ACCOUNTING PROCESS

EXERCISES
Exercise 1
Diluted Earnings Per Share
Comparison of the balance sheet of OUTLOOK
at the end of 2015 with its balance sheet at
the end of 2014 showed a decrease in total
assets of P69,000 and owners’ equity by
P15,000. The change in liabilities during the
year was __________.

Ans. Decrease of P54,000

Exercise 2
Diluted Earnings Per Share
The following transactions and events relate to Booty Company for the current
accounting period:
a. Sold merchandise costing P450,000 for P100,000 and P700,000 on open account.
A perpetual inventory system is used.
b. Purchased land for P1,000,000 cash and a P3,000,000 mortgage.
c. Received payment on account, P120,000.
d. Estimated that utilities expense for the coming six months will total P80,000.
e. Declared a cash dividend totaling P100,000. The dividend will be paid in six
weeks.

The foregoing transactions and events increased __________ by P_________.

Net Asset/Equity by P250,000

Exercise 3
Diluted Earnings Per Share
The accountant of Acctg 6A Company made the following adjusting
entry on December 31:

Prepaid Rent 1,800

Rent Expense 1,800

If the annual rent is paid in advance every October 1, the original

transaction entry made was __________.

Ans. Rent Expense 2,400

Cash 2,400
Exercise 4
Diluted
Corn Earnings
Corporation PertoShare
loaned P60,000 another corporation on
December 1, 2015 and received a 3-month, 8% interest-
bearing note with a face value of P60,000.

What adjusting entry should Corn make on December 31,

2015?

Ans. Interest Receivable 400

Interest Income 400
Exercise 5
Diluted
Kundiman Earnings
Company received Per
P9,600Share
on April 1, 2015 for
one year’s rent in advance and recorded the transaction with
a credit to a nominal account.

The December 31, 2015 adjusting entry is __________.

Ans. Rent Income 2,400

Unearned Rent Income 2,400
Exercise 6
Diluted
A company Earnings
receives interest onPer Share
a P30,000, 8%, 5-year note
receivable each April 1. At December 31, 2015, the proper
adjusting entry was made to accrue interest receivable.

Assuming that the company does not use reversing entries,

what entry should be made on April 1, 2016 when the
annual interest payment is received?
Ans. Cash 2,400
Interest Receivable 1,800
Interest Income 600