I.Identify what is being asked in the statements. Use Al if accrued income. AE if accrued expense, Ul if unearned income, PE it prepaid expense. BD if bad debts and DE depreciation expense.

1. Transfer of asset cost to expense based on its declining value.

2. Advance payment recorded as an asset but a portion of which has already expired.

3. Income already earned but were not collected nor recorded.

4. Advance collection recorded as a liability, but a portion of which has already been

earned

5. Client accounts that may not be collected anymore or are doubtful of collection.

6. Expenses already expired but were not paid nor recorded.

II. Analyze the given transaction and identify what kind of adjustment is needed. Use Al

if accrued income, AE if accrued expense, Ul if unearned income, PE if prepaid expense, BD if bad debts and DE if depreciation expense.

1. Salaries incurred but unpaid as of December 31, 2020 amounting to P20,000.

2. Acquired an equipment for 1,500,000 on June 30, 2020 with an estimated life of 10 years

and a scrap value of P100,000.

3.5% of the P100,000 outstanding accounts receivable should be recognized as doubtful

of collection.

4. Rentals paid in advance for P60,000 recorded as prepaid rent was for 5 months starting October 1, 2020.

5. Sublet a building to Mercury drugstore on October 1, 2020 who paid P60,000 rent in

advance for four months. The advance collection was recorded as an income.

6. Notes receivable amounting to P60,000 represents a 60-day 12% note received from the customer on December 1, 2020.

III. Based on the above transactions, make adjusting entries assuming the end of the

reporting period is December 31, 2020. Show your solutions