Adjusting Entries Problem

Problem 1
The income statement and statement of financial position columns of Richmond Company worksheet
reflect the following subtotals:
Income statement Financial Position
Dr. Cr. Dr. Cr.

Totals P580,000 P450,000 P340,000 P470,000
A. How much is the net income or (net loss) for the period? (P130,000)
Problem 2
The Unadjusted trial balance column totals are P729,000, Only 3 adjustments appear in the adjustment
column of worksheet of Mikee Company:
1. to record the accrued interest on notes payable of P28,000.

INTEREST EXPENSE P28,000
INTEREST PAYABLE P28,000
2. to record P15,000 depreciation of office equipment.
DEPRECIATION EXPENSE P15,000
ACCUMULATED DEPRECIATION P15,000
3. to record the use of P12,000 office supplies.
SUPPLIES EXPENSE P12,000
OFFICE SUPPLIES P12,000
A. What will be the total of the adjustments column? P55,000
B. In preparing the worksheet, what will be the totals of the adjusted trial balance columns? P784,000
Problem 3
Valix failed to recognize accruals and prepayments since the inspection of his Drug company. The
unadjusted net income for 2016 amounts to P3,000,000. The accruals and prepayments at the end of 2016
are given below:
Prepaid insurance P 60,000

Accrued wages 75,000
Rent revenue collected in advance ( Unearned Rent) 96,000
Interest receivable 81,000
A. What is the net effect of the above errors in the 2016 net income? OVERSTATED
B. What is the adjusted net income 2016? P2,880,000
Problem 4
After examination of the records of Erece Company, you determined the following year end amounts:
2017 2016
Net credit sales P 1,200,000 P 1,050,000
Accounts receivable 305,000 260,000
Allowance for bad debts 12,000 6,000
Uncollectible accounts written off in
previous year and then recovered
this year 3,000 -
Your examination of the records of the company indicates that bad debts expense recorded during 2017
was P48,000.
A. What is the amount of the accounts receivable actually written off during 2017? P36,000
C. What is the amortized cost of accounts receivable at December 31, 2017?

Problem 5
On March 1, 2013, Santos Company purchased a machine for P540,000. Additional cost incurred to
bring the assets to its location and prepare for its intended use were: shipping, P4,000; and testing,
P2,000. The estimated useful life of the assets was 10 years and has estimated salvage value of P34,000.
On May 31, 2015, the machine was sold for P380,000.
A. What amount of depreciation should be recognized for the year ended December 31, 2013?
P42,166.67
D. What is the net book value of the machine on December 31, 2014? P497,833.33
E. How much is the gain or loss upon sale of the machine? LOSS ON REALIZATION – P59,736.12
F. What is the journal entry on May 31, 2015?

CASH 380,000
LOSS ON REALIZATION 59,736.12
EQUIPMENT 439,736.12
Problem 6
To maintain sufficient operating cash, Mendoza Musical industry frequently borrows from a bank.
Below is the summary of loans granted to Mendoza with 12% interest rate. The principal and the related
interest are payable at maturity and Mendoza was able to repay the loans on schedule at maturity date:
Date of loans Principal Amount Maturity date Terms of loans

11/1/15 P300,000 10/31/16 1 year
02/1/16 900,000 7/31/16 6 months
05/1/16 480,000 1/31/17 9 months
Mendoza records interest expense when the loans are repaid. Accordingly, interest expense of P90,000
was recorded in 2016.
A. What is the interest expense 2015?
G. what is the interest expense 2016?
H. what is the interest expense 2017?
I. If no correction is made, by what amount would 2016 interest expense be understated?
Problem 7
The trial balance prepared at December 31, did not balance. Debit total P238,100 and credit total was
P279,100. In determining the cause of the difference, the bookkeeper discovered the following error:
1. A payment of P6,500 to a supplier was correctly journalized but was posted as a credit to
accounts payable and a credit to cash account for the correct amount.
4. A transaction was credited and posted to service revenue P2,000 instead to accounts receivable.
5. A P1,500 debit entry to utilities expense was not posted.
6. A P500 debit entry to furniture was posted twice.
7. A payment of P25,000 was correctly journalized but posted as a credit to cash of P52,000.
8. A withdrawal of P1,000 by the owner was journalized and posted as a debit to capital account.
A. What is the correct trial balance total?

Problem 8
The following summary schedule was prepared from an aging of accounts receivable outstanding on
December 31, 2017.
No. of days outstanding Amount Probability of collection

0-30 days P 500,000 98%
31-60 days 200,000 90%
over 60 days 100,000 80%
The following information is available for the current year:
Net credit sales P 4,000,000

Allowance for bad debts, December 31, 2016 5,000 Credit
Allowance for bad debts, December 31, 2017
(before adjustment) 2,000 Debit
A. How much is the Bad debts expense?
J. How much is the Adjusted Allowance for bad debts on December 31, 2017?
K. What is the amortized cost of accounts receivable at December 31, 2017?

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Problem 1

Income statement Financial Position

Dr. Cr. Dr. Cr.

1. to record the accrued interest on notes payable of P28,000.

A. What will be the total of the adjustments column? P55,000

Prepaid insurance P 60,000

B. What is the adjusted net income 2016? P2,880,000

C. What is the amortized cost of accounts receivable at December 31, 2017?

F. What is the journal entry on May 31, 2015?

Date of loans Principal Amount Maturity date Terms of loans

A. What is the interest expense 2015?

G. what is the interest expense 2016?

H. what is the interest expense 2017?

I. If no correction is made, by what amount would 2016 interest expense be understated?

5. A P1,500 debit entry to utilities expense was not posted.

6. A P500 debit entry to furniture was posted twice.

A. What is the correct trial balance total?

No. of days outstanding Amount Probability of collection

The following information is available for the current year:

Net credit sales P 4,000,000

A. How much is the Bad debts expense?

K. What is the amortized cost of accounts receivable at December 31, 2017?

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