1 / 3 PROBLEM 3: ADJUSTING ENTRIES

Your business uses a calendar year accounting period. Th following were among your transactions during the year:

1. Your business issued a 14%, P300,000, one-year, note payable on April 1, 20x1. Both the principal and interest on the note are due at maturity date. What is the adjusting entry on December 31, 20x1?

2. Your business received billing of P32,000 on December 29, 20x1 for utilities used in December 20x1. Your business paid the bill on January 4, 20x2. What is the adjusting entry December 31, 20x1?

3. Your business is renting a space for a monthly rental of P22,000. As of December 31, 20x1, your business has paid the December rent. What is the adjusting entry December 31, 20X1? (Hint: 'Rent payable')

4. Your business is sub-leasing (renting out) a portion of the space referred to in #3 above to a tenant for a monthly rental of P4,000. As of December 31, the tenant has not yet paid the rent for the months of November and December. What is the adjusting entry on (Hints: 'Rent income'; 'Rent receivable)

5. Your business has total accounts receivable of P400,000 as of December 31, 20x1. Of that amount, 5% is doubtful of collection and should be expensed. What is the adjusting entry on December 31, 20x1?

6. Your business acquired a building on May 1, 20x1 for a total cost of P15,000,000. The building has an estimated useful life of 20 years. Your business records depreciation only at year-end. What is the adjusting entry on December 31, 20x1? (Hint: Depreciation normally starts from the acquisition date of an asset.)

7. Your business collected royalty* income of P720,000 in advance on November 1, 20x1. As of December 31, 20x1, P560,000 of the advanced collection is earned.

Requirements: a. Provide the journal entry to record the collection on November 1, 20x1 under each of the following methods: i. Liability method ii. Income method (Hints: 'Royalty income'; 'Unearned income')