FAR 01C Review of Accounting Cycle Illustrations
FAR 01C Review of Accounting Cycle Illustrations
FAR 01C Review of Accounting Cycle Illustrations
3rd Floor Lautengco Bldg., Osmeña St. Cor. Quirino Ave., General Santos City
Tel Nos. 0942.045.4564
2. On December 1, 20x7, J.C. Cohen Company purchased a general liability insurance policy for P3,600 to provide
coverage for the one year.
Case 1: The company recorded the policy as an asset when purchased
Case 2: The company expensed the cost of the policy on December 1, 20x7
Required:
Assuming that the company does not use reversing entries, what entry should be made on April 1, 20x8 when the
annual interest payment is received?
1.Assuming that the company does use reversing entries, what entry should be made on April 1, 20x8 when the annual
interest payment is received?
(a) Prepaid Insurance has a balance of P10,100. The company has the following policies in force:
Policy Date Term Cost Coverage
A 1/1/20x8 2 years P 3,600 Shop equipment
B 12/1/20x7 6 months 1,800 Delivery equipment
C 7/1/20x7 3 years 12,000 Buildings
(b) Unearned Subscription Revenue has a balance of P56,250. The following subscriptions were
collected in the current year. There are no other unexpired subscriptions.
Effective Date Amount Term
July 1, 20x7 P27,000 1 year
October 1, 20x7 22,200 1 year
January 1, 20x8 28,800 1 year
April 1, 20x8 20,700 1 year
(c) Interest Payable has a balance of P825. Noble owes a 10%, 90–day note for P45,000 dated March
1, 20x8.
(d) The Office Supplies account had a balance of P3,000. During the year, additional office supplies
were purchased for P3,800 and that amount was debited to Office Supplies Expense. On March 31 a
physical count of office supplies revealed that there was P3,400 on hand.
(e) Salaries Payable has a balance of P9,750. The payroll for the 5–day workweek ended April 3 totaled
P11,250.