Answer Key Activity 12, 13, & 14

Activity 12 In this activity let us check your understanding on the basic adjusting entries.
This
knowledge is crucial for the next level, your performance in the next level shall depend on your
competence of this level. A perfect score is needed to pass this level. On the space provided
write the correct type of adjustment that is describe for each item. You may answer the type of
adjustment more than once.
1. Pre-collected or deferred income not yet earned; but collected in advance.
2. Prepayments, Unused supplies; to be used in the next accounting period.
3. Pre-collected or deferred rent Income collected; but not earned yet.
4. Accrual rent Income not yet collected; but already earned.
5. Accrual, an expense incurred; but not yet paid or recorded.
6. Accrual, Income earned; but not yet collected.
7. Prepayment an expense not yet incurred; but already paid in advance.
8. Accrual salaries incurred; but not yet paid.
9. Depreciation expired cost of an asset allocated in one accounting period.
10. Provision for doubtful accounts practice in accounting to recognize those receivables
which is estimated to be uncollectible.
11 to 15 identify the term being describe.

11. Accrual an accounting method in which revenues are reported in the period In which
they are earned, and expenses are reported in the period in which they are incurred.
12. Adjusting entries refers to entries required at the end of the period to bring the
accounts up to date to ensure proper matching of income and expenses.
13. Book value or carrying value, the difference between the cost and accumulated
depreciation account of the related property and equipment account.
14. Net Realizable value, the difference between Accounts receivable and allowance for
doubtful account is called.
15. Account, it is used to classify and summarize transactions and to prepare data for
financial statements. This is where the increase and decrease of an account is
presented.
Activity 13. Determining the Effects of Omissions. For each of the following situations, state
the effect to total assets whether it is overstated or understated or not affected.
Understated a. Failure to recognize Interest income earned but not yet collected
Overstated b. Failure to recognize the expired insurance.
No effect c. Accrued interest on loans payable was omitted.
Overstated d. Failure to recognize depreciation.
No effect. e. Taxes incurred but not paid was not recorded.
No effect f. The earned portion of unearned revenue was not recognized.
ASSETS = LIABILITIES + OWNER’S EQUITY

Activity 14. This in an additional activity to check your understanding on the identification
of accounts affecting adjusting entries.
DEFERRALS ACCOUNT DEBITED ACCOUNT CREDITED

PREPAID EXPENSES (Orig)
Asset Approach Expense Asset
Expense Approach Asset Expense
UNEARNED REVENUES (Orig)

Liability Approach Liability Income
Income Approach Income Liability
ACCRUALS
Expense Expense Liability
Income Receivable Income
Assume that on Nov. 1 the entity received cash of P120,000 representing one year advance
of services to be rendered.
Liability approach
Cash. 120,000
Unearned rental revenue 120,000
Rec’d cash for services not rendered yet (Nov. 1, 2021 to Oct. 31, 2022)
ADJE on Dec. 31, 2021 assuming that the entity’s accounting period ends on Dec. 31, 2021.
Rental Revenue 20,000
To recognize the earned portion which is 2 months
Income approach ( orig )

Cash. 120,000
Rental revenue 120,000
ADJE Dec. 31, 2021

Rental Revenue 100,000
To recognize the unearned portion which is equivalent to 10 months.
PREPAYMENTS
On Oct. 10, 2021 the entity pays one year insurance premium for P12,000 which covers
period from Oct. 1, 2021 to Sept. 30, 2022.
Original entry (at the time of payment) is asset approach
Prepaid Insurance. P12,000
Cash 12,000
Payment for one year insurance premium (From Oct. 1, 2021 to Sept. 30, 2022)
ADJE on Dec. 31, 2021

Insurance Expense . . . . . . . . 3,000
Prepaid Insurance . . . . . . . .. 3,000
To recognize the expense portion (w/c is equivalent to 3 months)
If original entry is expense approach

Insurance expense . . . . . P12,000
Cash 12,000
Payment for one year insurance premium (From Oct. 1, 2021 to Sept. 30, 2022)
ADJE on Dec. 31, 2021

Prepaid Insurance . . . . . . 9,000
Insurance Expense 9,000
To recognize the asset portion (w/c is equivalent to 9 months)
ACCRUALS
Accrued Expense
Accrued light and water amounting to P4,300
Light and Water Expense . . . . . 4,300
Light and water payable or Accrued Expenses 4,300
To recognize unpaid light and water bill at the end of the period
Accrued salaries of employees amounting to P20,000
Salaries expense . . . . .. 20,000
Salaries Payable or Accrued salaries . . 20,000
To recognize unpaid salaries at the end of the period
Accrued income
Accrued interest on notes receivable is P5,000
Interest Receivable . . . P5,000
Interest Income . . . . . . . . . P5,000
To recognize uncollected interest on notes receivable at the end of the period.
The lessor has uncollected amount of rentals amounting to P11,200 at the end of the
accounting period.
Accounts Receivable . . . . . P11,200
Rental Income . . . . . . . . . . . . . P11,200
To recognize uncollected rentals at the end of the period.
LET’S ANALYZE
Activity 15. Identifying the terms needed in the study of adjusting entries is just a guide for
you to correctly prepare the required adjusting entries. In this activity, you are required to
correctly journalized the adjusting entry. For each situation (transaction) answer the
questions.
CASE 1
On Nov. 15, 2019, Jay Cesar borrowed money from Mayaman Bank for P400,000 to finance
an -on-going project that he ventured into. He issued a 150-day note dated Nov. 15, 2019.
The note is 10% interest bearing note which will be paid together with the principal upon
maturity. (Use ordinay interest in computing interest)
1. When is the maturity date of the note? _____________________________________.

2. What is the maturity value of the note? ____________________________________.
3. How much is the accrued Interest?________________________________________.
4. How much interest payable to be recognized on Dec. 31, 2019? ________________.
5. How much interest Expense to reported in the Income Statement on Dec. 31, 2019?
6. Prepare the adjusting entry on Dec. 31, 2019. _____________________________.
7. Prepare the journal entry to be made on maturity date.______________________.
CASE 2
Magic Trading decided to invest the excess cash in a more profitable instrument to earn an
additional income for the company. A time deposit for P2,500,000 was purchased on Aug.
1, 2019 which will mature on April 1, 2020. The time deposit has an annual interest rate of
5% which can be withdrawn by the company on a monthly basis, every 1 st day of the
following month. So the interest for August can be drawn on Sept. 1, 2019 and so on.
1. How much interest income will be recognized for the year 2019? _________________.
2. How much of the interest income is actually collected for the year 2019? ___________.
3. Is there and accrued interest income? If yes, how much and why? __________. If your
answer is No, why?
4. How much is the amount of Interest Receivable will be recognized on Dec. 31, 2019?
5. On April 1, 2020, how much cash will Magic Trading receive from the Bank for the Time
deposit?
6. What are the entries to record the following?
a. August 1, 2019 when the Time Deposit was placed.
b. April 1, 2020 when the Time Deposit mature.

Answer Key Activity 12, 13, & 14

Uploaded by

Copyright:

Available Formats

Answer Key Activity 12, 13, & 14

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Answer Key Activity 12, 13, & 14

Uploaded by

Copyright:

Available Formats

Activity 12 In this activity let us check your understanding on the basic adjusting entries.

11 to 15 identify the term being describe.

ASSETS = LIABILITIES + OWNER’S EQUITY

DEFERRALS ACCOUNT DEBITED ACCOUNT CREDITED

UNEARNED REVENUES (Orig)

Income approach ( orig )

ADJE Dec. 31, 2021

ADJE on Dec. 31, 2021

If original entry is expense approach

ADJE on Dec. 31, 2021

1. When is the maturity date of the note? _____________________________________.

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.