ADJUSTING THE ACCOUNTS, WORKSHEET AND FINANCIAL STATEMENTS, AND COMPLETING THE ACCOUNTING CYCLE| 1

EXERCISE PROBLEM

Remulla, CPA Consulting is a new firm organized last January 1, 2018. Some of its clients
pay in advance for the advisory service while the others are billed after the service has been
rendered. The company adjusted & closes its account every month. At December 31, 2018, the
Trial balance appeared as follows:

Remulla, CPA Consulting

Trial Balance
For the month ended December 31, 2018

Account Titles Debit Credit

Cash 308,940
Accounts Receivable 120,000
Office Supplies 29,700
Prepaid Insurance 30,000
Prepaid Rent 88,500
Office Equipment 187,920
Accum. Depreciation – Office Equipment 6,960
Notes Payables 70,000
Accounts Payable 28,500
Unearned Revenue 378,000
Remulla, Capital 320,000
Remulla, Withdrawal 13,500
Service Revenue 285,000
Insurance Expense 6,000
Salaries Expense 266,700
Miscellaneous Expense 37,200
1,088,460 1,088,460

Consider the following information:

a) The firm’s monthly rent is P 17,700.

b) The office supplies on hand on December 31, 2018, amounted to P 19,500.
c) Purchased office equipment on August 1, 2018 with an estimated useful life of 9 years.
d) Last October 1, 2018, the firm purchased insurance for 1 year from Morado’s Insurance
Company which amounted to P 36,000.

Junior Philippine Institute of Accountants – CvSU Chapter

 ADJUSTING THE ACCOUNTS, WORKSHEET AND FINANCIAL STATEMENTS, AND COMPLETING THE ACCOUNTING CYCLE| 2

e) Service rendered during the month and chargeable to Unearned Revenue (Subscription
Basis) amounted to P 87,000.
f) The firm rendered consulting services (Non-subscription Basis) during the month but not
yet billed which amounted to P 16,800.
g) Salaries earned by the employees during the month but not yet paid amounted to
P 6,900.
h) Issued a note to Ladines Company on December 1, 2018 amounted to P 70,000, 12%
annually, that will mature on December 1, 2019.

Requirement:

1) Prepare adjusting entries for each transaction.

2) Prepare a 10-column worksheet.
3) Prepare the Statement of Financial Performance for the year ended December 31, 2018.
4) Prepare the Statement of Changes in Equity as of December 31, 2018.
5) Prepare the Statement of Financial Position as of December 31, 2018.
6) Prepare closing entries.
7) Prepare a post-closing trial balance.
8) Prepare reversing entries (if there’s any).

Junior Philippine Institute of Accountants – CvSU Chapter

 ADJUSTING THE ACCOUNTS, WORKSHEET AND FINANCIAL STATEMENTS, AND COMPLETING THE ACCOUNTING CYCLE| 3

COMPREHENSIVE PROBLEM

The Trial Balance for Cris John Cleaners appears as follows:

Cris John Cleaners

Trial Balance
For the Year Ended December 31, 2018

Debit Credit
Cash P158,000
Accounts Receivable 61,350
Notes Receivable 80,000
Cleaning Supplies 92,040
Prepaid Insurance 60,000
Prepaid Rent 150,000
Cleaning Equipment 270,000
Accounts Payable P 98,290
Notes Payable 250,000
Unearned Cleaning Revenues 144,,000
John, Capital 159,540
John, Withdrawal 10,000
Cleaning Revenues 600,000
Salaries Expense 155,560
Utilities Expense 74,000
Delivery Truck Expense 95,540
Other Expenses 45,340

Total P 1,251,830 P 1,251,830

Consider the following information:

a.) A review of insurance policies showed that P7,500 is unexpired at year-end.

b.) An Inventory of Cleaning Supplies showed P20,520 on hand.
c.) The Cleaning Equipment was purchased on February 1, 2018. The useful life is 8
years and can be sold for P20,000 at the end of its useful life.
d.) The P250,000 note was issued on March 1, 2018. It will be repaid in 12 months
together with interest at an annual rate of 15%.
e.) The P80,000 note was received on May 1, 2018 from Victoria Clinic. The interest on
the note is 10% per annum and will mature on April 30, 2019

Junior Philippine Institute of Accountants – CvSU Chapter

 ADJUSTING THE ACCOUNTS, WORKSHEET AND FINANCIAL STATEMENTS, AND COMPLETING THE ACCOUNTING CYCLE| 4

f.) On June 1, 2018, Cris John Cleaners signed a contract, effective immediately, with
Amazing Hospital to dry clean, for a fixed monthly charge of P12,000, the uniforms
to be used by doctors in surgery. Amazing Hospital paid for 1 year service in
advance.
g.) On September 1, 2018, Cris John Cleaners Paid Susan Realtors 150,000 for 8 months’
rent on the office building commencing that day.
h.) At December 31, 2018, P15,050 salaries have accrued.

Required:

1) Prepare adjusting entries for each transaction.

2) Prepare a 10-column worksheet.
3) Prepare the Statement of Financial Performance for the year ended December 31, 2018.
4) Prepare the Statement of Changes in Equity as of December 31, 2018.
5) Prepare the Statement of Financial Position as of December 31, 2018.
6) Prepare closing entries.
7) Prepare post-closing trial balance.
8) Prepare reversing entries (if there’s any).

Prepared by:

KENNETH R. REMULLA
BSACC 4-1
VP for Media and Graphics

CRIS JOHN O. VICTORIA

BSACC 4-1
Consul-General – 4th Year

Junior Philippine Institute of Accountants – CvSU Chapter