Exercises on Adjusting Journal Entries

Please show solutions

P5-7 REQUIRED: For each of the following information pertaining to the Dawn Company, a fiscal-year company, prepare the necessary adjusting journal entries as of May 31, 2015: a) Dawn Company entered into a lease agreement with Carmel Company on November 1, 2014 for the rental of office space for the next 24 months for P312,000. All rent payments for this lease was paid when due at the end of each month. A second lease agreement was signed on February 1, 2015 for use of a warehouse for six months, with P112,800 paid in advance, which Dawn debited to rent expense. b) On May 31, 2014, the Office Supplies account had a debit balance of P21,300. Office supplies in the amount of P82,600 were purchased during the year. A count of office supplies on hand on May 31, 2015 totaled P15,850. c) On December 1, 2014, Dawn Company acquired a new printer for P179,200. It is estimated that the printer will have a useful life of 4 years with a P7,200 residual value. d) Dawn Company borrowed P2,500,000 from Clarence Lending, Inc. on February 28, 2015, and issued a note for the loan. The note carries a 20% annual interest rate and will be due one year from date of issue. e) On October 1, 2014, Dawn Company paid P32,400 for 6-months' worth of insurance. The transaction was debited to Prepaid Insurance. No entry was made to adjust the account at period-end. f) On January 1, 2015, Dawn Company received P91,200 from Wyeth, Inc, a customer, for services to be rendered during the months of January, February, March, April, and May 2015. The whole amount was credited to Service Fee Income. g) Dawn Company also acquired additional equipment worth P75,600 on April 1, 2015. The equipment is expected to last five years, after which it will be worthless. The accountant failed to record this transaction. h) Dawn Company had year-end accounts receivable totaling P520,000. It is estimated that 5% of the receivables will prove uncollectible. The Allowance for bad debts has a credit balance of P2,000 before an adjustments