Adjusting Entries:

Prepayments Precollections Accrued expenses Accrued revenue Bad debts Depreciation

Prepayments
To record prepayment: Prepaid Expense Cash

xxx
xxx

To recognize expired/used portion: Expense xxx Prepaid Expense

xxx

If prepayment is recorded initially as expense

Expense Cash xxx xxx

Adjustment: to recognize unexpired portion:

Prepaid expense xxx Expense

xxx

Precollections
To record pre-collection: Cash Unearned Revenue

xxx
xxx

To recognize earned portion: Unearned Revenue xxx Income

xxx

If precollection is recorded initially as revenue

Cash Revenue xxx

xxx

Adjustment: to recognize liability Revenue xxx Unearned revenue

xxx

Accrued Expense
Expense Payable Or Expense xxx Accrued Expense xxx

xxx

xxx

Accrued Revenue

Accounts Receivable xxx Revenue

xxx

Bad Debts
Bad Debts Expense Allowance for Bad Debts xxx
xxx

Depreciation
Depreciation Expenseasset xxx Accumulated Depreciation-asset xxx Straight-line Depreciation= Original Cost Salvage Value Estimated economic useful life

Adjusting Entries:
Prepayments Precollections Accrued expenses Accrued revenue Bad debts Depreciation

Prepayments
To record prepayment: Prepaid Expense Cash

xxx
xxx

To recognize expired/used portion: Expense xxx Prepaid Expense

xxx

If prepayment is recorded initially as expense

Expense Cash xxx xxx

Adjustment: to recognize unexpired portion:

Prepaid expense xxx Expense

xxx

The Tagaytay Hinterlands Corporation manages a golf-course in Tagaytay City. To maintain the greenery, it has to consume 50,000 gallons of water monthly. Its water supply is assured by a local water cooperative which regularly delivers the gallons required at a rate of P1.50 per gallon. Assume the corporation pays the cooperative for one years water supply in advance.
1. Prepare the journal entries that will record the corporations prepayment of one years water supply. 2. What is the adjusting entry after three months of operation to record the expensed portion of the prepaid water supply?

3. Assuming the corporation recorded the advance payment as an outright expense, what would be the adjusting entry after three months?

Precollections
To record pre-collection: Cash Unearned Revenue

xxx
xxx

To recognize earned portion: Unearned Revenue xxx Income

xxx

If precollection is recorded initially as revenue

Cash Revenue xxx

xxx

Adjustment: to recognize liability Revenue xxx Unearned revenue

xxx

The Agricultural Cooperative of Tarlac is the largest producer of sugarcane in Tarlac. Its produce is bought entirely by Central Asucarera de Tarlac. Every year, the cooperatives management and the sugar mills management agree on a price per ton of sugar and on an expected tonnage production. The sugar mill then pays the cooperative for the expected produce in advance. This forwardbuying contract is done to assure the sugar mill of its sugarcane supply. Assume the agreed buying price for the sugarcane is P1,000 per ton and the agreed production target is 100,000 tons for the year.
1. Prepare the journal entries that will record the unearned income gained by the cooperative. 2. After the 1st harvest, the cooperative was able to produce and deliver 32,328 tons of sugarcane to the sugar mill. Prepare the adjusting entry that will record the delivered portion of the cooperatives unearned income. 3. What should the balance of the cooperatives unearned income account be after the first harvest? 4. Assuming the cooperative recorded the advance collection as income what should be the adjusting entry after the first harvest?

Accrued Expense
Expense Payable Or Expense xxx Accrued Expense xxx

xxx

xxx

The Salon de Manila, a leading store in Makati, pays 12,000 worth of SSS Contributions as employers share every month. The contributions are, however, paid and turned over to the SSS every end of a quarter.
1. Assuming it is the end of January, prepare the adjusting entry that will record the accrued SSS contributions for the month: 2. At the end of February, what will the balance of the SSS contributions expense be? What will the balance of the accrued SSS contributions be? 3. At the end of March, what will the balance of the SSS contributions expense be? What will the balance of the accrued SSS contributions be? 4. At the beginning of April, what will the balance if the accrued SSS contributions account be? What will the balance of the accrued SSS contributions be? 5. At the end of April, what will the balance if the accrued SSS contributions account be?

Accrued Revenue

Accounts Receivable xxx Revenue

xxx

In November of 2008, the trendy DKNY Store sold several ready-to- wear clothes to Ms. May Tamah amounting to P78,000. Ms. Tamah promised to fully pay DKNY in the following month.

Prepare the adjusting entry that will record DKNYs sale to Ms. Tamah:
Assuming that May paid only three-fourths of her account in the following month, prepare the adjusting entries that will record her payment. What will the balance of accounts receivable for Ms. Tamah be at the end of December?

Bad Debts
Bad Debts Expense Allowance for Bad Debts xxx
xxx

Eng Ngot Systems Partnership sells computer hardware to several large companies. At present, it has a total accounts receivable balance of P475,000.
One of the partnerships clients has an unpaid balance of P3,000. Assuming that this balance will be considered as a bad debt, prepare the adjusting entries providing for this bad debt. The partnership has a policy of setting aside 1% of its outstanding accounts receivable for bad debts. Since it has provided for P3,000 already. How much more should the partnership provide for as bad debt? Prepare the adjusting entries that will bring up the balance of the partnerships bad debts provision to 1% of its accounts receivable.

The following are the selected accounts taken from the unadjusted trial balance of Waken Woll: Debit Credit Accounts Receivable P 200,000 Allowance for Bad Debts P 1,750 Sales 750,000 Sales Returns and Allowances 20,000
It was also confirmed that 20% of the total sales was on cash basis.

Required: Prepare the adjusting entries under the following independent assumptions: 1. Bad debts expense is estimated at 1% of Gross Sales 2. Bad debts expense is estimated at 1% of net sales. 3. Bad debts expense is estimated at 1% of credit sales. 4. Allowance for bad debts is estimated at 1% of Accounts Receivable balance 5. Allowance for bad debts is to be increased to 1% of A/R balance. 6. Allowance for bad debts is to be increased by 1% of A/R balance.

Depreciation
Depreciation Expenseasset xxx Accumulated Depreciation-asset xxx Straight-line Depreciation= Original Cost Salvage Value Estimated economic useful life

Luke Lhoko bought a 586-AMD personal computer for his home-based mail order business. The computer cost P23,500 inclusive of installation and delivery. He also bought a color inkjet printer worth P6,500. Luke thought that computer obsolescence came fast, so he estimated that the computer should be good for only two years with a scrap value of P3,500 at the end of its life. He will use the straight line method of depreciation for both assets. Prepare the adjusting entry that will record the depreciation of Luke's computer after one year of use: What will the book value of Lukes computer be after one year of use? If the computer was purchased on July 24,2008, what will the depreciation expense be on December 31,2008, assuming Luke prepares financial statement annually?

Luke thought that the obsolescence of inkjet printers will come more slowly, so she estimate that his printer will have an economic life of 5 years with a scrap value of P1,500 at the end of its life.
Prepare the adjusting entries that will record the depreciation of Lukes ink jet printer after one year of use. What will the accumulated depreciation of Lukes inkjet printer be after three years of use? What will the book value of Lukes ink jet printer be after three years of use? If the printer was purchased on July 1,2008, what will the depreciation expense be on December 31,2008, assuming Luke prepares financial statement annually?