Reference no: EM132797345

Problem 1 - Accrual of Interest Expense - Kristine June Uy Forwarders borrowed P600,000 from the bank on Sept. 1, 2019. The note carried an 8% annual rate of interest and was set to mature on Feb. 28, 2020. Interest and principal were paid in cash on the maturity date.

Required -

1. What was the amount of interest expense paid in cash in 2019?

2. What was the amount of interest expense recognized on the 2019 income statement?

3. What was the amount of total liabilities shown on the 2019 balance sheet?

4. What was the total amount of cash that was paid to the bank on Feb. 28, 2020 for principal and interest?

5. What was the amount of interest expense shown on the 2020 income statement?

Problem 2 - Accrual of Interest Revenue - Reynaldo San Mateo, an angel investor, decided to invest P1,200,000 excess cash in a certificate of deposit on April 1, 2018. The certificate carried an 8% annual rate of interest and a 1-year term to maturity. Interest will be withdrawn monthly (disregard tax effects).

Required -

1. What amount of income will be recognized for the year ending Dec. 31, 2018?

2. What is the effect of the adjusting entry on the accounting equation?

3. What amount of cash will be collected for interest revenue in 2018?

4. What is the amount of interest receivable as of Dec. 31, 2018?

5. What amount of cash will be collected for interest revenue in 2019?

6. What amount of interest revenue will be recognized in 2019?

7. What is the amount of interest receivable as of Dec. 31, 2019?

Problem 3 - Adjusting Entries and Accounting Policy - The following are some of the transactions made by Rosemarie Jacalan Cleaners during 2019:

Apr. 1 Acquired cleaning supplies in the amount of P260,000. A count of the supplies on Dec. 31, 2019 amounted to P110,000.

Aug. 1 Received P360,000 from Cebu Manpower for cleaning janitorial uniforms over the next 3 years.

Nov. 1 Paid P240,000 for annual rent.

Required -

1. Assume that Jacalan records these transactions using the following accounts, record the adjusting entries on Dec. 31, 2019:

Office Supplies

Prepaid Rent

Unearned Cleaning Revenues

2. Now, assume that Jacalan records these transactions using the following accounts, what will be the adjusting entries on Dec. 31, 2019?

Office Supplies Expense

Rent Expense

Cleaning Revenues