TRUE OR FALSE One of the adjusting entries that entity B has made at year end involved a debit to an income amount and a credit to a liability (unearned income) account. Entity A must have used the income method or initial recording of advances collections of items of income.

SPLITTING OF MIXED AMOUNTS

1. On May 1, 20x1, Entity B received one-year advanced rent of 480,000 from one of its tenants. The advanced rent covers the months of May 1, 20x1 to April 20, 20x2. Requirements:

a. Provide the journal entry to record the collection on May 1, 20x1 under each of the following methods:

i. Liability method ii. Income method b. Provide the adjusting netries on Dec 31, 20x1 under each of the method listed above.

2. On August 1, 20x1 Entity C paid one year insurance of 360,000.

Requirements

a. Provide the journal entry to record the prepayment on August 1, 20x1 under each of the following methods.

i. Asset method ii. Expense method PREPARE FOR ADJUSTING ENTRIES

1. Your business has total accounts receivable of 400,000 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?

2. Your business acquired a building on May 1, 20x1 for a total of 15,000,000. The building has an estimated useful life of 20 years. Your business records depreciation only at year-end. What is the adjusting entry on Dec. 31, 20x1?

3. Your business collected royalty income of 720,000 in advance on November 1, 20x1. As of December 31, 20x1, 560,000 of the advanced collection is earned.

Requirements:

a. Provide the journal entry to record the collection on Nov. 1, 20x1 under each of the following methods.

i. Liability method ii. Income method b. provide the adjusting entries on December 31, 20x1 under each of the methods listed above.

4. Your business has accounts receivable of 300,000. You estimated that out of that amount, 10% is doubtful of collection and needs to be charged to expense. What is the adjusting entry to record the doubtful accounts?

5. Your business is renting out properties. On June 1, 20x1, your business receives one-year advanced rent of 360,000 from one of your tenants. The advanced rent covers the months of June 1, 20x1 to May 31, 20x2.

Requirements:

a. provide the journal entry to record the collection on June 1, 20x1 under each of the following methods.

i. liability method ii. income method

b. Provide the adjusting entries on December 31, 20x1 under each of the methods listed above.

8. Your business pays one-year insurance of 360,000 on September 1, 20x1.

Requirements:

a. Provide the journal entry to record the prepayment on September 1, 2x1 under each of the follwong methods:

i. asset method ii. expense method b. provide the adjusting entries on december 31, 20x1 under each of the methods listed above.