Reference no: EM132930374
Problem 1 - At the start of the year, J. Aluning, C. Ignacio, and R. Galula Service Firms, each had P75,000 of supplies on hand. The three companies use different accounting procedures for recording supplies.
J. Aluning and R. Galula show the beginning balance in the Supplies on Hand account, but C. Ignacio reflects the beginning balance in the Supplies Expense account. J. Aluning debits the account Supplies on Hand when supplies are acquired, while C. Ignacio and R. Galula follow the policy of debiting Supplies Expense upon acquisition. Each of the three companies acquired P452,000 of supplies at various times throughout the year, and each has P96,000 supplies on hand at year-end.
Required - Prepare the adjusting entry for each entity.
Problem 2 - Prepare the adjusting entry for Xavier Castillo Cargo under each of the following for the year ending Dec. 31, 2020:
a. Paid P24,000 for a 1-year fire insurance policy to commence on Sept. 1, 2020. The amount of premium was debited to Prepaid Insurance.
b. Borrowed P100,000 by issuing a 1-year note with 7% annual interest to Metrobank on Oct. 1, 2020.
c. Paid P160,000 cash to purchase a delivery van (surplus) on Jan. 1. The van was expected to have a 3-year life and a P10,000 salvage value. Depreciation is computed on a straight-line basis
d. Received an P18,000 cash advance for a contract to provide services in the future. The contract required a 1-year commitment, starting April 1.
e. Purchased P6,400 of supplies on account. At year's end, P750 of supplies remained on hand.
f. Invested P90,000 cash in a certificate of deposit that paid 4% annual interest. The certificate was acquired on May 1 and carried a 1-year term to maturity.
g. Paid P78,000 cash in advance on Sept. 1 for a 1-year lease on office space.
Problem 3 - On June 30, 2020, the end of fiscal year, the following information is available to Alana Haim's accountants for making adjusting entries:
Required: Prepare the adjusting entries.
a. Among the liabilities of the entity is a P2,400,000 mortgage payable. On June 30, the accrued interest on this mortgage amounted to P120,000.
b. Assume that on, July 2, a Friday, the entity, which is on a five-day workweek and pays employee weekly, paid its regular salaried employees P192,000.
c. On June 29, the entity completed negotiations and signed a contract to provide services to a new client at an annual rate of P36,000.
d. The Supplies account showed a beginning balance of 16,150 and purchases during the year of P37,660. The year-end inventory revealed supplies on hand of P11,860.
e. The Prepaid Insurance account showed the following entries on June 30: Beggining Balance P15,000
January 1. 29,000
May 1 33,600
The beggining balance represents the unexpirefd portion of a one year policy in April of the previous year. The January 1 entry represented a new one-year policy, and the May 1 entry is the additional coverage of a three year policy.
f. The following table contains the cost and annual depreciation for buildings and equipment, all of which were purchased before the current year:
Buildings P1,850,000
Annual Depreciation P 73,000
Equipment 2,180,000
Annual Depreciation 218,000
g. On June 1, the entity completed negotiations with another client and accepted an advance of P210,000 for services to be performed in the next year. The 210,000 was credited to Unearned Service Revenues.
h. The entity calculated that as at June 30 it had earned P35,000 on a P75,000 contract that will be completed and billed in August.