True or False

1. True
2. False – Expenses are recognized when it is incurred regardless of whether or not it has been paid.
3. False – Allowance for Doubtful Accounts is a contra-asset account
4. False – PPE can be disposed of at a price that may be higher or lower than that of the salvage value
5. False
6. False – They may also occur mid-year
7. False – it is the asset method that that recognized the expense upon adjustment
8. True
9. False – Net pay is already net of the contributions
10. False – It may result to a decrease in equity
11. False – No, people more ancient than him have been doing accounting already back then.
12. False – They are not interchangeable
13. False - adjusting entries are not mandatory.
14. False – They are debited, not credited
15. False
16. False – Fiscal year is also allowed
17. False – Not the PRC, but the Board of Accountancy (BOA)
18. False – Creditors first, before owners
19. False – debit supplies for 35,350
20. False – debited to the owner’s drawing account

Multiple Choice
1. A 8. B 15. B
2. D 9. D 16. C
3. B 10. C 17. E
4. A 11. B 18. B
5. A 12. C 19. D
6. A 13. D 20. C
7. D 14. E
 Problem Solving
1.) Ending Capital (₱70,000*130%) ₱ 161,000
Beg. Capital 70,000
Change in Capital ₱ 91,000

Let X = investment made

X - 0.5 X = ₱91,000
X = ₱182,000

2.) Office Computer ₱ 9000.00

Scrap Value (1,350.00)
Depreciable Amount ₱ 7,650.00
Divide by: Useful Life 5
Annual Depreciation ₱ 1,530.00
Partial Year (Nov. 15 - April 30) 5.5/12
Depreciation Expense ₱ 701.25

3.) Interest Income (₱250,000 x 11% x 90/360) ₱ 6,875.00

Face Value 250,000.00
Maturity Value ₱ 256,875.00
Interest Expense (₱256,875 x 14% x 78/360) 8,070.16
Cash Proceeds ₱ 248,804.84

4.) Month # of Days Cumulative

November 7 7
December 31 38
January 31 69
February 21 90

Answer: February 21, 2013

5.) Cash received from sale of equipment ₱ 46,000

Purchase of equipment (120,000)
Cash received from sale of long term investments 70,000
Net Cash Outflow from Investing Activities ₱ (4,000)
6.) Gross Price ₱ 480,000
Allowance (5% x ₱500000) (25,000)
Remaining Price to Pay ₱ 455,000
Discount Rate 3%
Discount Lost ₱ 13,650

7.) Gross Price ₱ 480,000

Allowance (5% x ₱500000) (25,000)
Returns (10,000)
Remaining Price to Pay ₱ 445,000
Discount Lost (₱445,000*3%) 13,350
Cost of the Equipment ₱ 431,650

8.) Rates: 2%, 3%, 4.5%, 6.75% (increment of 50%)

Balances: x, 1.75x, 3.0625x, 1.75/3(x)

2%(x) + 3%(1.75x) + 4.5%(3.0625x) + 6.75%(1.75/3(x)) = ₱149,812.5

X = ₱600,000

30 - 60 days ₱ 600,000
61 - 90 days 1,050,000
91 - 180 days 1,837,500
181 days or more 350,000
Accounts Receivable ₱ 3,837,500

9.) Basic Pay (24 days x 8 hrs./day x ₱200/hr.) ₱ 38,400

Overtime Pay (₱200/hr. x 150% x 2 hrs./week x 4 weeks) 2,400
Total Gross Pay ₱ 40,800

10.) Gross Pay @ Month's End (₱40,800/2) ₱ 20,400

Less: Deductions
SSS ₱ 500
Philhealth 375
Pag-Ibig 100
Withholding Tax 8,187 9,162
Take-Home Pay ₱ 11,238

11.) Principal ₱ 100,000

Add: Interest (₱100,000 x 12% x 60/360) 2,000
Maturity value ₱ 102,000
12.) Maturity Value ₱ 102,000
Less: Discount (₱102,000 x 14% x 15/360) 595
Net Proceeds ₱ 101,405

13.) Interest Income ₱ 2,000

Interest Expense (595)
Net Interest Income ₱ 2,595

14.) Notes Payable ₱ 30,000

Discount on Note Payable (₱30,000*.12*30/360) (300)
Net Proceeds ₱ 29,700

15.) Discount on Notes Payable (₱30,000*.12*30/360) ₱ 300

16.) ADA, beg. (₱300,000 * 10%) ₱ 30,000

Accounts written-off (50,000)
ADA balance - unadjusted ₱ (20,000)
Bad Debts Expense (squeezed) 43,000
Req. ADA, end (₱230,000 * 10%) ₱ 23,000

17.) Allowance for Doubtful Accounts (₱230,000*10%) ₱ 10,000

18.) Accounts Receivable -Net Realizable Value (₱230,000*90%) ₱ 207,000

19.) Overstatement of Services Rendered ₱ (5,000)

Additional Bad Debts Expense [₱5,000 - (3,000 - 4,000) - 2,000] (4,000)
Net Adjustments ₱ (9,000)

20.) Total Liabilities and Owner's Equity ₱ 185,000

Total Non-Current Assets 70,000
Total Current Assets ₱ 115,000
Investment in Trading Securities ₱ 10,000
Prepaid Expenses 5,000
Trade and Other Receivables 15,000 30,000
Ending Cash Balance ₱ 85,000
Net Cash Flows for the Period (₱55,000 - 10,000 - 9,470) 35,530
Beginning Cash Balance ₱ 49,470
 Journal Entries
1.)
Date Particulars Debit Credit
Jan. 1 Cash 500,000
Nicollo, Capital 500,000
Initial Investment

Taxes and Licenses Expense 5,000

Cash 5,000
Tax paid to City Treasurer

Feb. 15 Office Equipment 10,000

Office Furniture and Fixtures 15,000
Accounts Payable - Abenson 25,000
To record purchase of office equipment and office furniture and fixtures

May 31 Office Supplies 12,000

Cash 12,000
To record purchase of office supplies

July 31 Accounts Receivable - Employ Company 25,000

Service Income 25,000
To record services rendered

Aug. 15 Cash 14,000

Service Income 14,000
To record services rendered

Sept. 30 Accounts Payable - Abenson 25,000

Cash 25,000
Payment of accounts payable

Oct. 31 Cash 25,000

Accounts Receivable - Employ Company 25,000
Collection of accounts receivable

Nov. 15 Nicollo, Drawing 6,000

Cash 6,000
Withdrawal of cash by the owner
 Dec. 31 Salaries and Wages Expense 18,000
Cash 18,000
Payment of salaries

2.)
Date Particulars Debit Credit
May 5 Notes Receivable 150,000
Service Income 150,000

Sept. 2 Cash 156,000

Notes Receivable 150,000
Interest Income 6,000

3.)
Date Particulars Debit Credit
July 7 Cash 152,542
Interest Expense 3,458
Interest Income 6,000
Liability on Discounted Notes Receivable 150,000

4.)
Date Particulars Debit Credit
Aug. 31 Salaries and Wages Expense 46,900
SSS Contributions Payable 1,400
Philhealth Contributions Payble 575
Pag-Ibig Contributions Payable 300
Withholding Tax Payable 5,162
Cash 28,563
To record payment of salaries to employees

SSS Contributions Expense 3,038

Philhealth Contributions Expense 575
Pag-Ibig Contributions Expense 300
SSS Contributions Payable 3,038
Philhealth Contributions Payble 575
Pag-Ibig Contributions Payable 300
To record employer's share
 Preparation of Financial Statements

Char Concert Organizers, Inc.

Income Statement
For the Year Ended December 31, 2012
Note
Revenues
Ticket Sales Php 7,000,000
Merchandise Commission Revenue 770,000
Total Revenue Php 7,770,000

Less: Expenses
Band Commission Php 1,800,000
Rent Expense 1 1,300,000
Salaries and Wages Expense 320,000
Interest Expense 70,000
Depreciation Expense 200,000
Insurance Expense 600,000
Entertainment Expense 80,000
Advertisement Expense 200,000
Supplies Expense 60,000
Taxes and Licenses Expense 80,000
Utilities Expense 2 50,000
Gasoline and Oil Expense 100,000
Miscellaneous Expense 8,000 4,868,000
Net Profit Php 2,902,000

Char Concert Organizers, Inc.

Statement of Financial Position
As of December 31, 2012

ASSETS
Current Assets
Cash and Cash Equivalents 3 Php 4,500,000
Trade and Other Receivables 4 550,000
Prepaid Expenses 5 480,000
Total Current Assets Php 5,530,000

Non-Current Assets
Property, Plant, and Equipment 6 450,000

TOTAL ASSETS Php 5,980,000

 LIABILITIES & OWNER'S EQUITY
Current Liabilities
Trade and Other Payable 7 Php 78,000

Non-Current Liabilities
Bonds Payable, due 2014 Php 350,000
Loans Payable, due 2015 200,000
Total Non-Current Liabilities 550,000

Total Liabilities Php 628,000

Owner's Equity
Char, Capital 5,352,000

TOTAL LIABILITIES AND

OWNER'S EQUITY Php 5,980,000

Char Concert Organizers, Inc.

Statement of Changes in Owner's Equity
For the Year Ended December 31, 2012

Char, Capital - Beg. Php 2,000,000

Add: Additional Investment Php 500,000
Net Revenue 2,902,000 3,402,000
Subtotal Php 5,402,000
Less: Char, Drawing 50,000
Char, Capital - End Php 5,352,000

Char Concert Organizers, Inc.

Statement of Cash Flows
For the Year Ended December 31, 2012

Cash Flows from Operating Activities

Cash received from sales Php 7,262,000
Cash paid for expenses (3,248,000)
Interest paid (55,000)
Rent payment (1,400,000)
Interest received 40,000 Php 2,599,000
Cash Flows from Investing Activities
Purchase of new equipment Php (500,000)
Resale of old equipment 190,000
Proceeds from Sale of Investments 150,000
Investment in ABC's Common Shares (130,000)
Proceeds from Sale of Land 500,000 210,000

Cash Flows from Financing Activities

Dividends received Php 21,000
Issuance of Bond Indenture 400,000
Char, Drawings (50,000) 371,000

Net Increase (Decrease) in Cash Php 3,180,000

Add: Beginning Cash Balance 1,320,000
Ending Cash Balance Php 4,500,000

Notes to Financial Statements

Note 1 - Rent Expense

Office Rent Php 150,000
Equipment Rent 300,000
Venue Rent 700,000
Transportation Rent 150,000
Total Php 1,300,000

Note 2 - Utilities Expense

Light and Water Expense Php 23,000
Telephone and Communications Expense 27,000
Total Php 50,000

Note 3 - Cash and Cash Equivalents

Cash in Bank Php 4,250,000
Cash on Hand 250,000
Total Php 4,500,000

Note 4 - Trade and Other Receivables

Accounts Receivable Php 430,000
Commission Receivable 100,000
Advances to Employees 20,000
Total Php 550,000
Note 5- Prepaid Expense
Office Supplies Php 50,000
Prepaid Advertising 57,000
Prepaid Insurance 373,000
Total Php 480,000

Note 6 - Property, Plant, & Equipment

Transportation Equipment Php 1,200,000
Less: Accumulated Depreciation 750,000
Carrying Value Php 450,000

Note 7- Trade and Other Payables

Accounts Payable Php 50,000
Interest Payable 28,000
Total Php 78,000