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QUESTION 1
1.1
Which of the following accounts would be debited and credited as a result of the transactions
or adjustments given? Code your answer using the following:
A.
B.
C.
D.
E.
F.
Expenses
Revenues
Liabilities
Assets
Stockholders Equity
No Entry
Transaction
A credit sale is made
A desktop/computer is purchased on credit
Cash is collected on transaction #1
An invoice from supplier of raw materials was received for
orders placed for delivery in the following month.
5. Provision for depreciation
1.
2.
3.
4.
1.2
Debit
Credit
1.
3.
5.
7.
2.
4.
6.
8.
9.
10.
Following are the amounts from an adjusted trial balance. In the closing process, what
amount will be closed to retained earnings from income summary?
Cash
Capital Stock
Sales revenue
Retained Earnings
Salaries and Wages
Accounts Payable
Interest expense
Rent Expense
Supplies expense
20,000.0
0
18,000.0
0
75,000.0
0
12,000.0
0
10,000.0
0
10,000.0
0
10,000.0
0
10,000.0
0
15,000.0
0
Question 2
2.1 Indicate the effect of the following errors on each of the accounting elements described in the
column headings. Using the following key:
A. Overstated
B. Understated
Error
C. No Effect
Total
Revenue
1.
Total
Expenses
2.
Net
income
3.
Total
Assets
4.
Owners
Equity
5
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
2.2 After the transactions for the year were recorded, a Trial Balance was prepared as of December
31, 2005 for Renees Desks and Furniture.
RENEES DESK AND FURNITURE
Trial Balance as of December 31, 2005
Account Number
101
Account
Cash in Bank
Dr (P)
Cr (P)
16,000
102
103
104
151
152
152A
201
301
302
401
402
501
502
503
504
505
Accounts Receivables
Inventory
Supplies Inventory
Land and Buildings
Equipment
Accumulated Depreciation Equipment
Accounts Payables
Capital
Drawings
Sales
Sales Discounts
Cost of Sales
Administration Expenses
Advertising
Vehicle Expenses
Salaries and Wages
TOTALS
28,000
98,000
6,800
275,000
18,000
5,500
45,000
351,680
47,280
519,000
150
345,000
7,000
15,000
11,250
86,000
937,330
937,330
The following items require adjusting journal entries. Provide the entries and use standard
chart of accounts for account titles not included in the trial balance.
2.2.1 Supplies inventory on hand as of December 31, 2005 was P2,100.
2.2.2 Depreciation on equipment for the year is P1,925.
2.2.3 A physical count on December 31, 2005 revealed the following details relating to Model
421 of inventory items.
Quantity on Stock Card (Per Books)
Quantity as per Physical Count
Unit Cost (FIFO)
42 units
40 units
P500
2.2.4 A payment of P500 for Administration Expenses has been incorrectly posted to the
advertising account.
Question 3 MODULE 3
The following information pertains to Ellas Flower Shop, a calendar year sole proprietorship,
which maintained its books on the cash basis during the year.
Ellas Flower Shop
TRIAL BALANCE (Cash Basis)
December 31, 2005
Dr (P)
Cash
25,600
Accounts Receivable 12/31/2004
16,200
Inventory, 12/31/2004
62,000
Furniture and Fixtures
118,2000
Land Improvements
45,000
Accumulated Depreciation, 12/31/2004
Accounts Payable, 12/31/2004
Ellas Capital
Sales
Purchases
305,100
Salaries
174,000
SSS, HDMF and PHIC Contributions
12,400
Insurance
8,700
Rent Expense
34,200
Utilities
12,600
Employee Benefits
_______13,000
Totals
827,000
Cr(P)
32,400
17,000
124,600
653,000
_____________
827,000
Ella has developed plans to expand into wholesale flower market and is in the process of negotiation
for bank loan to finance the expansion. The bank is requesting 2005 financial statements prepared
on the accrual basis. Given the information on the following paragraphs:
3.1 Prepare the adjusting journal entries necessary to convert the trial balance of Ellas Flower Shop
to the accrual basis of accounting
3.2 With a brief essay answer, explain why the bank would require financial statements prepared on
the accrual basis instead of the cash basis.
Ellas Flower Shop
Additional Information
a. Receivable from customers totaled P32,000 at December 31, 2005
b. An analysis of the above receivables revealed that an allowance for bad debts of P3,800
should be provided.
c. Unpaid invoices for flower purchases totaled P30,500 and P17,000 at December 31, 2005
and December 31, 2004, respectively.
d. The inventory totaled P72,800 based on physical count of the goods at December 31,
2005. The inventory was priced at cost, which approximates market value.
e. On May 1, 2005, Ella paid P8,700 to renew its comprehensive insurance covering one
year. The premium on the previous policy, which expired on April 30, 2005, charged in
2004 expenses is P7,800.
f. Depreciation on Furniture and Fixtures for 2005 is P12,000 while P1,200 was provided for
land improvements depreciation.
g. Accrued expenses at December 31, 2004 and 2005 were as follows:
2004
P900
1,100
2,000
Utilities
Salaries
2005
P1,500
1,600
3,100
Question 4 MODULE 3
4.1 During 2005 Anika became increasingly concerned about the businesss cash position. The profit
reported for the year ended December 31, 2005 was P85,000, yet the bank balance fell by P60,000
during the year.
The account has prepared the following summary of cash transactions for the year ended December
31, 2005.
Cash Receipts
Cash Payments
Cash Sales
Interest
Capital
Proceeds: Disposal of
computers
Collections
P240,800.00
600.00
14,000.00
300.00
31,200.00
Vehicles Expenses
Payments of Payables
Drawings
P3,200.00
160,000.00
9,200.00
Salaries
Advertising
Administrative Expenses
Prepaid Insurance
Loan Repayments
286,900.00
105,000.00
9,600.00
14,700.00
1,200.00
44,000.00
346,900.00
Note: The bank account balance per passbook at December 31, 2005 was P29,000.
Required: Prepare a direct or classified Statement of Cash Flows for the year ended December 31,
2005.
4.2 The following is a comparative trial balance of MMC Corporation for the year ended December
31, 2004 and 2005. The company is on its second year of operation and uses the accrual method of
recognizing transactions. Stock details are kept using perpetual recording system.
MMC CORPORATION
Adjusted Trial Balance
As of December 31, 2004 and 2005
ACCOUNT NUMBER
101
ACCOUNT
Petty Cash
2005
500.00
2004
1,000.00
102
103
104
151
151A
152
152A
160
170
201
202
203
300
301
302
401
402
501
502
503
504
505
506
507
508
509
510
Cash in Bank
Supplies Inventory
Inventory
Buildings
Accum Depreciation-Building
Vehicles
Accum Depreciation-Vehicles
Security Deposits
Investments
Accounts Payable
Accrued Expenses
Loans Payable
Paid Up Capital
Retained Earnings
Dividends
Sales
Sales Discounts
Cost of Sales
Administration Expenses
Advertising
Depreciation-Building
Depreciation-Vehicles
Freight in
Interest Expense
Stationery and Supplies
Inventory Loss
Salaries and Wages
Totals
(140,000.00)
900.00
400,000.00
600,000.00
(15,000.00)
12,000.00
(1,000.00)
30,000.00
10,000.00
(60,000.00)
(2,400.00)
(100,000.00)
(500,000.00)
(156,500.00)
65,000.00
(1,348,500.00)
5,000.00
800,000.00
40,000.00
60,000.00
15,000.00
1,000.00
4,000.00
7,000.00
2,000.00
1,000.00
270,000.00
-
625,500.00
1,500.00
200,000.00
30,000.00
10,000.00
(75,000.00)
(26,500.00)
(110,000.00)
(500,000.00)
(1,200,000.00)
10,000.00
684,000.00
37,000.00
50,000.00
3,800.00
6,500.00
1,500.00
700.00
250,000.00
-
Problem 1: MODULE 3
The accountant of Borneo Enterprises received the bank statement of the company for the
month of December 2008, which showed a credit balance of P102,365.10. The cash in bank balance
as per the general ledger however showed a debit balance of P98,011.10.
The following reconciling items were discovered:
1. A deposit in the amount of P6,250 made in the afternoon of August 31 was not reflected
in the bank statement.
2. The company issued total checks for the month of October in the amount of
P54,326.00 but the cancelled checks returned by the bank amounted to only
P35,022.00. There were no outstanding checks last month.
3. A check payable to Borbon Enterprises for P900 was erroneously credited by the bank to
the account of Borboneo Enterprises.
4. A customer paid his account directly to the bank in the amount of P5,000.00
5. Checks deposited but returned by the bank marked DAIF
(Drawn against insufficient fund), P14,930.00
6. Bank service charge, P30.00.
7. A check issued for P3,265.00 in payment of insurance expense was erroneously recorded
in the books by the bookkeeper as P3,625.00.
REQUIRED:
a. Prepare the Bank Reconciliation Statement.
b. Give the adjusting entries necessary.
Problem 2 VAT
The following selected transactions were completed by Liwayway Trading for the month of
November of the current year:
November
2
2
4
5
6
8
11
12
13
13
14
19
Investing
Financing
Inflow
Outflow
Advances to employees
Cash withdrawal of the owner
Payment of VAT
Short-term borrowing
Payment of long-term long
loan
Purchase of computer for
cash
Collection of accounts
receivable
Collection of rental
Sale of old equipment for
cash
Problem 4: MODULE 2
The adjusted accounts (excluding the capital account) of Rico Lopez, a CPA on December 31,
200F are summarized below:
Advertising Expense
Cash
Rico Lopez Drawing
Rental Income
Rent Expense
Notes Receivable
Allowance for Impairment Loss
Office Equipment
Accounts Receivable
Prepaid Insurance
Insurance Expense
Misc. Expense
Furniture & Fixture
Professional Fees
10,000
10,800
25,000
6,000
24,000
2,100
2,500
80,000
16,450
3,600
6,400
2,750
17,500
125,475
8,000
750
1,225
1,750
38,000
4,000
1,800
2,000
1,375
12,500
50
8,000
5,000
25
REQUIRED:
1. Rearrange the accounts in the following order, assets, liabilities, capital drawing, income,
operating expenses, other income, financial expense and prepare the adjusted trial
balance.
2. Distinguish between a trial balance of balances and trial balance of totals.
Problem 5
At the end of the calendar year 200G of Nelson Trading, the following information is
available:
1. The merchandise inventory at December 31 as per physical count amounted to P103,260.
2. The accounts receivable account had a balance of P125,600 and the allowance for impairment
Loss account showed a balance of P10,800. The impairment loss is estimated at 10% of the
outstanding accounts receivable.
3. Equipment costing P150,000 with a salvage value of P30,000 at the end of its estimated 10year life was acquired on June 1, 200G.
4. Accrued interest on the note receivable amounted to P2,300.
5. Interest in the amount of P4,500 has accrued on the note payable.
6. The preliminary trial balance showed an advertising expense account with a balance of
P12,000, of which P2,000 pertains to next year.
7. A tenant paid P24,000 representing three months rent on December 1, 200G and was
credited to rental income.
8. Unpaid salaries as of December 31 amounted to P12,600.
9. Furniture costing P24,000 acquired on November 1, 200G is depreciated at the rate 5% a
year.
10. The VAT input showed a balance of P23,400 while the VAT output showed a balance of
P47,600.
REQUIRED:
a.
b.
c.
d.
Problem 6
From the information given below, prepare the income Statement and Balance Sheet of
Mariposa Enterprises in good form. The companys fiscal year ends April 30, 200C:
Cash
Sales Returns
Beginning Inventory
Purchase
Allowance for Impaired Loss
Accum. Depn. Office Eqpmt.
Purchase Returns
Accounts Payable
Ending Inventory
21,880
4,000
75,000
133,600
1,000
3,000
3,000
30,250
80,000
Rental Income
Unused Office Supplies
Loan Payable Long term
Notes Receivable
Furniture & Fixtures
Sales
Nora Mariposa Drawing
Unearned Rent
Freight-in
Interest Expense
Accum. Depn. Furn. & Fixt.
Accounts Receivable
Notes Payable
Operating Expenses
Prepaid Advertising
Accrued Interest Expense
Accrued Interest Income
Nora Mariposa Capital
Office Equipment
2,000
1,500
80,000
6,000
44,000
225,000
23,150
800
1,400
1,200
1,200
30,000
13,000
48,000
5,000
600
120
100,000
65,000
Problem 7
Put a cross mark in the appropriate columns where the following transactions will be recorded
if the company is using special journals:
GJ
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
CRB
CDB
PB
SB
Note: GJ- General Journal / CRB- Cash Receipts Book / CBD- Cash Disbursements Book /
PB- Purchased Book / SB- Sale Book
Problem 8
Laredo Trading uses the single entry method of bookkeeping. The following information is
gathered at the end the calendar year 200B:
Accounts Receivable
Accounts Payable
Unearned Rent
Interest Payable
Joy Laredo Capital
Beginning Balance
P367,500
312,500
5,000
1,250
681,250
P725,000
150,000
37,000
100,000
Ending Balance
P412,500
302,500
7,500
3,750
813,750
P537,500
12,500
75,000
112,500
Additional information:
1.
2.
3.
4.
5.
P43,750
18,750
10,000
6,000
6,500
Net income
Gross Sales
Gross Purchases
Rental Income
Interest Expense
Problem 9
The following year-end information was made available to you by the accountant of
Luningning Enterprises, owned and operated by Luningning Makintab, on December 31, 200C.
Accounts receivable
Inventory
Operating expenses (including depreciation)
Depreciation Expense
Interest expense
Accounts Receivable turnover
Inventory turnover
December 1 Balance
P60,000
48,000
December 31 Balance
P90,000
32,000
P120,000
25,000
5,000
8x
10x
REQUIRED:
Part 1 Prepare the condensed Income Statement
Part 2 Compute the following financial ratios:
1. Times interest earned ratio
2. Return on sales
3. Operating ratio
Part 3 State briefly the significance of the following financial ratios:
1. Current ratio
2. Times interest earned ratio
3. Yield on common stock
Problem 10
In the course of your audit of the books of Maragondon Company for the year ended
December 31, 200C, the following errors were discovered:
1.
2.
3.
4.
5.
REQUIRED:
State the effect of the above errors (understated, overstated or no effect) on the net income,
assets, liabilities and or owners equity for the year 200c.
CASE 1 MODULE 2
Record the following merchandising transations within a General Journal twice once for a periodic inventory
system and once for a perpetual inventory system.
Note: Assume this is hte first year of operationi for this business. Disregard sales taxes and entry explanation.
Date
April 1
April 5
April 13
April 19
April 23
April 30
Transaction
Purhcase P6,000 of inventory (on account)
Sell P800 of inventory for P1,400 (received cash)
Sell P500 of inventory for P750 (on account)
Purchase P2,000 of inventory (paid cash)
Sell P1,200 of inventory for P2,000 (on account)
Record the closing entries for this accounting period
CASE 2 MODULE 2
Universal Company purchased equipment on January 1, 2001. Management has depreciated the equipment
using the accelerated method or the declining balance method. On July 1, 2003, the company sold the
equipment for P27,000 cash.
The depreciation schedule provides the following:
Annual depreciation expense Accumulated depreciation
Start
2001
8,800
8,800
2002
7,040
15,840
2003
5,632
21,472
Book value
P44,000
35,200
28,160
22,528
Required:
1. Record Universal Companys depreciation for 2003 and the sale of the equipment on July 1, 2003.
CASE 3 MODULE 2
Complete the merchandising income statemetn for CAT Merchandising presented below by:
1. placing the following account titles and balances within the proper format
2. calculating and recording any missing values for the titles indicated below
Revenue from sales:
Sales: P800,000
Sales Returns and Allowances: 20,000
Cost of Goods Sold:
Inventory, January 1: P20,500
Purchases: 500,000
Freight charges: 30,000
Purchases Returns and Allowances: 40,000
Inventory, December 31: 250,000
Operating expenses:
Rent Expense: P120,000
Lights and Water Expenses: 65,000
Telephone Expense: 40,500
Salaries and Wages: 150,000
Insurance Expenses: 15,000
Note: Be sure to find the value for each of the following:
1.
2.
3.
4.
5.
6.
7.
8.
CASE 4
Net sales
Cost of Delivered Goods
Cost of Goods Available for Sale
Net Purchases
Cost of Goods Sold
Gross Profit
Total Expenses
Net Income
A company has the following unadjusted account balances at December 31 of the current year with the
Allowance for Doubtful Accounts of P1,600 (credit balance). This company uses the aging of accounts
receivable to estimate its bad debts. The following aging schedule reflects its accounts receivable at the current
year-end:
Account age
Current (not yet due)
1-30 days past due
31-60 days past due
61-90 days past due
Over 90 days past due
Total
Required:
1. Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31 of
the current year balance sheet
2. prepare the adjusting journal entry to record bad debts expense for the current year
CASE 5
Present below are two conflicting balances of LM Merchandising:
EPCI Bank, bank statement balance, June 30
LM Merchandising, cash account balance, June 30
P205,000
206,600
The folloiwng information resulted from identifying and listing the discrepancy items for LM as of this June 31
bank statement:
Deposit in Transit, June 28
6,000
Outstanding checks:
No. 32
3,000
No. 40
2,000
Bank Service Charges
700
Bank Credit Memo for interest earned
100
Required:
1.
2.
Use the above information to produce an Adjusted Bank Reconciliation Statement for LM Merchandising
Prepare the journal entries to be taken up in the books of LM Merchandising
CASE 6
Complete the provided Statement of Cash Flows based on the following information for MTR Service. The
accounting period is the month of March:
1. Total cash received from clients
P16,500
2. Cash received form interest on bonds
4,000
3. Cash received from sale of old equipment
2,000
4. Cash paid to Cosmo Music for rental of lighting gear
3,750
5. Cash paid for fuel for van
2,180
6. Cash paid for telephone expense
860
7. Balance of Cash account as of end of February
40,500
CASE 7 MODULE 1
A company had the following transactions during December 2005
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
Dec 1 Sold merchandise on credit for P5,000, terms 3/10, n/30. The items sold had a cost P3,500
Dec 2 Purchased merchandise for cash, P720
Dec 4 Purchased merchandise on credit for 2,600, terms 1/20, n/30
Dec 5 Issued a credit memorandum for P300 to a customer who rerturned merchandise purchased on
Nov 29. The returned item had a cost of P210
Dec 6 Received payment for merchandise sold December 1
Dec 7 Received a credit memorandum for the return of faulty merchandise purchase on December 4
for P600
Dec 7 Paid freight charges of P200 for merchandise ordered las month. (FOB shippling point)
Dec 11 Paid for the merchandise purchased on December 4
Dec 24 Sold merchandise on credit for P7,000, terms 2/10, n/30. The item had a cost of P4,900
Dec 27 Received payment for merchandise sold on December 24
Required:
Prepare the general journal entries to record the above transactioins using a perpetual inventory system.
(Record all purchases initially at the gross invoice amounts, disregard sales taxes/VAT)
CASE 8
Louise Margarette pays her office assistant every Friday. Her office assistant earns P400 a day with MondayFriday work week. Within the General Journal provided, demonstrate the adjusting entry Louise Margarette
should make at the end of May in order to assign the appropriate amount of salary expense to this month.
Then, show the entry that would be made on June 1st when Louise Margaratte actually does pay her secretary.
(The calendars for the months of May and June are presented below)
CASE 9
Prepare general journal entries on December 31 to record the following unrelated yearend adjustments
assuming the company uses an accrual accounting period:
a. Depreciation on office equipment for the year is P4,000
b. The Prepaid Insurance account has a P4,680 debit balance before adjustment. An examination of
insurance policies shows P950 of insurance expired
c. The company has three office employees who earn P100 per day for a five-day workweek that ends
on Friday. The employees were paid on Friday, December 26, and have worked full days on
Monday, Tuesday, and Wednesday, December 29, 30 and 31
d. On November 1, the company received 6 monthds rent in advance from a tenant whose rent is
P7,000 per month. The P42,000 was credited to the Unearned Rent account
e. The company collects rent monthly from its tenants. One tenant whose rent is P7,500 per month
has not paid his rent for December
CASE 10
The following information is available for the XYZ Company:
Assets
Cash inflows forpm operating activities
Cash outflows from financing activities
Cash outflows from invensting activities
Costs and Expenses
Retained earnings, December 31, 2001
Retained earnings, December 31, 2002
Liabilities
Revenues
Dividends
Common Stock
152,000.00
105,000.00
(44,000.00)
(84,000.00)
43,000.00
12,000.00
???
28,000.00
135,000.00
(30,000.00)
50,000.00
Using the above information prepare an Income Statement, Statement of Retained Earnings, and statement of
Cash Flows for the XYZ Companys calendar year 2002. Also prepare its Balance Sheet at December 31, 2002.
Cash balance at January 1, 2002 is at P100,000.
CASE 11
Evaluate each (separate) inventory error and determine whether the item in the heading is overstated,
understated or correct.
Inventory error
Cost of
Goods sold
December 2005
Gross margin
And net
income
Ending
owners
Equity
Cost of
Goods
sold
January 2006
Gross
margin
And net
income
Ending
owners
Equity
CASE 12 MODULE 2
Following are selected accounts and their balances for a company after the adjustments as of May 31, the end
of its fiscal year. (all accounts have normal balances)
Common stock
P20,000
Retained earnings
10,000
Dividends
6,000
Fees earned
20,000
Salaries expense
7,000
Insurance expense
350
Utilities expense
75
Supplies expense
500
Supplies
400
Salaries payable
300
Depreciation expense
425
Required: Prepare all necessary closing entries for this company.
Date
Post ref.
Debit
Credit