EXERCISE 01

Entity X makes use of the following special journals, in addition to the general journal, cash receipts journal
sales journal, cash disbursements journal and purchases journal. All purchases of merchandise on accoun
recorded in the purchases journal and any down payment made is subsequently recorded in the cash
disbursements journal. Likewise, it maintains the sales journal to record all sales and down payment
collected is recorded in the cash receipts journal.

In what journal will each of the following numbered transactions be recorded? (Indicate the letter )

A. Sales journal
B. Purchases journal
C. Cash receipts journal
D. Cash disbursements journal
E. General journal

C 1. Issuance of shares of capital stock for cash.

D 2. Purchase of treasury share
D 3. Periodic lease payment applying to both principal and interest in a finance lease.
A 4. Sale of merchandise on account
B 5. Issuance of a promissory note for a machine purchased.
E 6. Receipt of a promissory note in settlement of an account.
B 7. Purchase of merchandise on account.
E 8. Declaration of dividends.
E 9. Consumption of supplies, purchase of which was recorded in the Supplies account.
E 10. Receipt of property dividend.
C 11. Receipt of cash dividend.
E 12. Transferring the resulting balance of income summary to the retained earnings account.
C 13. Sale of used equipment for cash.
E 14. Recognition of deferred tax asset and deferred tax liability
E 15. Correction of a prior period error due to understatement of depreciation in a prior period
E 16. Write down of inventory to lower of cost and net realizable value.
eral journal, cash receipts journal,
hases of merchandise on account are
uently recorded in the cash
ll sales and down payment

ded? (Indicate the letter )

earnings account.

on in a prior period
EXERCISE 02
ADJUSTING AND REVERSING ENTRIES
The following data were gathered in analyzing the accounts of Tiger Company at December 31, 2021,
the end of its first period of operations. Indicate the adjusting entries needed at December 31, 2021.
If a reversing entry is needed, write the reversing entry in the next column.

a. Supplies of P25,000 were purchased during the year and were debited to Supplies account.
On December 31, supplies of P8,500 are on hand

b. The Prepaid Insurance account shows a balance of P24,000, representing the cost of a two-year insurance
policy dated May 1, 2021.

c. On March 1, 2021, Tiger Company entered into a three-year contract of lease with Luckytown Company.
The contract calls for a P20,000 monthly rental payable quarterly in advance beginning March 1, 2021.
The P60,000 quarterly rentals were paid during 2021 on March 1, June 1, September 1 and December 1
and recorded in the Rent Expense account.

d. On November 1, 2021, the company subleased a portion of its space and received P27,000, representing
three-months rent beginning on that date. The amount was credited to Rent Revenue.

e. The company purchased office equipment on March 1, 2021 costing P400,000. The office equipment
has estimated useful life of 5 years and salvage value of P40,000. The company uses the sum-of-the-years
digits method and depreciates to the nearest month.

f. It is estimated that 2% of the accounts receivable at the end of the year is uncollectible. Accounts
Receivable balance at December 31, 2021 is P450,000. The Allowance for Uncollectible Accounts
shows a credit balance before adjustment of P3,000.

g. On December 1, the company issued a 90-day, 12% note for P200,000. The interest on the note is
payable on maturity (Use 360-day year)

h. Merchandise Inventory at December 31, 2021 amounted to P480,000. At the end of the year, selected
account balances were as follows: Purchases P900,000; Freight-in P20,000; Purchase Returns and
Allowances P25,000.
i. Investments in equity securities at fair value through profit or loss is listed in the trial balance at
P350,000. The fair value at December 31, 2021 is P390,000.
er 31, 2021.

ADJUSTING ENTRIES at December 31, 2021

Account Debit Credit
Supplies Expense 16,500
Supplies Inventory 16,500

Insurance Expense 8,000

-year insurance Prepaid Insurance 8,000

wn Company. Prepaid Rent 40,000

rch 1, 2021. Rent Expense 40,000
December 1

, representing Rent Revenue 18,000

Unearned Rent 18,000

um-of-the-years

Bad debts 6,000

Allowance for Bad debts 6,000

Interest Expense 2,000

Interest Payable 2,000

Merchandise Inventory, end 480,000

ear, selected Cost of Goods Sold 415,000
Purchase Return and Allowance 25,000
Purchases 900,000
Freight In 20,000
 REVERSING ENTRIES JANUARY 1, 2022
Account Debit Credit
Supplies Inventory 16,500
Supplies Expense 16,500

Prepaid Insurance 8,000

` Insurance Expense 8,000
`

Rent Expense 40,000

Prepaid Rent 40,000

Unearned Rent 18,000

Rent Revenue 18,000

Allowance for Bad debts 6,000

Bad debts 6,000

Interest Payable 2,000

Interest Expense 2,000

Purchases 900,000
Freight In 20,000
Merchandise Inventory, end 480,000
Cost of Goods Sold 415,000
Purchase Return and Allowance 25,000
EXERCISE 3

Required:
Complete the following schedule:

Amount of adjustment
a. Salaries payable 16,800
b. Interest payable 6,750
c. Advertising payable 60,000
d. Accumulated depreciation 20,000
e. Office supplies 58,000
f. Unearned plumbing revenue 108,000
g. Prepaid insurance 20,000

The following information relates to Rooster Contractors on June 30, 2021. The company prepares financial statemen
fiscal year basis ending June 30.
a. Rooser Company's weekly payroll is P28,000, paid every Friday for a five-day work week. June 30, 2021 is a Wednesday
b. On May 31, 2021, the company borrowed P450,000 from a local bank with a term of 90 days at 18% annual interest.
Assume a 360-day year.
c. During June, the company advertised in the local newspaper at a cost of P60,000, that is unpaid and unrecorded.
d. Equipment that cost P100,000, and has no salvage value was purchased on January 1, 2020. It has a five-year estimate
e. At the beginning of the year, Office Supplies amounted to P21,000. During the year, P65,000 of supplies were purchase
charged to the asset account. At year-end, there was P28,000 worth of supplies on hand.
f. On April 1, 2021, Rooster Company contracted to install plumbing for a new housing project. The contract was for P14
install plumbing in 24 houses. The P144,000 payment was received on April 1,2021 and credited to Unearned Plumb
As of June 30, 2021, eighteen (18) houses have been completed.
g. On March 1, 2021, a one-year insurance policy was purchased for P60,000 and the premium was debited to Prepaid Ins
 Amount that would appear in the
statement of financial position
16,800
6,750
60,000
30,000
28,000
36,000
40,000

ny prepares financial statements annually on a

June 30, 2021 is a Wednesday.

days at 18% annual interest.

unpaid and unrecorded.

20. It has a five-year estimated useful life.
,000 of supplies were purchased and

ject. The contract was for P144,000 to

d credited to Unearned Plumbing Revenue

ium was debited to Prepaid Insurance.