collected in advance;

22. Supplies costing P8,000 bought during the period was debited to the account Supplies expense of which P 6,500 were consumed
during the period;

23. Commissions already earned but not yet collected amounted to P18,000 as of the year-end.

24. Equipment per general ledger as of December 31 shows a balance of P186,000. Equipment acquired during the period was P26,000 on
October 1. All equipment is to be depreciated at the rate of 20% per annum;

25. Store supplies recorded in the Store supplies account during the year P 12,400. As of December 31 store supplies unused is P4,800.
 P5-3 Before preparing the adjusting journal entries at the end of the current
reporting period, the accountant of Yuseco Polishers. determined
certain unadjusted amounts, as follows:

Profit during the year P955,750

Total assets 972,360

Total liabilities 385,440

The following items are to be adjusted at the end of the current period:

a Accrued Expenses P 4,770

.

b Prepaid Expenses 1,890

.

c Accrued Income 2,355

.

d Unearned Income 6,880

.

e Depreciation 11,500
.

f Bad debts 890

.

REQUIRED: Based on the given data, determine the adjusted amounts of the profits, total assets and total liabilities, after taking up the
adjustments.

P5-4 REQUIRED: From the following information, prepare adjusting

journal entries on December 31, 2012, the end of the accounting
period:

a. Unrecorded salaries, P145,000.

b. Accrued interest on notes from customers, P15,000.
c. Accrued interest on notes to suppliers, P50,000.
d. Equipment was acquired on July 1, 2012, for P80,000. The useful life of equipment is five years, at the end of which it is
expected to be sold for P20,000.
 e. A room of the building is being leased to a tenant at P7,500 a month. On December 31, 2012, the record shows that the
tenant is three months in arrears in the payment of rent.
f. Depreciation of delivery equipment is 10% per annum. The ledger balance of the account is P250,000, acquired on April 1,
2012.
g. On December 1, a customer issued a 60-day, 18% note for P60,000. The principal and the interest will be collected on the
maturity date.

P5-5 Presented below is the unadjusted trial balance of Helper Company for
the year ended December 31, 2012:

Helper Company

Unadjusted trial balance

December 31, 2012

Dr. Cr.

Cash on hand and in banks P 189,000

Accounts receivable 967,500

Office supplies on hand 94,500

Rent paid in advance 540,000

Furniture and fixtures 3,262,500

Accumulated depreciation P 652,500

Accounts payable 427,500

24% Note payable 1,350,000

Aurora, Capital 2,842,500

Aurora, Personal 1,800,000

Service fee income 7,699,500

Salaries and wages 5,656,500

 Heat, light and power 157,500

Taxes and licenses 139,500

Telephone expenses 165,000

P12,972,000 P12,972,000

Additional information:

 Office supplies on hand at December 31, 2012 amounted to P42,500.

 On October 30, 2012, Helper paid Lessor Company P540,000 for six month's worth of rent on the office building, commencing on
November 1, 2012.
 Depreciation expense for the furniture totaled P362,500 for Year 2012.
 As of December 31, 2012, the following expenses were still unrecorded and unpaid:
j. Salaries of employees for the second half of December, P157,500.
k. Telephone expenses for the month of December, P15,000.
l. Heat, light and power expenses for the second half of December, P28,000
m. Interest on the 24% note payable. The P1,350,000 note was issued to the Bank of the Philippine Archipelago on November 1, 2012,
and will be due in 12 months.

REQUIRED:

n. Prepare the necessary adjusting journal entries at period-end.

o. Prepare a revised trial balance at December 31, 2012 for the Helper Company.

P5-6 REQUIRED: Prepare adjusting journal entries from the books of

Silent Company as of December 31, 2012. Consider the following
information:

26. Office supplies acquired during the year amounted to P86,000. Office supplies account had a beginning balance of P22,000 and the
same account has an ending balance of P 36,000.

27. The Prepaid Insurance account has a balance of P96,000 as of yearend. The balance represented two insurance policies acquired
during the year as follows: Policy A for P51,000 dated February 1,2012 and Policy B was acquired on August 31, 2012 for P45,000;

28. New equipment was installed on April 1 of the current year at a cost of P846,000. The equipment is estimated to have a salvage value
of P20,000 and useful life of 14 years.
 29. On September 21, 2012 the company borrowed P280,000 from the BPI by issuing a 20% one-year note.

30. The ledger balance of Supplies as of yearend is P 18,920 of which P 12,000 is unconsumed.

31. Silent Company entered into a lease agreement with another company on March 1, 2012 for rental of office space for the next 24
months for P156,000. A second lease was signed on November 2 of the same year for storage space for 6 months for P 56,400 both
paid in advance.

32. Salaries per general ledger is P288,000 of which P 5,600 is paid in advance.

33. Advertising contract is recorded at P62,000 as Advertising expense. This is a 10-month contract signed Feb. 1, 2012.

34. Notes Receivable has a balance of P40,000 which is a 120 day 12% note received December 23, 2012.

35. Fees Collected in Advance has a balance of P174,000 of which 80% has been earned.

36. Interest Income of P6,200 is recorded of which P2,600 is actually earned. Interest expense of P4,200 is recorded , of this P1,200 is
paid in advance.

P5-7

REQUIRED: For each of the following information pertaining to the Dawn Company, a fiscal-year company, prepare the necessary adjusting
journal entries as of May 31, 2012:

p. Dawn Company entered into a lease agreement with Carmel Company on November 1, 2011 for the rental of office space for the next
24 months for P312,000. All rent payments for this lease was paid when due at the end of each month. A second lease agreement was
signed on February 1, 2012 for use of a warehouse for six months, with P112,800 paid in advance, which Dawn debited to rent
expense.
q. On May 31, 2011, the Office Supplies account had a debit balance of P21,300. Office supplies in the amount of P82,600 were
purchased during the year. A count of office supplies on hand on May 31, 2012 totaled P15,850.
 r. On December 1, 2011, Dawn Company acquired a new printer for P179,200. It is estimated that the printer will have a useful life of 4
years with a P7,200 residual value.

s. Dawn Company borrowed P2,500,000 from Clarence Lending, Inc. on February 28 , 2012, and issued a note for the loan. The note
carries a 20% annual interest rate and will be due one year from date of issue.

t. On October 1, 2011, Dawn Company paid P32,400 for 6-months' worth of insurance. The transaction was debited to Prepaid
Insurance. No entry was made to adjust the account at period-end.

u. On January 1, 2012, Dawn Company received P91,200 from Wyeth, Inc, a customer, for services to be rendered during the months of
January, February, March, April, and May 2012. The whole amount was credited to Service Fee Income.

v. Dawn Company also acquired additional equipment worth P75,600 on April 1, 2012. The equipment is expected to last five years,
after which it will be worthless. The accountant failed to record this transaction.

w. Dawn Company had year-end accounts receivable totaling P520,000. It is estimated that 5% of the receivables will prove
uncollectible. The Allowance for bad debts has a credit balance of P2,000 before adjustments.

P5-8 The following information were gathered from the records of New
Zealand Company as of December 31, 2012:

x. Prep Insurance has a balance of P60,000 per General Ledger, of which P40,000 is expired.
y. Advertising Expense shows a balance of P52,000, paid on September 30, 2012 and the contract is for 8 months.
z. Notes Payable was issued on November 28, 2012 for P100,000 at 15% for one year. No interest has been accrued on this note.
aa. Equipment has a balance of P250,000 acquired on March 1, 2012 with life of 4 years and residual value of P10,000.
bb. Building was acquired on June 30, 2011 at a cost of P45,000,000 with a scrap value of P80,000 and life of 40 years.
cc. Office supplies has a balance per General Ledger of P18,000 Of this amount, P12,000 was consumed.
dd. Notes Receivable was received on November 1, 2012 in the amount of P60,000 at 16% per annum. No interest has been accrued on
the note.
ee. Furniture and Fixtures has a General Ledger balance of P320,000 as of December 31, 2012. Additional fixtures were acquired on
March 31, 2012 in the amount of P40,000. Furniture and fixtures are depreciated at 12% per year.
 ff. Taxes and Licenses balance per General Ledger is P32,000 of which P6,000 applies to the year 2012.
gg. Rent Expense has a balance of P144,000 paid on September 1, 2012. Contract on the rent is for one year.
hh. Unpaid Salaries as of year-end, P12,000.
ii. Accounts Receivable has a balance of P600,000 and Allowance for Doubtful Accounts is P50,000. It is estimated that 12% of
Accounts Receivable is considered uncollectible.

REQUIRED: Prepare necessary adjusting journal entries on December 31, 2012.

Reference: Fundamentals of Accounting by Beticon, Hinayon, Ireneo