UNEARNED REVENUE

1. Rent

Assume that a hotel leases space with rental terms of three months rent due in advance on the first day of each quarter. On April 1, the hotel receives 60,000 from concessionaire in payment of rent for April, May, and June.

Original Entry:_______________________________________________

_____________________________________________________ _____________________________________________________

On April 30, the hotel has earned 1/3 of the advance rental payment in accordance with the realization principle.

Adjusting Entry:_______________________________________________

_____________________________________________________ _____________________________________________________

UNRECORDED REVENUE

2. Commissions Assume that on March 31, 15,000 in commissions has been earned but not yet received.

Adjusting Entry:_______________________________________________

_____________________________________________________ _____________________________________________________

EXPIRED ASSETS

3. Prepared Insurance Assume that a restaurant paid 24,000 on June 1 for one year's insurance in advance. On June 1, the company made the following entry:

Original Entry:_______________________________________________

_____________________________________________________

_____________________________________________________ On June 30, the passage of time causes part of the asset to expire, the expired portion of an asset's cost is recorded as expense. One-twelfth or 2,000 has expired.

Adjusting Entry:_______________________________________________

_____________________________________________________ _____________________________________________________

UNRECORDED EXPENSE

4. Bad Debts Expense or Uncollectible Accounts

Assume that a lodging operation estimates that its potential bad debts expense (uncollectible accounts) for the month of October is 850.

Adjusting Entry:_______________________________________________

_____________________________________________________ _____________________________________________________

5. Unpaid Utilities

Assume that the bill for the utilities used in December amounting to 8,500 may be received early January of the following year. In order to update and complete the recording of expenses incurred as of December 31, the accountant will prepare the following:

Adjusting Entry:_______________________________________________

_____________________________________________________ _____________________________________________________

Problem: Answer the following questions:

A. On August 1 2019, Bryle Company insured its property with Consolidated Insurance Company and pays premium of P24,000 fora one-year policy contract covering the period from August 1, 2019 to August 1, 2020. The accounting period ends on December 31, 2019.

Assuming Expense Method is Used:

1.What is the journal entry to record the prepayment.

2.In your adjusting entry, what account will you record? Expense or Asset?

3.What is the adjusting entry on December 31, 2019?

4.In your adjusting entry, are you increasing or decreasing the amount of your Insurance Expense account?

Assuming Asset Method is Used:

1.What is the journal entry to record the prepayment.

2.In your adjusting entry, what account will you record? Expense or Asset?

3.What is the adjusting entry on December 31, 2019?

4.In your adjusting entry, are you increasing or decreasing the amount of your Prepaid Insurance account?