accounting 10brought to you by: ateneo lex1 accounting 10: chapter 2

Accounting 10 Brought to you by: Ateneo Lex 1

Accounting 10: Chapter 2


Short problems


Short Problem 1

During the Year 2004, William Company had revenues of P350,000 and expenses of P230,000. Total Liabilities at year-end amounted to P450,000 while the owner’s equity at the start of the year was P150,000. Compute for the total assets at the end of the year.

Solution:

Assets = Liabilities + Equity

720,000 (ANS) = 450,000 + 270,000


Short Problem 2

Answer: Net Income = P294000

Sharon Company had total assets of P1,500,000 and liabilities of P490,000 on January 1, 2005. After six months of business operations,the assets totaled P1,900,000 while outstanding obligations amounted of P356,000. During the six-month period,the proprietor withdrew cash of P150,000 and some store supplies valued at P5,000. During the same period, the owner made additional investments of P245,000 cash and a second-hand store equipment originally costing P250,000 but with a current fair market value of only 60% of its original cost. Compute for the net income or loss during the six-months period.


Short Problem 3

Manny Pacman Boxing School reported the following information pertaining to the business on December 31 of the current Year:

Property, Plant and Equipment (net of depreciation) P5,000,000Accounts Receivable 1,200,000Prepaid Insurance

100,000Unearned Boxing Revenue 400,000Cash

2,500,000Bank Loans Payable 1,100,000Land

4,500,000Accounts Payable

600,000Accounts Payable

75,000Marketable Securities (short-term investments)

1,400,000Salaries Payable

600,000• How much is the toaal assets of Pacman Boing School on Dec. 31?

P14,775,000• What is the amount of Manny Pacman’s capital on Dec. 31? P12,075,000


Short Problem 4The following accounts appear in the trial balance of Kikay Company for the month of May 31, 2005: Debit Credit Cash 9200 Accounts Receivable 3400 Office Supplies 3200 Accounts Payable 8600 Kikay,Capital 5000 Service Revenue 8600 Wages Expense 7000 However, the following errors were made to some of the accounts in the trial balance above:

a. The cash account is overstated by P1600 b. Services rendered on account for P1200 was not recorded at all . c. A P2000 debit to Accounts Payable was posted as P200. d. Service Revenue of P4000 was recorded as debit rather than a credit.

What is the corrected debit and credit column total of Kikay Company’s Trial balance?

Answer: 22,400


Short Problem 5

Pasaway began the year 2004 with a cash of P172,000. In addition to earning a net income of P100,000 and making an owner’s withdrawal of P60,000 for personal use, the owner borrowed P240,000 from a local bank and purchased a brand new equipment for P360,000 with cash. Also, accounts receivable increased by P24,000 for services rendered on account. Assuming there were no other company transactions, compute thecash on hand at the end of the year?

Answer: P68000


Short Problem 6

Hannah Pin, an entrepreneur started her own service business. She does not know about the double entry accounting system, but managed to keep track of the following information for three months operation: Cash invested into the business P200,000 Second-hand equipment invested 300,000 Cash received from customers 185,000 Accounts receivable 45,000 Salaries paid to her employees 15,000 Purchase of new computer 30,000 Supplies used and paid 3,000 Rent incurred but unpaid 5,000 Cash withdrawal for personal use 10,000 Ignore depreciation of fixed asset. Compute the net income of Hanah Pin for the three-month period.

Answer: Net Income = 207,000


Short Problem 7

If Hanah Pin invested old office furniture and fixtures to her business costing P50,000 but with a current market of only P35,000, what would be the balance of the owner’s equity as of the end of the three-month period?

Answer: P732,000


Short Problem 8

Matam Puhin owns a company in Greenhills. It reported the following assets as of December 31, 2004: Cash, P70,000; Accounts Receivable, P154,000; Inventory, P100,000; Land, P400,000; Equipment, P310,000; Factory Building, P5,000,000. Total owner’s equity is 2/3 of the total assets.

The Total liabilities are 1/2 of the total owner’s equity. The accounts payable is 1/6 of the total liabilities. What is the balance of the accounts payable?

Answer: Accounts Payable: P335,222.22


Short Problem 9

On December 31, 2004, Paha Mak Company had total assets of P160,000 and total liabilities of P40,000. During 2005, the company had service revenues amounting to P140,000 and total expenses of P100,000. Moreover, during that year, Paha Mak took P20,000 for his personal use. Assuming that on December 31, 2005, the total assets of the company amounted to P200,000, how much was the year-end total liability balance?

Answer: Total Liability= P60,000


Short Problem 10

The following have been extracted from the records of Dok Leng after the first six months of operation: Dok Leng, Capital P450,000 Equipment (Invested in the company) 50,000 Accounts Receivable 120,000 Service Revenue 245,000 Salaries and Wages paid 35,000 Rent Expense Paid 20,000 Supplies purchased 25,000 Accounts Payable 12,500 Assuming that part of the purchase price of the supplies was paid in cash and that Dok Leng invested both cash and equipment into the business, how much cash does Dok currently have?

Answer: P457,500


Short Problem 11

On October 1, 2001, Coconut Fuel Co. sold 100,000 gallons of heating oil to Kennot Afford Co. at P3 per gallon. Fifty thousand gallons were delivered on December 15, 2001, and the remaining 50,000 gallons were delivered on January 15,2002. Payment terms were 50% du e on October 1, 2001,25% due o n first delivery, and the remaining 25% due on second delivery. What amount of revenue should Coconut Fuel Co. recognize from this sale during 2001?

Answer: 225,000


Short Problem 12

On August 1, 2002, Cover Me Blue Magazine had total assets of P260,000 and total liabilities of P75,000. The business earned net income of P85,000 for the month of August but the owner withdrew P25,000. As of August 31, 2002, the owner determined that total liabilities decreased by P35,000. By how much did total assets increase or decrease in August of 2002?

Answer: Assets increase by: P25,000


Short Problem 13

Diamond Company began the year 2002 with cash of P86,000. In addition to earning a net income of P50,000 and making an owner’s withdrawal of P30,000 for personal use, Diamond borrowed P120,00 from the bank and purchased equipment for P180,000 with cash. Also, accounts receivable increased by P12,000 and accounts payable decreased by P18,000. Assuming there were no other company transactions, the amount of cash on hand at the end of the year amounts to:

Answer: Cash = P16,000


Short Problem 14

Answer: Insurance Coverage on Assets: 58,000


Short Problem 15

Joshua Ferrer put in P100M to form a new basketball team. The franchise was acquired on January 1, 2001 at the cost of P100M of which P20M was paid immediately. A note was signed with the league officials for the balance scheduled to be paid at the beginning of each of the next four years (20M per year). The team signed up 8 players resulting in a total annual salary commitment of P100M. Also, the team paid a total of P50M assigning bonuses to the top four players to get them to sign with the team. How much in total assets should the company report?


Short Problem 16

Answer: Revenues for company A: P547,000 Expenses for company B: P300,000


Short Problem 17

Answer: P225,000


Short Problem 18

865000820000

NO


Long Problems


Long Problem 1


Long Problem 1: AnswerA. Journal Entries

20051-May Cash 4000000

Guma Mela, Capital 40000002-May Medical Equipment 25000

Guma Mela, Capital 250003-May Medical Equipment 100000

Cash 80000 Notes Payable 20000

5-May Medical Supplies 35000 Accounts Payable 35000

8-May Cash 15000 Service Revenue 15000

10-May Laboratory Expense 5000 Cash 5000

14-May Salaries Expense 10000 Cash 10000

18-May Accounts Receivable 75000 Service Revenue 75000

20-May Accounts Payable 26250 Cash 26250

21-May Medical Furniture 45000 Accounts Payable 45000


Long Problem 1: AnswerA. Journal Entries

25-May Cash 50000 Accounts Receivable 50000

26-May Medical Supplies 40000 Cash 20000 Accounts Payable 20000

27-May Salaries Expense 10000 Cash 10000

28-May Telephone Expense 1000 Cash 1000Accounts Receivable 67500 Service Revenue 67500

29-May Accounts Payable 20000 Cash 20000

30-May Guma Mela, Withdrawal 40000 Cash 40000Electricity Expense 2500 Cash 2500


Long Problem 1: AnswerB. Trial Balance

Cash 3850250Accounts Receivable 92500Medical Supplies 75000Medical Equipment 125000Medical Furniture 45000Notes Payable 20000Accounts Payable 53750Capital 4025000Withdrawal 40000Revenues 157500Salaries Expense 20000Laboratory Expense 5000Telephone Expense 1000Electricity Expense ___2500____ ____________

4256250 4256250

Guma MelaTrial Balance30-May-05


Long Problem 2


Long Problem 2 AnswerA. Income Statement

RevenuesService Revenue 1400000Interest Income 4500Investment Income 5000

P1409500Less: Expenses

Taxesand Licenses Expense 15000Salaries Expense 720000Supplies Expense 60000Miscellaneous Expense 24000

(P819000)Net Income: P590,500

Ayawma BalanceIncome Statement

For the month ended June 30


Long Problem 2 AnswerB. Balance Sheet

AssetsCash 2330500Furniture and Equipment 410000Prepaid rent 300000Office Supplies 40000Marketable Securities 200000

P3280500Liabilities

Accounts Payable 200000Accrued Liabilities 130000

P330000Owner's Equity

Capital 2410000Withdrawal -50000Revenue 1400000Interest Income 4500Investment Income 5000Salaries Expense -720000Taxes -15000Miscellaneous Expense -24000Supplies -60000

P2950500P3280500

Ayawma BalanceBalance Sheet

30-Jun


Long Problem 2 Answer

C. Statement of Changes in Owner’s Equity

Ayaw Ma Balance, Capital,June 1 $0

Plus: Owner's Investment 2410000Net Income 590500

3,000,000Less Owner's withdrawals -50000

Ayaw Ma Balance, Owner's Equity $2,950,000

Ayaw Ma BalanceStatement of changes in Owner's Equity

30-Jun


Long Problem 3


Long Problem 3 Answer

Income Statement

Django Bustamante, Capital Mar. 1 $0

Plus:Owner's Investment 8000Net Income 285

8285

Less: Owner's Withdrawals 0

Django Bustamante, Equity, mar. 31 8285

Django Repair Service CompanyIncome Statement

31-Mar


Long Problem 3 AnswerBalance Sheet

AssetsCash 9310Office Equipment 10100

Prepaid Rent 900Accounts Receivable 600

Total Assets 20910Liabilities

Accounts Payable 1250Accrued Liabilities 75Unearned Revenue 50 12625

EquityCapital 8000Legal Expense -500Interest Expense -40Revenues 1300Salaries Expense -400Utilities Expense -74 8285

Total Liabilitiesand Equity 20910

Django Repair Service CompanyIncome Statement

31-Mar


Long Problem 4


Long Problem 5

accounting 10brought to you by: ateneo lex1 accounting 10: chapter 2

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