For each of the following information pertaining to SERENA TRADING, a fiscal-year company, prepare

the necessary adjusting journal entries as of June 30, 2011.

a. On August 1, 2010, SERENA TRADING acquired an insurance worth P540,000 with LOCKE
INSURANCE CO. The insurance policy covers the period from 9/1/2010 until 9/1/2011.
SERENA TRADING initially recorded this transaction with a debit to Insurance Expense.
Prepaid Insurance Expense
Insurance Expense

90 000
90 000

b. Utilities Expenses representing electricity P8,200, water P3,100 and telephone charges P2,500
remain unpaid as of June 30, 2011.
Utilities Expense
Accrued Utilities Expense

13 800
13 800

c. SERENA TRADING issued a 10% 120-day promissory note to HERMAN LENDING for money
borrowed amounting to P500,000. The note matures on July 30, 2011.
Interest Expense
Accrued Interest Expense

12 500
12 500

d. SERENA TRADING received a promissory note on May 1, 2011 from SALEISHA SUPPLIES
amounting to P820,000. The note has an annual interest rate of 12% and will mature on August
29, 2011.
Accrued Interest Income
Interest Income

16 400
16 400

e. SERENA TRADING has P150,000 balance on its Subscriptions Revenue account representing
advance payment of GIO TRADING for a 10-month subscription on SERENAS email updates.
The subscription will expire on October 30, 2011.
Subscription Revenue
Unearned Subscriptions
f.

60 400
60 400

Office Supplies had a beginning balance of P45,000. During the year, SERENA TRADING
purchased additional office supplies amounting to P27,800. Count at June 30, 2011 revealed that
P11,500 of office supplies remain unused.
Office Supplies Expense
Office Supplies

61 300
61 300

g. On February 1, 2011, SERENA TRADING entered into a lease contract with FERB LEASING
for the rental of an additional warehouse amounting to P630,000 valid for 24 months. As per
contract, rent payment must be made by SERENA monthly and it is due every 5 th day of the
succeeding month.
Rent Expense
Accrued Rent Expense

25 250
25 250

h. On March 31, 2011, SERENA TRADING entered into a quarterly agreement with NATES
SUPPLIES to sell the latters product for a commission of 2% for every sale made. NATE paid
SERENA the commission in advance amounting to P50,000 and the latter recorded it in the books
as Unearned Commission Income. As of June 30, 2011, SERENA sold a total of P1,580,000 of
NATEs products.
Unearned Commission Income
Commission Income
i.

31 600

As of June 30, 2011, rent for the month of June has not yet been collected from YESSI
DEALERS. This amounts to P63,000 and it was not yet recorded in the books.
Rent Income
Unearned Rent Income

j.

31 600

63 000
63 000

SERENA TRADING pays the salaries of its employees every Friday for work rendered from
Monday until Friday. SERENA have 10 employees; 6 of which earn P2,500/employee weekly
and the remaining earn P3,500/employee weekly. June 30 is a Thursday.
Salaries Expense
Accrued Salaries Expense

23 200
23 200

k. SERENA TRADING had an agreement with Melon Merchandising to sell the goods of the latter
for a commission equal to 5% of every sale made. SERENA received P80,000 in advance from
Melon for goods that will be sold for the month of December. As of December 31, 2012,
SERENAs total sales of Melons products amounted to P1,500,000. The company uses nominal
accounts in recording deferrals.
l.

Described below are the different types of property assets owned by the SERENA TRADING.

Depreciation Expense Building

Depreciation Expense Office Equipment
Accumulated Depreciation Building
Accumulated Depreciation Office Equipment

466 666.67
17 000
466 666.67
17 000

m. Accounts receivable as at June 30, 2011 totaled P140,600. The Allowance for Doubtful Accounts
per general ledger showed a credit balance of P4,700 before adjustment. It is company policy to
record 4% of accounts receivable as doubtful of collection.
Doubtful Accounts Expense

924

Allowance for Doubtful Accounts

924

n. It is company policy to record 6% of Accounts Receivable as doubtful of collection. Accounts

Receivable at year-end amounted to P157,350. The Allowance for Doubtful Accounts as shown
in the general ledger has a credit balance of P1,700 before adjustment.
Doubtful Accounts Expense
Allowance for Doubtful Accounts

7741
7741

o. Accounts receivable per ledger before provision for bad debts totaled P100,500. Allowance for
doubtful accounts at the beginning of the year amounted to P7,700. It is company policy to
increase allowance to 10% of the outstanding accounts receivable.
Doubtful Accounts Expense
Allowance for Doubtful Accounts

2350
2350

Direct Write-off Method

Bad Debt Expense
Accounts Receivable

xxx

Allowance Method
Bad Debt Expense
Estimated Uncollectible

xxx

Merchandise Inventory
Income Summary

xxx

xxx
xxx

Accrued income income earned but not yet collected

Accrued expense expense incurred but not yet paid
Unearned income income is received in advance
Prepaid expense expense is paid but not yet incurred

xxx