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CAT EXAMINATION LEVEL 1 ACCOUNTING

On December 1, 2016, ABSOLUTE COMPANY was organized by Eva Wilkins with


an initial capital of P1,000,000 to provide consulting services, computer systems
installation and custom program development. The capital is composed of P300,000
cash and service vehicle worth P700,000. The company adopts a calendar year and
expects to prepare the companys first set of financial statements on December 31,
2016. The following Chart of Accounts prepared by the account is as follows:
ACCOUNT TITLE
ASSETS
Cash
Accounts receivable
Computer supplies
Prepaid insurance
Prepaid rent
Input VAT
Office equipment
Accumulated depreciation
Computer equipment
Accumulated depreciation
Furniture & fixtures
Accumulated depreciation
Service vehicle
Accumulated depreciation

NO.

OE
CE
FF

1-001
1-002
1-003
1-004
1-005
1-006
2-001
2-002
2-003
2-004
2-005
2-006

- SV

LIABILITIES
Accounts payable
Notes payable
Wages payable
Interest payable
Unearned
computer
service
revenue
Output VAT
VAT Payable
SSS premiums payable
Philhealth premiums payable
HDMF payable
Withholding taxes payable

3-001
3-002
3-003
3-004
3-005
3-006
3-007
3-008
3-009
3-010
3-011

ACCOUNT TITLE

NO.

CAPITAL
Wilkins, Capital
Wilkins, Drawings
Income Summary

4-000
4-001
4-002

REVENUES & EXPENSES


Computer service revenues

5-000

Advertising expenses
Computer supplies expense
Depreciation expense OE
Depreciation expense CE
Depreciation expense FF
Depreciation expense SV
Gasoline expense
Insurance expense
Rent expense
Repairs expense
Representation expense
Permits and licenses
Utilities expense
Miscellaneous expense

6-001
6-002
6-003
6-004
6-005
6-006
6-007
6-008
6-009
6-010
6-011
6-012
6-013
6-014

Wages expense
SSS premiums expense
Philhealth premiums expense
HDMF premiums expense

6-015
6-016
6-017
6-018

ABSOLUTE COMPANY had the following transactions for the month of December:
2

Paid P5,600 for various permits and licenses to operate.


Paid P45,000 cash for 3-month rent of office space (covering December
2016, January and February 2017). Rent expense was debited upon
payment.
Purchased various computer equipment on credit from IBM, Makati
P168,000 including VAT.
Purchased office furniture for cash, P13,440 including VAT.
Purchased two air-conditioning units for cash, P29,120, including VAT.

Purchased various computer supplies for cash, P4,500. Computer supplies


was debited upon purchase.
Paid P12,000 for one-year insurance premium on property. The accountant
debited upon Insurance expense payment.

Installed a new web server for Spider Web Company for cash, P16,800
including VAT.
Hired Ralph Lauren as full time assistant with a monthly salary of P15,000,
Nelie Romano as secretary with a monthly salary of P8,500. Clint Eastwood
as accountant with monthly salary of P12,000 and Happy Feet as utility
man with a monthly salary of P6,000.

Billed Natope Company for consulting services performed, P5,600. The


amount includes VAT. Netopie promised to pay after five days.

Paid P6,500 for an advertisement in the local newspaper announcing the


opening of the office.

Billed Starcustom Company for customized program developed, P28,000.


The amount includes VAT.

Eva spent P1,200 for entertaining a valued client.

Paid P5,000 as the company share in billboard advertising.

10

Eva was notified by Alans Enginering Company that EVADEFGH Company


bid of P50,000 on a proposed project for 2017 has been accepted. They
paid P20,000 cash advance. Computer services revenue was credited for
the amount received.

13

Purchased additional computer supplies for cash, P1,000. Computer


supplies account was debited.
Completed another project for ACE Company and received cash, P16,800
including VAT.
Received P5,600 from Natope company in full payment of its account.

15

Paid the salaries of the staff, P20,750. Salary deductions are made only in
the month end payroll.
Received P95,000 (net of P5,000 service charges) from Metro Financing
Company as proceeds of short-term loan. EVADEFGH issued a 60-day, 10%
note.

16

Paid P1,200 for the repairs of one if its computer damaged when moved to
another location.

17

Performed another consulting services to LTC Company and received P5,600


cash, including VAT.

18

Paid P68,0000 to IBM Makati in partial payment of account.

19

Starcustom Company paid its account in full, P28,000.

21

Billed Clark Company the amount of P33,600 for a new program developed.
The amount includes VAT.

22

Eva withdrew P20,000 from the business for her personal use.

23

Received cash from Surf Tide Company for consulting services, P5,000,
including VAT.

24
27

Seasons holiday

28

Eva was reimbursed P5,000 for gas expenses for the month. Eva has just
finalized an installation service for another client. Total contract price is
P22,400, including VAT. The work is scheduled on the first week of January
2017. The client already paid P10,000 advance for the project. Unearned
computer service revenue was credited by the accountant.

29

Paid the second half salary of the staffs. Remittance of government


mandatory deductions will be done on the next month. Ignore the closing of
Input VAT to Output VAT.

Refer to the payroll, December 16 31, 2016.


PAYROLL: December 16 -31, 2016
EMPLOYEES CONTRIBUTION

NAME
Ralph
Lauren
Clint
Eastwood
Clark Kent

S
HF

Happy Feet

M
1

S
M

GROSS
PAY

SSS

7,500.00

500.00

6,000.00

400.00

4,250.00

283.33

3,000.00

200.00

20,750.0
0

1,383.
33

DEDUCTIONS
HDM
PHIL
F
WHT
125.0 100.0
2,006.
0
0
25
125.0 100.0
1,483.
0
0
33
106.2 100.0
638.84
5
0
100.0
75.00
187.47
0
431.2 400.0
4,315.
5
0
89

NET PAY
TOTAL
2,731.
25
2,108.
33
1,128.
42
562.47
6,530.
47

4,768.7
5
3,891.6
7
3,121.5
8
2,437.5
3
14,219.
53

EMPLOYERS CONTRIBUTION
NAME
Ralph Lauren
Clint Eastwood
Clark Kent
Happy Feet

S
HF
S
M
M1

GROSS PAY
7,500.00
6,000.00
4,250.00
3,000.00
20,750.00

SSS
1,060.00
848.00
600.70
424.70
2,933.40

DEDUCTIONS
PHIL
HDMF
125.00
100.00
125.00
100.00
106.25
100.00
75.00
100.00
431.25
400.00

TOTAL
1,285.00
1,073.00
806.95
599.70
3,764.65

The following additional facts are collected in making adjusting entries prior to
preparing financial statements for the first month of operation:
a. Inventory count of computer supplies on December 31 reveals that P2,300
are on hand.
b. The bookkeeper had not recorded the MERALCO bill received on December
29. The amount is P5,600.
c. The rent expense is for three months covering December 2016 February
2017.
d. The estimated life of computers, office equipment and furniture and fixtures
is 5 years with no salvage value while the service vehicles estimated life is
ten years with no salvage value.
e. The insurance expense represents on year premium starting December 1,
2016.
f. P20,000 of the computer services revenue represents advance payment for
2017 project.
g. Interest on the note if to be accrued. (Use days in computing)
REQUIRED:
1. Journalize the above transactions (ignore explanations and posting
references). (31pts)
2. Prepare an unadjusted trial balance, December 31, 2016. Use the ledgers to
facilitate the preparation. Ignore explanations and post-referencing. Write the
trial balance on the work sheet. (8pts)
3. Prepare adjusting entries then post to the ledgers. (10pts)
4. Prepare a ten-column worksheet. (24pts)
5. Prepare financial statements.
a. Income statement (3pts)
b. Statement of Changes in Capital (3pts)
c. Balance Sheet (6pts)
6. Prepare closing entries (use direct method). (4pts)
7. Prepare post-closing trial balance. Use the ledgers to facilitate the
presentation if necessary. (6pts)
8. Prepare the reversing entries required, January 1, 2017. (5pts)