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Exercises III - Accruals and Deferrals Adjusting Entries

1) NC III Company had P34,000 prepaid insurance at the start of the year and P6,800 was unexpired at year-end, so an adjusting entry was made to decrease prepaid insurance by P27,200 and increase insurance expense. 2) Office supplies of P8,000 were purchased during the year and P3,000 remained at year-end, so an adjusting entry increased office supplies expense by P7,000. 3) An advertising contract of P80,000 was completed on Dec. 31 but not paid until 30 days later, so accounts receivable and advertising revenue were both increased by P80,000.

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967 views

Exercises III - Accruals and Deferrals Adjusting Entries

1) NC III Company had P34,000 prepaid insurance at the start of the year and P6,800 was unexpired at year-end, so an adjusting entry was made to decrease prepaid insurance by P27,200 and increase insurance expense. 2) Office supplies of P8,000 were purchased during the year and P3,000 remained at year-end, so an adjusting entry increased office supplies expense by P7,000. 3) An advertising contract of P80,000 was completed on Dec. 31 but not paid until 30 days later, so accounts receivable and advertising revenue were both increased by P80,000.

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Jowjie TV
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Exercises for Accruals and Deferrals Adjusting Entries:

Prepare the adjusting entry for NC III Company under each of the following for the year ending December 31, 2017.

1. The Prepaid Insurance account has a balance of P34,000 at the start of the operation. A review of insurance
policies showed that P6,800 is unexpired at the year-end.

2. During 2017, office supplies amounting to P8,000 were purchased for cash and debited to Office Supplies
account. At the end of 2016, the inventory count of supplies on hand was P2,000. Inventory of supplies as at
Dec. 31, 2017 showed P3,000 ending balance.

3. On Dec. 31, 2017, NC III Company completed an advertising contract. The bill was P80,000 payable within 30
days. No cash has been collected and no journal entry has been made for this transaction.

4. On July 1, 2017, the company purchased a new building at a cash price of P236,000. The estimated useful life of
the building was 10 years, with an estimated residual value of P36,000. Compute for the depreciation expense.

5. Unearned Consulting Revenues has a P450,000 balance in the trial balance prepared by the bookkeeper of NC III
Company. One-third of the unearned revenues has been earned as at December 31, 2017.

6. A cash loan worth P360,000 was borrowed by NC III Company from Banco de Oro, Inc. Upon having the loan, a
note was issued on Sept. 1, 2017, and will be settled together with a 20% interest on May 31, 2018.

7. At year-end, NC III Company reported sales of P7,100,000 and credits sales of P5,000,000 before adjustment.
The entity estimated that the uncollectible accounts is 2% of sales on account.

8. Salaries and delivery wages are paid on Saturdays. The weekly payroll is P4,800. Assume that December 31 falls
on Wednesday and the company has a six-day pay week.

Adjusting Entries:

Dec. 31 Insurance Expense 27,200


Prepaid Insurance 27,200

Office Supplies Expense 7,000


Supplies 7,000

Accounts Receivable 80,000


Advertising Revenue 80,000

Depreciation Expense - Building 10,000


Accumulated Depreciation - Building 10,000

Unearned Consulting Revenues 150,000


Consulting Revenues 150,000

Interest Expense 32,000


Interest Payable 32,000

Uncollectible Accounts Expense 100,000


Allowance for Uncollectible Accounts 100,000
Salaries Expense 2,400
Salaries Payable 2,400

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