FINACT 3

Asuncion, Janice
Buduan, Dianne Jane
Lubiton, Joshua

QUESTION------

Problem 15-1

On January 1, the capital of Console Company was P1,700,000 and on December 31, the capital was
P2,400,00. During the year, the owner withdrew merchandise costing P 100,000 and with sale price of P 180,000
and paid a P 1,000,000 note payable of the business with interest of 12% for six months with a check drawn on
personal checking account.

What is the Net Income or Loss for the current Year?

a. 260,000 income
b. 260,000 loss
c. 180,000 income
d. 180,000 loss

Problem 15-2

During the first year, Exel Company issued 15,000 shares with P100 par value at P150 per share. At year-end, the
entity issued 2,000 shares in payment of current obligations of P250, 000. Dividends of P500,000 were paid during
the year. Total liabilities at the end of the year amounted to P200,000 and total assets at the end of the year
equalled P3,000,000.

What is the net income for the first year of operations?

a. 1,500,000
b. 800,000
c. 500,000
d. 300,000

Problem 15-3

Sunshine Company had total assets of P4,000,000 and shareholders’ equity of P2,080,000 at the beginning of
the year. During the year, assets increased by P520,000 and liabilities decreased by P820,000.

What is the shareholders’ equity at the end of the year?

a. 3,420,000
b. 3,700,000
c. 3,380,000
d. 1,340,000
Problem 15-4

On January 1, 2017, the statement of financial position of Racel Company showed total assets of P5,000,000,
total liabilities of P2,000,000 and contributed capital of P2,000,000.

During the current year, the entity issued share capital of P500,000 par value at a premium of P300,000.
Dividend of P250,000 was paid on December 31,2107.

The statement of financial position on December 31, 2017 showed total assets of P7,500,000 and total liabilities
of P3,200,000.

What is the net income for the current year?

a. 1,750,000
b. 1,000,000
c. 750,000
d. 500,000

Problem 15-5

Aubrey Company provided the following data at year-end:

2016 2017

Share capital (P100 par value) 5,000,000 5,750,000

Share Premium 1,000,000 1,500,000
Retained Earnings 3,500,000 4,500,000

During the current year, the entity declared and paid cash dividend of P1,000,000 and also declared and
issued a stock dividend. There were no other changes in shares issued and outstanding during the year.

What is the net income for the current year?

a. 3,250,000
b. 2,000,000
c. 1,000,000
d. 2,750,000

Problem 15-6

On December 31, 2017 Zeus Company showed shareholders’ equity of P4,000,000. During the current year, the
shareholders’ equity was affected by:

 An adjustment to retained earnings for overstatement of inventory on December 31,2016 in the amount
of P200,000.
 Declared dividend of P400,000 of which P300,000 was paid in 2016.
 The share capital was split five for one.
 Net income for the year amounted to P700,000.
 The share capital of P3,000,000 remained unchanged during the year.
What is the retained earnings balance on January 1, 2017?
a. 1,000,000
b. 900,000
c. 800,000
d. 500,000

Problem 15-7

On December 31, 2017, Melissa Company showed shareholders’ equity of P5,000,000. The share capital of
P3,000,000 remained unchanged during the year. The transactions which affected the equity were:

 An adjustment of retained earnings for 2016 over depreciation 100,000

 Gain on sale of treasury shares 300,000
 Dividend declared, of which P4000,000 was paid 600,000
 Net income for the current year 800,000
What is the retained earnings balance on January 1, 2017?
a. 1,400,000
b. 1,700,000
c. 1,200,000
d. 1,600,000

Problem 15-8

Marble Company provided the following selected information for the current year:

Cash balance, January 1 130,000

Accounts receivable, January 1 190,000
Collections from customers 2,100,000
Shareholders’ equity, January 1 380,000
Total assets, January 1 750,000
Total assets, January 31 880,000
Cash balance, December 31 160,000
Accounts receivable, December 31 360,000
Total liabilities, December 31 390,000

What is the net income for the current year?

a. 490,000
b. 150,000
c. 110,000
d. 70,000
Problem 15-9

Trend Company provided the following information for the current year:

Net loss 100,000

Total assets at December 31 3,000,000
Share capital at December 31 1,000,000
Share premium at December 31 500,000
Dividends declared 700,000
Debt to equity ratio on December 31 50%

What is the retained earnings balance on January 1?

a. 1,100,000
b. 1,300,000
c. 500,000
d. 600,000

Problem 15-10

Myra Company was incorporated on January 1, 2017, with proceeds from the issuance of P7,500,000 in share
capital and borrowed funds of P1,000,000.

During the first year of operations, revenue from sales and consulting amounted to P4,000,000, and operating
costs and expense totalled P3,000,000.
On December 15, 2017, the entity declared a P300,000 cash dividend, payable to shareholders on January 15,
2018.

No additional activities affected owners’ equity in 2017. The liabilities increased to P1,200,000 by December 31,
2017.

On December 31,2017, what amount should be reported as total assets?

a. 9,400,000
b. 8,200,000
c. 7,000,000
d. 8,700,000

Problem 15-11

Rice Company was incorporated on January 1, 2017, with P5,000,000 form the issuance of share capital and
borrowed funds of P1,500,000. During the first year of operations, net income was P2,500,000.

On December 15,2017, the entity paid a P500,000 cash dividend. No additional activities affected
shareholders’ equity in 2017. On December 31, 2017, the liabilities had increased to P1,800,000.

On December 31,2017, what amount should be reported as total assets?

a. 6,500,000
b. 9,300,000
c. 8,800,000
d. 6,800,000
Problem 15-12

Vela Company reported the following increases in account balances during the current year:

Assets 8,900,000
Liabilities 2,700,000
Share Capital 6,000,000
Share Premium 600,000

There were no changes in retained earnings other than for a dividend payment of P1,300,000.

What was the net income for the current year?

a. 1,700,000
b. 1,300,000
c. 900,000
d. 400,000

Problem 15-13

Lanao Company showed the following increase(decrease) in ledger account balances during the current
year:

Cash 800,000
Accounts receivable (400,000)
Inventory 300,000
Equipment 950,000
Note payable- bank 500,000
Accounts payable (600,000)
Share capital 700,000
Share premium 300,000

There were no transactions affecting retained earnings other than a P1,500,000 cash dividend and a P250,000
prior period error from understatement of ending inventory.

What was the net income for the current year?

a. 2,000,000
b. 2,500,000
c. 3,250,000
d. 3,000,000

Problem 15-14

Easy company reported that the beginning and ending total liabilities were P840,000 and P1,000,000,
respectively. At year-end, owners’ equity was P2,600,000 and total assets were P200,000 larger than at the
beginning of the year.

During the year, the new share capital issued exceeded dividend by P240,000.
What was the net income or loss for the year?
a. 280,000 income
b. 280,000 loss
c. 200,000 loss
d. 40,000 income

Problem 15-15

Camadillo Company reported the following changes in the account balances for the current year, except for
retained earnings:

Increase (decrease)
Cash 800,000
Accounts receivable, net 250,000
Inventory 1,250,000
Investments (500,000)
Accounts payable (400,000)
Bonds payable 900,000
Share capital 1,000,000
Share premium 100,000

There are no entries in the retained earnings account except for net income and a dividend declaration of
P300,000 which was paid in the current year.

What was the net income for the current year?

a. 1,300,000
b. 1,600,000
c. 500,000
d. 200,000

Problem 15-16

Jolo Company reported the following increase(decrease) in the account balances for the current year:

Cash 1,500,000
Accounts receivable 3,500,000
Inventory 3,900,000
Investments (1,000,000)
Equipment 3,000,000
Accounts payable (800,000)
Bonds payable 2,000,000

During the year, the entity sold for cash 100,000 shares with P20 par for P30 per share. Dividend of P4,500,000
was paid in cash. The entity borrowed P4,000,000 from the bank and paid off note of P1,000,000 and interest of
P600,000. The entity had no other loan payable. Interest of P400,000 was payable at the end of the year.
Interest payable at the beginning of the year was P100,000. Equipment of P2,000,000 was donated by a
shareholder during the year.
What was the net income for the current year?
a. 7,900,000
b. 8,900,000
c. 5,900,000
d. 6,900,000

Problem 15-17

Elaine Company disclosed the following changes in account balances for current year:

Cash 450,000 increase

Accounts receivable 300,000 decrease
Merchandise inventory 200,000 increase
Accounts payable 100,000 increase
Prepaid expenses 20,000 increase
Accrued expenses 40,000 increase
Unearned rental income 30,000 decreases

In the current year, the owner transferred financial assets to the business and these were sold for P500,000 to
finance the purchase of merchandise. The owner made withdrawals during the year of P100,000.

What was the net income or net loss for the current year?
a. 360,000 income
b. 360,000 loss
c. 140,00 income
d. 140,000 loss

Problem 15-18

Haze Company provided the following information for the current year:

January 1 December 31

Cash 620,000
Accounts receivable 670,000 ?
Merchandise inventory 860,000 780,000
Accounts payable 530,000 480,000

The sales and cost of goods sold were P7,980,000 and P5,830,000 respectively. All sales and purchases were on
credit.

Various expenses of P1,070,000 were paid in cash. There were no other pertinent transactions.

1. What is the amount of collections from customers?

a. 7,980,000
b. 8,600,000
c. 7,750,000
d. 8,210,000
2. What is the payment of accounts payable?
a. 5,750,000
b. 5,880,000
c. 5,800,000
d. 5,700,000

3. What is the cash balance on December 31?

a. 1,090,000
b. 1,500,000
c. 2,570,000
d. 3,050,000

Problem 15-19

At the beginning of current year, Crispin Santos started a retail merchandise business. During the current
year, the business paid a trade creditors P 2,000,000 in cash and suffered a net loss of P 350,000.

The ledger preclosing balances at year-end included the following:

Accounts receivable 600,000

Accounts payable 750,000
Capital (total investment in cash) 2,000,000
Expenses (paid in cash) 100,000
Merchandise (unadjusted debit balance) 700,000

There were no withdrawals. All sales and purchases were on credit.

The merchandise account is debited for purchases and credited for sales.

1. What is the amount of purchases for the year?

a. 2,000,000
b. 2,750,000
c. 1,250,000
d. 2,050,000

2. What is the amount of sales for the year?

a. 2,750,000
b. 2,050,000
c. 2,650,000
d. 700,000

3. What is the cash balance at the year-end?

a. 1,350,000
b. 2,000,000
c. 1,450,000
d. 3,450,000
4. What is the merchandise inventory at year-end?
a. 700,000
b. 450,000
c. 750,000
d. 0

Problem 15-20

Lancer Company provided the following data obtained from the single entry records for 2017:
December 31 January 1

Cash 1,600,000 1,200,000

Notes receivable 1,200,000 400,000
Accounts receivable 2,000,000 1,600,000
Merchandise inventory 960,000 1,600,000
Equipment 1,120,000 1,200,000
Notes payable 480,000 720,000
Accounts payable 1,040,000 1,200,000
Accrued interest payable 40,000 80,000
Unearned rent income 40,000 120,000

Cash receipts

Accounts receivable (after sales

Discounts of P100,000) 3,000,000
Notes receivable 960,000
Cash sales 800,000
Rent income 80,000
Sale of equipment costing P 200,000
And carrying amount of P 100,000 120,000
Investment 600,000

Cash payments

Accounts payable 1,520,000

Notes payable 1,280,000
Cash purchases 600,000
Interest expense 160,000
Expenses 800,000
Equipment 400,000
Withdrawals 400,000

Accounts Receivable of P120,000 were written off as uncollectible. Returns of P 320,000 were made on
merchandise sales. Allowances of P 80,000 were received on merchandise purchases.

Required:

Compute the net income or loss using the single entry method and prepare an income statement.
Problem 15-21

Corolla Company prepared the following comparative statement of financial position on December 31,
2017:

Assets December 31 January 1

Cash 750,000 330,000

Notes receivable 210,000 200,000
Accounts receivable 950,000 740,000
Inventory 1,500,000 1,600,000
Prepaid expenses 100,000 120,000
Investment (at cost) 100,000 400,000
Equipment (net) 1,200,000 1,000,000
4,810,000 4,390,000

Liabilities and Equity

Notes payable 580,000 750,000

Accounts payable 750,000 600,000
Interest payable 30,000 -
Accrued expenses 50,000 40,000
Bonds payable - 500,000
Share capital, P100 par 1,300,000 1,000,000
Share premium 1,500,000 1,000,000
Retained earnings 600,000 500,000
4,810,000 4,390,000

Cash receipts cash disbursements

Issue of share capital 800,000 Trade creditors- notes

and accounts 2,100,000
Trade debtors- notes
and accounts 2,950,000 Expenses 790,000
Notes receivable discounted: Dividends 400,000
face value, P200,000, Equipment 280,000
proceeds 190,000 Bonds 500,000
12% one-year note issued to 4,070,000
Bank on March 1, 2017 300,000
Sale of investment 250,000
4,490,000

Required:

Determine the net income or net loss using the single entry method and prepare an income statement.
Problem 15-22

Camry Company, a sole proprietorship, did not have complete records on a double entry basis.

However, an investigation of the records established that the assets and liabilities January 1, 2017 were:

Cash 200,000
Accounts receivable 420,000
Allowance for doubtful accounts 20,000
Equipment 350,000
Accumulated depreciation- equipment 100,000
Prepaid supplies 40,000
Accounts payable 250,000
Accrued salaries payable 250,000
Merchandise inventory 700,000
Notes payable 200,000

 A summary of the transactions for the current year as recorded in the check book showed the
following:

Deposits for the year 3,930,000

Checks drawn during the year 3,360,000
Bank service charge 10,000

 The following information related to accounts payable:

Purchases on account during the year 2,280,000

Returns of merchandise 70,000
Payments of accounts by check 2,200,000

 Information about accounts receivable is as follows:

Accounts written off 30,000

Accounts collected 1,720,000
Accounts receivable on December 31,2017
(of this balance P50,000 is estimated
To be uncollectible) 450,000

 Checks drawn during the year included checks for the following:

Salaries 400,000
Supplies 75,000
Taxes 45,000
Drawings of proprietor 240,000
Miscellaneous expense 35,000
Note payable 120,000
Other operating expenses 245,000

 Cash sales for the year are assumed to account for all cash received other than collected on
accounts.
 Equipment is to depreciated at the rate of 10% per annum.
  Other financial information on December 3, 2017:
Merchandise inventory 650,000
Supplies on hand 20,000
Accrued salaries payable 15,000

Required:

Prepare an income statement for 2017 and a statement of financial position n December 31, 2017.

Problem 15-23:

Ronald Company provided the following information for the current year:

Increases
Cash 420,000
Accounts receivable 140,000
Accounts payable 40,000
Prepaid insurance 20,000

Decreases

Inventory 100,000
Equipment 10,000
Notes receivable 60,000
Accrued salaries payable 30,000

Summary of cash transactions

Receipts:
Cash sales 300,000
Collections on accounts receivable 3,000,000
Collections on notes receivable 240,000
Interest on notes receivable 20,000
Purchase returns and allowances
(total purchase returns and allowance, 80,000) 50,000

Disbursements:
Cash purchases
Payments on accounts payable
Sales returns and allowances (total sales
Returns and allowances, P120,000) 40,000
Insurance 70,000
Salaries 1,000,000
Equipment 80,000
Other expenses 150,000
Dividends 100,000

Required:
 a. Prepare an income statement for the current year.
b. Compute the net income or loss using the single entry method.

Problem 15-24

Complex Company kept very limited records.

Purchases of merchandise were paid for by check, but most other items of cost were paid out of cash receipts.

Weekly the amount of cash on hand was deposited in a bank account.

No record wad kept of cash in the bank, nor was a record kept of sales

Accounts receivable were recorded only by keeping a copy of the ticket, and this copy was given to the

customer when he paid his account.

On January 1, 2017, the entity started business and issued share capital, 60, 000 shares with P100 par, for the

following considerations:

Cash 500,000
Building (useful life, 15 years) 4,500,000
Land 1,500,000

An analysis of the bank statements showed total deposits, including the original cash investment, of 3,500,000.

The balance in the bank statement on December 31, 2017, was P250,000.

There were checks amounting to 50,000 dated in December 2017 but not paid by the bank until January 2018

Cash on hand on December 31, 2017 was P125,000 including customer deposit of P75,000.

During the year, the entity borrowed P500,000 from the bank and repaid P125,000 and P25,000 interest.

Additional information:

Disbursements paid in cash during the year were:

Utilities 100,000
Salaries 100,000
Supplies 175,000
Taxes 25,000
Dividends 150,000

An inventory of merchandise taken on December 31, 2017 showed P755, 000 of merchandise.

Tickets for accounts receivable totalled P900,000 but P50,000 of that amount may prove uncollectible.

Unpaid suppliers invoices for merchandise amounted to P350,000.

Equipment with a cash price of P400,000 was purchased in early January on a one-year instalment basis.

During the year, checks for the down payment and all maturing instalments totalled P445,000.
The equipment has a useful life of 5 years.

Required:

A. Prepare an income statement for the year ended December 31, 2017.

B. Prepare a statement of financial position on December 31, 2017.

Problem 15-25

Ultimate Company provided the following information for the preparation of financial statements for 2017:

Balances - January 1, 2017

Cash 400,000
Accounts receivable 120,000
Inventory 230,000
Prepaid Insurance 35,000
Land 500,000
Building 2,000,000
Accumulated Depreciation 700,000
Equipment 800,000
Accumulated Depreciation 240,000
Accounts payable 170,000
Accrued salaries payable 20,000
Advances from customers 90,000
Share capital 2,500,000
Retained earnings 365,000

* Cash receipts for 2017

Advances from customers 70,000

Cash sales and collections on accounts receivable 2,960,000
Sale of equipment on December 31, 2017
costing P50,000 on which P30,000 of depreciation
had been accumulated 45,000
3,075,000

* Cash disbursements for 2017

Insurance premium 80,000

Purchase of equipment on October 1,200,000
Cash purchases and payments on accounts payable 1,640,000
Salaries 390,000
Dividends paid 125,000
Other expenses 135,000
2,570,000

* Dividends of 5% were declared on June 30 and on December 31, 2017.

* All depreciable assets should be depreciated at 10% per year.

* Doubtful accounts are estimated to be 5% of year-end accounts receivable. The accounts receivable totaled

P200,000 on December 31, 2017.

* Additional data on December 31, 2017

Inventory 245,000
Prepaid insurance 25,000
Advances from customers 50,000
Accrued salaries 30,000
Accounts payable 100,000

Required:

A. Prepare an income statement for 2017.

B. Prepare a statement of financial position on December 31, 2017.

Problem 15-26

Merill Company has not prepared financial statements for 3 years since December 31 2014.

During the 3-year period, cash receipts and cash disbursement were maintained and sales on account were

entered directly into an accounts receivable ledger.

However, no general ledger postings have been made since the December 31, 2014 closing.

The examination of the records disclosed balances at the beginning and end of the 3-year period as follows:

December 31, 2014 December 31, 2017

Less than 1 year old 77, 000 141, 000

1 to 2 years old 6,000 9,000

2 to 3 years old 4,000

Over 3 years old 11,000

Total accounts receivable 83,000 165,000

Inventory 58,000 94,000

Accounts payable 25,000 55,000

No account balances were written off during the 3 year period. The ratio of gross profit to sales remains

constant from year to year. Other data available are:

2015 2016 2017

Cash received applied to

Current year 744,000 809,000 1,044,000

Accounts of prior year 67,000 75,000 84,000

Accounts of two years prior 3,000 2,000 10,000

 Total collections 814,000 886,000 1,138,000

Cash sales 85,000 130,000 156,000

Payment of accounts payable 625,000 706,000 869,000

Required:

1. Compute total sales for each year, 2015, 2016, and 2017.

2. Compute total purchases for 2015, 2016, and 2017.

3. Compute total cost of goods sold for 2015, 2016, and 2017.

4. Compute gross profit for each year, 2015, 2016, and 2017.