ACT1101: ADJUSTING ENTRIES

Name: Ebuenga, Allysa Mae P. Section: Section 15

1. Justin Berber Company paid a 6month advance rental for their office located at Ayala Columns. the monthly
rental is P20,000 and it started on August 1, 2018. When this was paid, the amount was debited to Rent Expense
account. Prepare the adjusting entry at the end of the period, December 31, 2018?
a. Indicated what type of Adjustment this particular transaction. Expense/Prepayment
b. Analysis (show your analysis of the transaction) and use T-Accounts
As Should be For
recorded: at Dec. 31: adjustment:
PREPAID RENT: 20,000 20,000
RENT EXPENSE: 120,000 100,000 (20,000)
PREPAID RENT RENT EXPENSE
Dec 31 (AE) 20,000 Aug 1 120,000 20,000 Dec 31 (AE)
Balance 100,000
c. Record the original journal entry:
Date Particulars DR. CR.
August 1, 2018 Rent Expense 120, 000
Cash 120, 000
Paid rent in advance.
d. Adjusting Journal Entry:
Date Particulars DR. CR.
December 31, 2018 Prepaid Rent 20, 000
Rent Expense 20, 000
Accounts adjusted.

2. Lady Boy Gaga received an advance rental for 6 months from its tenant JT Berber Company, amounting to
P120,000 on August 2018. Lady Boy Gaga credited Rental Income account at the time of collection. Prepare the
adjusting entry at the end of the period, Dec. 31, 2018?
a. Indicated what type of Adjustment this particular transaction. Deferred Revenue
b. Analysis (show your analysis of the transaction) and use T-Accounts
As Should be For
recorded: at Dec. 31: adjustment:
RENTAL INCOME: 120,000 100,000 (20,000)
UNEARNED RENTAL INCOME: - 20,000 20,000
UNEARNED RENTAL INCOME RENTAL INCOME
20,000 Dec 31 (AE) Dec 31 (AE) 20,000 120,000 Aug 1
100,000 Balance
c. Record the original journal entry:
Date Particulars DR. CR.
August 2018 Cash 120, 000
Rental Income 120, 000
Received 6 months payment of rent.
d. Adjusting Journal Entry:
Date Particulars DR. CR.
December 31, 2018 Rental Income 20, 000
Unearned Rental Income 20, 000
Accounts adjusted.
3. Rafaearl Nadal Company paid six month advance rental in the amount of P120,000 on August 1, 2018. When the
payment was made, the amount was charged to Prepaid Rent account. Prepare the adjusting entry at the end of
the period, Dec. 31, 2018?
a. Indicated what type of Adjustment this particular transaction. Prepayment
b. Analysis (show your analysis of the transaction) and use T-Accounts
As Should be For
recorded: at Dec. 31: adjustment:
PREPAID RENT: 120,000 20,000 (100,000)
RENT EXPENSE: - 100,000 100,000
PREPAID RENT RENT EXPENSE
Aug 1 120,000 100,000 Dec 31 (AE) Dec 31 (AE) 100,000
Balance 20,000
c. Record the original journal entry:
Date Particulars DR. CR.
August 1, 2018 Prepaid Rent 120, 000
Cash 120, 000
Paid rent in advance.
d. Adjusting Journal Entry:
Date Particulars DR. CR.
December 31, 2018 Rent Expense 100, 000
Prepaid Rent 100, 000
Accounts adjusted.

4. Sampragassi Company received a 24 months advanced rental. The contract starts on Sept. 1, 2018 and monthly
rental is for P6000. Procopio, the accountant recorded this as a credit to Unearned Rental Income at the time of
its collection. Prepare the adjusting entry at the end of the period, Dec. 31, 2018?
a. Indicated what type of Adjustment this particular transaction. Deferred Income
b. Analysis (show your analysis of the transaction) and use T-Accounts
As Should be For
recorded: at Dec. 31: adjustment:
RENTAL INCOME: 24,000 24,000
UNEARNED RENTAL INCOME: 144,000 120,000 (24,000)
UNEARNED RENTAL INCOME RENTAL INCOME
Dec 31 (AE) 24,000 144,000 Sep 1 24,000 Dec 31 (AE)
120,000 Balance
c. Record the original journal entry:
Date Particulars DR. CR.
August 1, 2018 Cash 144, 000
Unearned Rental Income 144, 000
Received 24 months of rent payment in advance.
d. Adjusting Journal Entry:
Date Particulars DR. CR.
December 31, 2018 Unearned Rental Income 24, 000
Rental Income 24, 000
Accounts adjusted.
Short problems on Adjusting
A. The Commission Income Account in the trial balance at the end of the year showed a balance of P24,000. 2/3 of
this amount has been not earned during the year.
A. What type of adjustment is used in the said transaction? Deferred Revenue
B. What is the year-end adjusting entry?

Adjusting Journal Entry:

Date Particulars DR. CR.
December 31, 2018 Commission Income 16, 000
Unearned Commission Income 16, 000
Accounts adjusted.

B. A Rent Expense Account amounting to P300,000 was shown in the Trial Balance on December 31, 2017.
Accordingly, the account is good for two years and was paid on Feb. 28.
A. What type of adjustment is used in the said transaction? Expense Method
B. What is the year-end adjusting entry?

Adjusting Journal Entry:

Date Particulars DR. CR.
December 31, 2018 Prepaid Rent 175, 000
Rent Expense 175, 000
Accounts adjusted.

C. An Unearned Subscription Revenue Account of P180,000 was credited when it was received on March 31, 2017
and the subscription will run for two years.
A. Compute for the balance of Unearned Subscription Revenue at the end of the year.
P180, 000 (Subscription Revenue Account) ÷ 24 (months) = P7, 500 (a month)
P7, 500 X 9 (months) = P67, 500
B. What is the amount of adjustments? P180, 000 – P67, 500 = P112, 500

D. Kokorokokho company leased an entire floor of the SM Mall of Marawi by paying P350,000 as one-year advance
rental on July 1, 2017. When the payment was made, the amount was charged to real account.
A. What is the amount of adjustments? P350, 000 – P175, 000 = P175, 000 (Asset Method)
B. What is the adjusting journal entry at the end of December 31, 2017?

Adjusting Journal Entry:

Date Particulars DR. CR.
December 31, 2018 Rent Expense 175, 000
Prepaid Rent 175, 000
Accounts adjusted.

E. The payroll cut-off of 2LILING Company is done every week. The employees have rendered the services from
December 21 to 31, 2017 amounting to P100,000 which was paid on January 2, 2018.
A. What type of adjustment is used? Accrual of Expenses
B. What is Adjusting Journal Entry to take up the salaries for the services rendered?

Adjusting Journal Entry:

Date Particulars DR. CR.
December 31, 2018 Salaries Expense 100, 000
Salaries Payable 100, 000
Accrued salaries.