ADJUSTING JOURNAL ENTRIES EXERCISE #2

August 10, 2018

Instruction: Write all your adjusting journal entries in a yellow paper.

King Dairy Treats opened for business on May 1, 2003. Its trial balance before
adjustments on July 31, 2003 includes the following selected accounts:

Debit Credit
Cash P 1,400
Prepaid Insurance 800
Cleaning supplies 900
Milk products inventory 1,480
Building 250,000
Equipment 30,000
Accounts Payable P 3,200
Unearned Revenue 400
Note Payable 50,000
Rent Expense 6,300
Salaries Expense 1,587
Utilities Expense 2,478
Other data:
1. Monthly depreciation is P400 on the building and P200 on the equipment.
2. Certain dairy treats for which the customer had paid P400 in June, were
delivered in July.
3. An inventory count of cleaning supplies at July 31 shows P900 on hand.
4. Rent for July of P900 was unpaid at July 31.
5. Insurance is paid at the rate of P200 per month.
6. Milk products worth P400 were delivered to the company on July 31, but
the bill has not been received yet.
7. The note payable has an interest rate of 7% per year and is paid at the
end of every calendar quarter.

Instruction
Journalize the adjusting entries for July on July 31.
Action Plan
 Prepare separate journal entries for each adjusting entry. Make sure debits
equal credits.
 Note the adjustments are made for one month.
 Look at how the amounts are currently recorded in the accounts before trying to
determine what adjustments are necessary.
 Choose account titles carefully. Use existing titles where possible.
 Record debits first and indent credits.