ATENEO DE MANILA UNIVERSITY

JOHN GOKONGWEI SCHOOL OF MANAGEMENT

ACCOUTING20: FINANCIAL ACCOUNTING

ACCOUNTING PROCESS JOURNAL ENTRIES

DISCUSSION PROBLEMS
AY2015-2016 | 1ST SEMESTER

PROBLEM I: TRANSACITON ANALYSIS, JOURNALIZING, AND POSTING

Prepare the Journal Entries and T-accounts for the transactions below after performing transaction
analysis.
ACCOUNTS
Cash and Owners
Capital
Accounts Receivable
Inventories
Prepaid Expenses
(Insurance)
Prepaid Expenses
(Insurance)
Property, Plant, and
Equipment
Accounts Payable

Accrued Expenses

Unearned Revenue
Owners
Withdrawals

TRANSACTIONS
Bruce Wayne invested PHP10,000,000 to his business called Wayne Enterprise
(The Company).
The Company rendered services to different customers. The sales invoice
amounted to PHP15,000. No payment was made by the customers.
The Company purchased 100 items of inventories. Each item had a tag price of
PHP2,000. Only 30% of the total purchases were paid.
The Company paid PHP180,000 of property insurance good for 3 years.
The Company purchased PHP10,00 worth of office supplies in cash.
The Company purchased computers. The company received a sales invoice and
official receipt of PHP200,000.
The Company purchased inventory items from Stark Industries. The sales invoice
sent by the supplier amounted to PHP250,000. No official receipt was issued
because no payment was made by the buyer of this transaction.
On February 2, 2018, the Company received a bill from MERALCO for the month of
January. The invoice amounted to PHP12,500. The Company was able to pay this
on February 10, 2018.
The Company received PHP50,000 cash from different customers for services to
be rendered and goods to be delivered (sold) in the future.
The owner withdrew from the business cash amounting to PHP10,000.

ATENEO DE MANILA UNIVERSITY

JOHN GOKONGWEI SCHOOL OF MANAGEMENT
ACCOUTING20: FINANCIAL ACCOUNTING

ACCOUNTING PROCESS JOURNAL ENTRIES

DISCUSSION PROBLEMS
AY2015-2016 | 1ST SEMESTER

PROBLEM II: ADJUSTING ENTRIES

Prepare the adjusting entries of the transactions below.
A. Prepaid Expenses
On 1/1/2018, the company paid PHP180,000 to acquire a three-year fire insurance policy. Three
months later, the company paid cash amounting to PHP30,000 for office supplies. At year-end, per
physical count of the manager, the office supplies was only PHP5,500.
Required:
1. Prepare the adjusting entry every year-end until the fire insurance policy expires.
2. Prepare the adjusting entry pertaining to the Office Supplies on 12/31/2018.
3. Determine the amount that will be presented in the Balance Sheet as Prepaid Expense.
4. Determine the amount that will be presented in the Income Statement.
B. Unearned Revenue
On 7/1/2018, the company received cash amounting to PHP30,000 from a customer for services to be
performed. According to the contract, the cash advance is for 30 hours of services (PHP1,000 per
hour) that the business will render. The company issued the following Service Invoice: 8/1/2018 15
hours, 9/30/2018 5 hours, and 12/15/2018 2 hours.
Required:
1. Prepare the adjusting entry at year-end.
2. Determine the amount that will be presented in the Income statement.
3. Determine the amount that will be presented in the Balance sheet.
C. Accrued Expenses
The Company operates under a calendar year. As of 12/31/2018, the electricity expense of the
company is PHP1,240,130. On 1/1/2019, the company received its December 2018 bill amounting to
PHP85,230.
Required:
1. Prepare the adjusting entry at year-end.
2. Determine the amount that will be presented in the Income Statement.
3. Determine the amount that will be presented in the Balance Sheet.
4. Prepare the requirements of the previous three numbers assuming that the December 2018 bill
provided that the billing period is from 12/5/2018 until 1/4/2019.
D. Accrued Interest
On 1/1/2018, Company A borrowed PHP1,000,000 from Company B. According the loan contract
between the two, the borrower will pay the interest and principal a day after their respective
maturity dates. The loan will mature on 12/31/2020. The interest rate of the loan is 6%.
Required:
1. Prepare the adjusting entry of the Borrower every year-end until the loan matures.
2. Prepare the adjusting entry of the Lender every year-end until the loan matures.
3. Prepare the journal entry to record the cash payments of the Borrower until the last payment.
4. Prepare the journal entry to record the cash receipts of the Lender until the last payment.

ATENEO DE MANILA UNIVERSITY

JOHN GOKONGWEI SCHOOL OF MANAGEMENT
ACCOUTING20: FINANCIAL ACCOUNTING

ACCOUNTING PROCESS JOURNAL ENTRIES

DISCUSSION PROBLEMS
AY2015-2016 | 1ST SEMESTER

E. Correcting Errors
The company determined that it credited cash when the company received the service invoice (SI)
sent by the engineer amounting to PHP150,000 when it had one of its machines repaired. The SI date
is 11/1/2018.
Required: Prepare the adjusting entry to correct the error under the assumptions below.
1.

The OR Date is 1/5/2019 and the error was discovered on 1/5/2019 when the financial statements
were being prepared.

2.

The OR Date is 12/5/2018 and the error was discovered on 1/5/2019 when the financial
statements were being prepared.

3.

The OR Date is 1/5/2019 and the error was discovered on 12/4/2018.

4.

The OR date is 12/5/2018 and the error was discovered on the same day.

ATENEO DE MANILA UNIVERSITY

JOHN GOKONGWEI SCHOOL OF MANAGEMENT
ACCOUTING20: FINANCIAL ACCOUNTING

ACCOUNTING PROCESS JOURNAL ENTRIES

DISCUSSION PROBLEMS
AY2015-2016 | 1ST SEMESTER

PROBLEM III: CLOSING PROCESS AND PREPARATION OF FINANCIAL STATEMENTS

The following is an adjusted trial balance. The company is subject to a income tax of 30%.

WAYNE ENTERPRISE
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2018
Cash
Accounts Receivable
Inventory
Prepaid Insurance
Property, plant, and equipment
Accounts Payable
Accrued Salaries
Accrued Interest
Dividends Payable
Income Tax Payable
Unearned Revenue
Notes Payable
Owner's, Capital
Owner's, Withdrawals
Sales Revenue
Cost of Services
Electricity Expense
Water Expense
Utility Expense
Salary Expense
Rent Expense
Income Tax Expense
TOTAL

1,592,500
470,000
87,500
7,500
770,000
132,500
2,000,000
800,000
50,000
60,000
600,000
865,000
125,000
7,560,000

85,000
12,500
5,000
37,500
175,000
5,000
375,000
1,865,000
5,000,000
7,560,000

Required:
1. Prepare the Closing Entries.
2. Prepare the Post-Closing Trial Balance.
3. Prepare the Balance Sheet as of 12/31/2018.
4. Prepare the Income Statement (Full) for the year ended 12/31/2018.
5. Prepare the Income Statement (Condensed) for the year ended 12/31/2018.
6. Prepare the Statement of Changes in Owners Equity for the year ended 12/31/2018.