Accounting 10Ateneo Lex1 Chapter 4. Accounting 10Ateneo Lex2 Short Problems.

Accounting 10 Ateneo Lex 1

Chapter 4


Short Problems


Short Problem 1

1. If equipment purchased for P10,000 on January 2, 1999 (estimated life 10 years) was charged to Repairs and Maintenance account, how much was the net income for the year 1999 understated?

Solution: 10,000/10 = 1,000

10,000 - 1000 = 9,000 -->Answer


Short Problem 2 and 3

2. The correct amount of current assets on December 32, 2001should be: 2,830.0003. The correct amount of current liabilities on Dec. 32, 2002 should be: 595000

Use the ff. data for question 2 and 3:The accounts below were taken from the unadjusted trial balance of Tender Heart

Company as of December 31, 2001:Cash 400,000Marketable Securities 2,000,000Supplies 500,000Accounts Payable 300,000Notes Payable 200,000

Additional Information gathered for adjustment follows:The cash account includes collection in January 2002 of P200,000 account from customer who was given a cash discount of P10,000. It also includes a January 2002 cash revenue of P50,000 for services.Supplies used during the period amounted to P30,000.From the amount collected,the company paid a bank loan of P100,000 with interest of P20,000 accruing on January 2002.


Short Problem 4The balance sheet accounts of Baby Tugs Co. on December31, 2002 follow:

Cash 300,000Accounts Receivable 800,000Supplies 1,650,000Prepaid Expenses 250,000Property, Plant and Equipment 8,000,000Accounts Payable 1,250,000Salaries Payable 250,000Mortgage Payable 4,000,000Tugs, Capital 5,500,000

Additional information:A P500,000 note payable to the bank, due on June 30, 2003 was deducted from cash balances.The company recorded checks of P200,000 in payment of accounts payable on December31,2002. These checks were posted dated for January 20, 0003.An advance payment of P100,000 from a customer for goods to be delivered in 2003 was deducted from accounts receivable.

What is the amount of working capital (current assets less current liabilities) on December 31, 2002? ANS: 1,500,000


Short Problem 5

5. After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summary has a debit of P292,500 and a credit of P280,000. As of the same date, Susan Roa, Capital has a credit balance of P90,400 and Susan Roa, Drawing has a debit balance of P15,000.

a. Journalize the entries required to complete the closing of the accounts.

Capital 12,500

Income Summary 12500

a. What is the amount of Roa’s capital at the end of the period?

Answer: 62,900


Short Problem 6


Short Problem 7

Answer: P68450


Short Problem 8


Short Problem 9


Short Problem 10

Answer: P274,000


Long Problems


Long Problem 1

The Gerome Auto Repair Company began business operations on January 2, 2000. During 2000, the accounting records are kept on a double entry system but on the cash basis of accounting.On December 31, 2000, the trial balance prepared from these records appeared as follows:

Gerome Auto Repair CompanyTrial Balance

December 31, 2000

Debit CreditCash P55,000Repair Equipment 12,000Auto Supplies Expense 980,000Salaries Expense 90,000Repair Expense 38,000Office Supplies Expense 20,000


Long Problem 1

Utilities Expense 37000

Insurance Expense 6,000

Interest Expense 3,000

Notes Payable 45,000

Repair Income 1,100,000

Mr. Gerome Capital 100,000

Mr. Gerome, Drawing 4,000____ ________

1245000 1245,000

The owner, Robert Gerome, decided to use the accrual instead of the cash basis of keeping its accounting records.

Details of unrecorded accruals and other information as of December 31,2000 are as follows:


a. Auto supplies on hand on December 31, 2000, at cost, P125,000.b. On Dec. 31, accounts receivable amounted to P25,000.c. On Dec. 31, salaries payable totaled P18,000.d. Accrued utilities expense on Dec. 31, P4,800.e. Auto supplies expense included supplies in the amount of P2,500 bought

for the owner. He has not reimbursed the company.f. Included in the repair income was P5,200 deposit given by a customer for

repairs to be done in 2001.g. Office supplies unused as of December 31, 2000, P1,200.h. It is estimated that repair equipment bought on July 1, 2000 would have an

estimated useful life of 10 years, without scrap value.i. One-year insurance premium on a fire insurance policy recovering repair

shop and fixed assets was taken on October 1, 2000.j. The notes payable balance consisting of two notes: a non-interest bearing

note of P20,000, dated August 1, 2000, due on January 1, 2001; and a one year note of P25,000 dated September 1, 2000 bearing an interest of 12% (interest deducted in advance).

Long Problem 1


Additional account titles to be used:

Accounts Receivable Prepaid Interest Utilities Payable

Advances to Officers Accumulated Dep’n- Dep’n Expense

and Employees Repair Equip. Income Summary

Unused Auto Supplies Unearned Repair Income

Unused Office Supplies Salaries Payable

Prepaid Insurance.

Required:

As of December 31, 2000, prepare:

1. Adjusting entries (10 pts.)

2. Closing Entries (15 pts). Hint: Use T-accounts to arrive at your values

3. Post closing trial balance (7 pts).

Long Problem 1


Long Problem 1 (Answer)Adjusting entries (A)a Unused auto supplies 125000

Auto Supplies Expense 125000b Accounts Receivable 25000

Repair Income 25000c Salaries Expense 18000

Salaries Payable 18000d Utilities Expense 4800

Utilities Payable 4800e Advances to Officers and Employees 2500

Auto Supplies Expense 2500f Repair Income 5200

Unearned Revenue 5200g Unused Office Supplies 1200 Office Supplies Expense 1200h Repair Equipment Depreciation 600 Accumulated Depreciation -Equip. 600I Prepaid Insurance 4500 Insurance Expense 4500j Prepaid Interest 2000

Interest Expense 2000


Long Problem 1 (Answer)Closing entries (B)

Dec. 31 Income 1119800 Income Summary 1119800To close income account

Dec. 31 Income Summary 1062200 Auto Supplies Expense 852500

Salaries Expense 108000 Utilities Expense 418000 Office Supplies Expense 18800 Depreciation Expense 600 Insurance Expense 1500 Interest Expense 1000 Repair Expense 38000to close expenses account

Dec. 31 Income Summary 57600 Mr. Gerome, Capital 57600To close income summary account

Dec. 31 Mr. Gerome, Capital 4000 Mr. Gerome, Drawings 4000To close Mr. Gerome, Drawings

Year ended December 31, 2000General JournalGerome Auto Repair company


Long Problem 1 (Answer)Post-Closing Trial Balance (c)

Cash 55000Accounts Receivable 25000Repair Equipment 12000Unused Auto Supplies 125000Unused Office Supplies 1200Prepaid insurance 4500Salaries Payable 18000Notes Payable 45000Utilities Payable 4800Advances 2500Unearned Revenue 5200Accumulated Dep. - Equip. 600Prepaid Interest 2000Mr. Gerome, Capital ___________ 153600

227200 227200

Dec. 31, 2000

Gerome Auto Repair CompanyPost-Closing Trial Balance


Long Problem 2


Long Problem 2


Long Problem 2 (ANS) (incomplete)

Balance Sheet

ASSETSCash 40145Accouns Receivable 40500Beer Investment 8000Brandy Investment 35000Whisky Investment 7500Land 490000Equipment 176400Accumulated Dep. -70560

726985

LIABILITIESAccounts Payable 32000MortgagePayable 243000Interest Payable 4860Taxes Payable 18500Salaries Payable 39000

337360


Long Problem 2 (ANS)Statement of Changes in Owner’s Equity (B)

Beg. Equity 290,000

Add: Net Income x --> 149625

Less: Withdrawals (50000)

Ending Equity 389625


Long Problem 3

Cash P44,850Accounts Receivable 81, 400Studio Supplies 7,600Prepaid Insurance 500Prepaid Studio Rent 4,000Recording Equipment 90,000


Long Problem 3

Accum. Dep’n: Recording Equip. P52,500Noes Payable 16,000Interest Payable 840Taxes Payable 3,200Unearned Studio Revenue 9,600T. Ina, Capital 118,000Studio Revenue Earned 107,000Salaries Expense 18,000Supplies Expense 1,200Insurance Expense 1,000Dep’n Expense: Recording Equip. 16,500Studio Rent Expense 21,000Interest Expense 840Utilities Expense 2,350Tax Expense 17,900__ _________Total P307,140 P307,140


Long Problem 3

Required:

1. Prepare Adjusting journal entries, adjusted trial balance.

2. Prepare for the year ended December 31, 2002, an income statement, statement of changes in owner’s equity and a balance sheet.


Long Problem 3 (Ans)Adjusting Journal Entries

Accounts Receivable 4400

Studio Revenue Earned 4400

Studio Supplies Expense 700

Studio Supplies 700

Insurance Expense 250

Prepaid Insurance 250

Rent Expense 2000

Prepaid Rent 2000

Dep. Exp. - RE 1500

Acc. Dep . - RE 1500

Interest Expense 120

Interest Payable 120

Unearned Revenue 3600

Studio Revenue Earned 3600

Salaries Expense 590

Salaries Payable 590

Tax Expense 1700

Tax Payable 1700


Long Problem 3 (Ans)Adjusted Trial BalanceCash 44850

Accounts Receivable 85800

Studio Supplies 6900

Prepaid Insurance 250

Prepaid Studio Rent 2000

Recording Equipment 90000

Acc. Dep. RE 54000

Notes Payable 16000

Salaries Payable 960

Interest Payable 540

Tax Payable 4900

Unearned Revenue 6000

Capital 180,000

Revenues 115,000

Salaries Expense 18540

Supplies Expense 1900

Insurance Expense 1250

Dep. Exp. RE 18000

Rent Exp. 23000

Interest Exp. 960

Utilities expense 2350

Tax Expense 19600 _______

315400 315400


Long Problem 3 (Ans)Income Statement

Income StatementS. Rev. Earned 115000Less: Salaries Expense 18540

Supplies Exp. 1900Ins. Exp 1250Dep. Exp 18000Rent Exp. 23000Int. exp. 960Util. Exp. 2350Tax Ex. 19600 (85600)

29400

Statement of Owner’s Equity

Beg. Capital 118000Net Inc. 29400

Ending Capital 147400


Long Problem 4


Long Problem 4


Long Problem 4


Long Problem 4 (ANS)Adjusting Entries

Unearned Legal Fees 25 Legal Fees Earned 25Prepaid Rent 300 Rent Expense 300Salaries Expense 180 Salaries Payable 180Telephone Expense 45 Telephone Payable 45TaxExpense 130 Taxes Payable 130Office Supplies Expense 225 Office Supplies 225Insurance Expense 595 Prepaid Insurance 595Depreciation Expense (F&E) 800 Accum. Dep'n (F &E) 800


Long Problem 5


Long Problem 5


Long Problem 5

Required:

1. Prepare a comparative income statement using cash-basis and the accrual basis of accounting for the year ended December 31.

2. Using the accrual basis of accounting, prepare a classified balance sheet as of December 31.

Solution guide:

1. Do the adjusting entries for numbers 1 to 5. This will be used for the accrual basis income statement. For the cash basis, copy what is given except for the equipment and withdrawals.

2. Prepare the accrual basis balance sheet by considering the adjusting entries.


Long Problem 5 (ANS)

Income Statement (cash-basis)Revenues 66000

Supplies Expense 25000Rent Expense 8400Ins. Expense 900Adv. Expense 2000Utilities Expense 1600Wages Expense 8000 (45900)

Net Income 20100



income statement

(accrual)

revenues 69750

less: supplies exp. 20800

Rent Expense 7200

Ins. Expense 700

Adv. Expense 2000

Util. Expense 1600

Wage Expense 8190

Dep. Expense 1667 (42157)

Net Income 27593


Long Problem 5 (ANS)Balance Sheet

AssetsCurrent Cash 21900 Accounts Receivable 3750 Supplies 8200 Prepaid Rent 1200 Prepaid Insurance 200Total Current Assets 35250Plant Assets Shop Equipment 21200 Accum. Dep -1667Total Plant Assets 19533Total Assets

54783

Liabilities Accounts Payable 4000 Wages Payable 190total Liabilities 4190

Equity Chris Tee, Capital 50593


Long Problem 6


A detail of the unrecorded accruals and other information given to you as follows:

1. Accounts Receivable of P15,200

2. A client deposited P2,400 was credited to Service Revenue

3. Accounts Payable outstanding:

Purchases of Supplies P6,800

Operating expenses P7,550

4. Supplies inventory, P54,700

5. Included in the operating expenses were:

a. Furniture purchased for P12,300 on December 1, 20X0. It was estimated that life of the asset is 10 years,with P300 scrap value.

b. One-year insurance premium amounting to P400 for the quarter commencing October 1, 20X1.

Long Problem 6


Cash Basis Income Statement

Revenues 103600

Less:

Operating Expenses (42140)

Net Income: 61460


Long Problem 6



Cash 31600Accounts Receivable 15200Supplies 54700Prepaid Insurance 400Furnitures 12300Acc. Dep. 1000Accounts Payable 14750Interest Payable 480Loan Payable 1600Unearned Revenues 2400Capital 80000Revenues 116400Operating Expenses 49290Depreciation Expense 1000Suplies Expense 65660Interest Expense 480 ______

230630 230630

Adjusted Trial Balance



Revenues 116400Less: Operating Expense 49290

Depreciation Expense 1000Supplies Expense 65660Interest Expense 480 -116430

Net Loss -30

Income Statement


Long Problem 6 (ANS)Balance Sheet

Assets Current Assets

CashA/RSuppliesPP Ins.

Total Current Assets 111900 Plant Assets

FurnitureAcc. Dep

Total Plant Assets 1300Total Assets 113200

Liabilities Current Liabilities

A/PI/PU/RL/P

Total Liabilities 33230

Equity 79970Total Liabilities and Equity 113200

Accounting 10Ateneo Lex1 Chapter 4. Accounting 10Ateneo Lex2 Short Problems.

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