Entity A started operations on January 1, 20x1. A summary of the...

Entity A started operations on January 1, 20x1. A summary of the transactions during the year is

provided below:

2

1. The owner invested ₱2,000,000 to the business.

2. Acquired equipment for ₱1,000,000 cash.

3. Obtained a 12%, one-year, bank loan of ₱500,000.

4. Paid one-year insurance amounting to ₱160,000 on September 30, 20x1. Entity A uses the

"asset method" in recording prepayments.

5. Total service fees earned amounted to ₱6,000,000, one-third of which was on cash basis.

6. Collected ₱1,800,000 accounts receivable.

7. Total salaries expense paid amounted to ₱1,200,000.

8. Total utilities expense paid amounted ₱500,000.

9. Total supplies purchased on cash basis amounted to ₱120,000.

10. Total owner's drawings amounted to ₱1,400,000.

Requirements:

a. Provide the journal entries for the transactions.

b. Post the entries to the ledger using T-accounts.

c. Prepare the unadjusted trial balance using a worksheet.

d. Prepare the adjusting entries (see additional information below).

Information for adjusting entries:

i. The equipment was acquired on January 1, 20x1 and was estimated to have a useful life of

10 years.

ii. The loan was obtained on July 1, 20x1. Principal and interest are due at maturity date.

iii. The one-year insurance covers the period October 1, 20x1 to September 30, 20x2.

iv. Unused supplies at the end of the year amounted to ₱40,000.

e. Complete the worksheet.

f. Prepare the closing entries.

g. Prepare the balance sheet and income statement.