CHAPTER 6

CASH TO ACCRUAL ACCOUNTING/ SINGLE ENTRY SYSTEM

PROBLEMS

6-1. (BRAIN COMPANY)

Capital, end
Assets P609,000
Less liabilities 138,000 P471,000
Capital, beginning
Assets P485,000
Less liabilities 94,000 391,000
Increase in capital P 80,000
Additional investments (70,000)
Withdrawals 120,000
Profit P130,000

6-2.
a. 38,900 + 13,480 – 48,200 = 4,180
b. 1,160,000 + 980,000 – 700,000 = 1,440,000 collections;
1,440,000 + 1,660,000 + 30,000 – 1,200,000 = 1,930,000
c. 210,000 + 80,000 – 40,000 – 206,000 = 44,000
d. 440,000 – 80,000 + 100,000 + 54,000 – 30,000 = 484,000

6-3. (GRAIN COMPANY)

Requirement 1
Capital, end
Assets P352,800
Less liabilities (including P8,000 unrecorded purchase) 123,500 P229,300
Capital, beginning
Assets P293,200
Less liabilities 117,800 175,400
Increase in capital P 53,900
Withdrawals 20,000
Profit P 73,900

Requirement 2
Grain Company
Statement of Comprehensive Income
For Year Ended December 31, 2014
Sales (net of P21,000 returns) – Schedule 1 P725,000
Cost of goods sold
Merchandise inventory, January 1 P 97,200
Purchases (net of P13,000 returns) – Schedule 2 551,200
Merchandise inventory, December 31 (105,800) 542,600
Gross profit on sales P182,400
Other income 8,000
Operating expenses – Schedule 3 (114,000)
Operating income P 76,400
Interest expense ( 2,500)
Profit P 73,900

Schedule 1 – Sales
Receipts from customers P697,500
Accounts receivable, beginning ( 59,400)
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Accounts receivable, ending 76,100

Accounts written of 10,800
Sales returns 21,000
Gross sales P746,000

Schedule 2 – Purchases
Payments to trade creditors P536,600
Accounts payable, beginning ( 63,300)
Accounts payable, ending 69,900
Unrecorded purchases 8,000
Purchase returns 13,000
Gross purchases P564,200

Schedule 3 – Operating expenses

Bad debts expense P 10,800
Depreciation expense (85,000 + 20,000 – 95,500) 9,500
Other operating expenses:
Payments for operating expenses P94,100
Prepaid expenses, beginning 6,000
Prepaid expenses, ending ( 7,500)
Accrued expenses, beginning ( 4,500)
Accrued expenses, ending 5,600
Total operating expenses P 114,000

6-4. (TRAIN FASTFOOD)

Train Fastfood
Statement of Comprehensive Income
For Six Months Ended December 31, 2014
Sales P2,100,000
Cost of sales:
Purchases P1,850,000
Less Inventory, end 450,000 1,400,000
Gross profit P 700,000
Depreciation expense ( 24,000)
Other operating expenses ( 556,000)
Net profit P 120,000

Train Fastfood
Statement of Financial Position
December 31, 2014
Assets Liabilities and Capital
Current Assets Current Liabilities
Cash P 24,000 Accounts payable P230,000
Accounts receivable 200,000 Bank loan 200,000
Inventory 450,000 Total current liabilities P430,000
Total current Assets P674,000
Non-current Assets Tom Cruz, Capital
Equipment P400,000 Initial investment P500,000
Less accum. Depr 24,000 376,000 Add profit 120,000 620,000
Total assets P1,050,000 Total liabilities and capital P1,050,000

Computation of cash balance:

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Chapter 6 – Cash to Accrual/ Single Entry System

Cash receipts from

Initial investment by owner P 300,000
Collections from sales 1,900,000
Bank loan 500,000 P2,700,000
Less cash payments for
Purchases P1,620,000
Bank loan 300,000
Equipment 200,000
Cash operating expenses 556,000 2,676,000
Cash balance, end P 24,000

6.5. (HORN CORPORATION)

(Cash Basis)
Horn Corporation
Income Statement
For the Years Ended December 31, 2014 and 2013

2014 2013
Revenues P 515,000 P295,000
Expenses (272,000) (225,000)
Profit P 243,000 P 70,000
2014 sales = P160,000 + 355,000 = 515,000
2013 sales = 295,000
2014 expenses = 67,000 + 160,000 + 45,000 = 272,000
2013 expenses = 185,000 + 40,000 = 225,000

(Accrual Basis)
Horn Corporation
Income Statement
For the Years Ended December 31, 2014 and 2013
2014 2013
Revenues P445,000 P485,000
Expenses (255,000) (277,000)
Profit P190,000 P208,000
2014 sales = 355,000 + 90,000 = 445,000
2013 sales = 295,000 + 160,000 + 30,000 = 485,000
2014 expenses = 40,000 + 160,000 + 55,000 = 255,000
2013 expenses = 185,000 + 67,000 + 25,000 = 277,000

6-6. (BORN AND CORN)

Cash Basis Accrual Basis
Sales P750,000 P1,057,500
Cost of Sales ( 892,500) ( 637,500)
Salaries Expense ( 96,000) ( 126,000)
Rent Expense ( 60,000) ( 20,000)
Other Operating Expenses ( 84,000 ) (104,000)
Profit P(382,500) P 170,000

6-7. (ATTY. D. MACAPANALO)

Atty. D Macapanalo

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Profit and Loss

For the Year Ended December 31, 2014
Professional Fees P 1,242,200
Expenses 727,300
Profit P 514,900

Professional Fees
2014 Collection P1,250,000
Fees Receivable, January 1 ( 52,000)
Fees Receivable, December 31 47,000
Unearned Fees, January 1 26,200
Unearned Fees, December 31 ( 29,000)
Professional Fees, Accrual Basis P 514,900

Expenses
2014 Payments P 722,400
Accrued expenses, January 1 ( 18,000)
Accrued expenses, December 31 21,500
Prepaid expenses, January 1 6,400
Prepaid expenses, December 31 ( 5,000)
Expenses, accrual basis P 727,300

6-8. (JACK AND JILL COMPANY)

Jack and Jill Company
Statement of Comprehensive Income
For the Year Ended December 31, 2014
Sales P 7,440,000
Cost of sales 4,670,000
Gross Profit P 2,770,000
Other operating income
Gain on sale of automobile 20,000
Total income P 2,790,000
Operating expenses
Depreciation 298,667
Others 1,003,600
Total expenses 1,302,667
Profit before interest 1,487,733
Interest expense 104,000
Profit P 1,383,733

Jack and Jill Company

Statement of Changes in Partners’ Equity
For the Year Ended December 31, 2014
Jack Jill
Equity, January 1 P1,750,000 P1,815,000
Withdrawals (500,000) (250,000)
Share in profit 691,867 691,866
Equity, December 31 P1,941,867 P2,256,866

Jack and Jill Company

Statement of Financial Position
December 31, 2014
Assets

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Chapter 6 – Cash to Accrual/ Single Entry System

Current Assets
Cash P 736,000
Accounts receivable 1,782,500
Allowance for bad debts (60,000 – 17,500) (42,500)
Receivable from employees 30,000
Deposit on merchandise purchases 75,000
Merchandise inventory 3,750,000
Prepaid insurance 8,000
Total current assets P 6,339,000
Non-current Assets
Property, plant and equipment
Furniture and fixtures P 220,000
Accumulated depreciation – furniture and fixtures (87,000)
Automobiles 940,000
Accumulated depreciation - automobiles (421,667)
Total property, plant and equipment P 651,333
Total Assets P 6,990,333
Liabilities
Current Liabilities
Accounts Payable P 1,875,000
Accrued Expenses 16,600
Bank loan, including accrued interest 900,000
Total current liabilities P 2,791,600
Equity
Jack P 1,941,867
Jill 2,256,866
Total partners’ equity 4,198,733
Total liabilities and partners’ equity P 6,990,333

Sales
Collections in 2014 (6,500,000 -60,000) P6,440,000
Accounts receivable, end (1,800,000 – 17,500) 1,782,500
Write of 17,500
Accounts receivable, January 1, 2014 ( 800,000)
Sales P7,440,000

Purchases
Payments to merchandise creditors P4,500,000
Accounts payable, end 1,875,000
Returned merchandise (to be applied to future purchases) ( 75,000)
Accounts payable, beginning (1,380,000)
Net purchases P4,920,000

Cost of sales
Inventory, beginning P3,500,000
Net purchases 4,920,000
Inventory, end ( 3,750,000)
Cost of sales P4,670,000

Depreciation expense
On old furniture and fixtures (P220,000/10) P 22,000
On old automobiles (P780,000 – 280,000)/ 3 166,667
On new automobile 440,000 / 3 x 9/12 110,000

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Chapter 6 – Cash to Accrual/ Single Entry System

Depreciation expense P 298,667

Expenses other than depreciation

Payments for selling and general expenses P1,000,000
Prepaid insurance, beginning 15,000
Prepaid insurance, end ( 8,000)
Accrued expenses, beginning ( 20,000)
Accrued expenses, end 16,600
Expenses other than depreciation P1,003,600

Interest Expense
On bank loan obtained on 01/02/14 and paid 05/02/14 P 32,000
Accrued on bank loan obtained on 05/01/14 72,000
Total interest expense P 104,000

MULTIPLE CHOICE QUESTIONS

Theory
MC1 D MC3 C MC5 D MC7 C MC9 A
MC2 A MC4 A MC6 B MC8 A MC10 C

Problems
MC11 D 210,000 – 50,000 = 160,000 capital, end; 260,000 – 60,000 = 200,000 beg cap
160,000 – 200,000 = 40,000 dec in capital + 50,000 – 12,000 = 78,000 net loss.
MC12 A (80,000–4,000) + (120,000– 6,000+ 40,000 – 30,000) = 200,000
MC13 D 800,000 + 320,000 + 124,000 – 240,000 – 96,000 = 908,000
MC14 B 189,000 + 12,000 – 8,000 + 36,000 + 7,000 – 10,500 = 225,500
MC15 A 30,000 + 3,000 – 21,000 = 12,000 + 60,000 – 58,000 = 14,000
MC16 D 600,000 + 400,000 – 200,000 + 300,000 – 150,000 = 950,000
MC17 D 794,000 + 51,000 – 45,000 = 800,000
MC18 A 715,000 – 144,000 – 96,000 – 7,000 = 468,000 + 60,000 – 33,000 = 495,000
MC19 A 800,000 – (144,000/45%) = 480,000
MC20 B 890,000 – 270,000 – 600,000 – 60,000 + 130,000 = 90,000
MC21 D 310,000 + 85,000 + 4,000 + 66,000 = 465,000
MC22 B 280,000 + 67,000 + 5,000 = 352,000
MC23 C 352,000 – 5,000 – 21,700 = 325,300
MC24 C 45,000 + 3,500 + (200,000 x 2%) + (4,000/20% = 20,000 x 5%) = 53,500

MC25 A 45,000 + 280,000 + 140,000 – 110,000 = 355,000 + 10,000 + 50,000 – 60,000 =

355,000
MC26 C 800,000 – 96,000 + 124,000 + 320,000 – 908,000 = 240,000
MC27 B 2,000,000 + 960,000 + 100,000 + 800,000 + 120,000 + 320,000 – 400,000 –
1,600,000 + 1,200,000 + 2,000,000 = 5,500,000
MC28 C 7.5M – 5.8M = 1.7M – 1.5M + .28M = 480,000
MC30 C 320,000 – 650,000 – 400,000 = 730,000
MC31 B Dr changes = 142,500+202,500+630,000+172,500 = 1,147,500
Cr changes = 30,000+375,000+300,000+45,000 = 750,000
1,147,500 – 750,000 = 397,500 + 82,500 = 480,000
MC32 B 400,000+3,000,000-485,000=2,915,000 + 200,000 = 3,115,000
MC33 C 60,000 – 5,000 + 7,500 +3,000 – 4,000 = 61,500

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