DON JOSE ECLEO MEMORIAL FOUNDATION COLLEGE OF SCIENCE AND TECHNOLOGY

Justiniana, Edera, San Jose Dinagat Islands

Prelim Exam – Financial Analysis and Reporting

I. True or False
1) External decision makers can obtain whatever financial data they need whatever they need it.
2) Accounting information is prepared for and useful to only outside decision makers.
3) The members of the Board of Directors are not “external users” of financial information, but are “internal users” only.
4) Managers of an entity are considered to be internal decision makers.
5) The objective of external financial statements is to communicate the economic effects of completed transactions and other events in the entity.
6) General purposes of financial statements were developed primarily because all outside users have the same information needs.
7) The double-entry system of accounting has been used for centuries.
8) The practice of accounting requires considerable professional judgment.
9) Expenses are outflows of assets or incurrences of liabilities during a particular period of time.
10) Timeliness is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in
the balance sheet and income statement.

II. Unadjusted Trial Balance-September 30, 2019

ACCOUNT TITLE DEBITS CREDITS

Utilities expense P 5,000

Cost of goods sold 25, 000
Sales Revenue 60, 000
Dividends 5, 000
Share Capital 70,000
Note Payable 15, 000
Accounts Payable 20, 000
Equipment 25, 000
Note Receivable 15, 000
Inventory 15,000
Prepaid Rent 5, 000
Accounts Receivable 20, 000
Cash 50,000 ______
P165, 000 P165, 000

Maotka Wholesale Enterprise needs to prepare financial statements at the end of September 2019. An unadjusted trial balance as of September 30, 2019 is
presented above.

The following information is also available:

a) A note payable of 5,000 has been outstanding since September 1, 2019. Under the terms of the note, the note plus interest (12%) is to be paid on March
1, 2020. No interest has been recorded on the note.
b) Wages of 15, 000 for September has been paid.
c) Stocks were delivered for a client for 5, 000. The client has not been billed yet.
d) Advertising costs of 3, 000 for September has been paid.
e) The enterprise anticipates that of the 20, 000 in accounts receivable from customers, 3,000 will not be collected.
f) Depreciation of the equipment for the month of September is 1,000.

Required:

1. Journalize and prepare any necessary adjusting entries at September 30, 2019.
2. Prepare an Adjusted trial balance as of September 30, 2019.
3. Prepare an income statement, statement of changes in equity, and balance sheet as of September 30, 2019.
4. Prepare the necessary closing entries and a post-closing trial balance.

Prepared by:
HONEYZEL P. ONTOLAN
Instructor
 Prelim Exam – Financial Analysis and Reporting

ANSWER KEY

i. True or False
1) TRUE
2) FALSE
3) TRUE
4) TRUE
5) TRUE
6) TRUE
7) TRUE
8) TRUE
9) TRUE
10) FALSE

ii. Required:
i. Interest expense 100
Interest Payable 100
ii. Wage expense 15,000
Cash 15,000
iii. Accounts Receivable 5,000
Sales Revenue 5,000
iv. Advertising expense 3,000
Cash 3,000
v. Bad debts 3,000
Allowance for uncollectible debts 3,000
vi. Depreciation expense 1,000
Accumulated Depreciation 1,000

III. Adjusted Trial Balance as of September 30, 2019

ACCOUNT TITLE DEBITS CREDITS

Utilities expense 5,000

Cost of goods sold 25, 000
Sales Revenue 65, 000
Dividends 5, 000
Share Capital 70,000
Note Payable 15, 000
Accounts Payable 20, 000
Interest Payable 100
Equipment 25, 000
Note Receivable 15, 000
Inventory 15,000
Prepaid Rent 5, 000
Bad debts 3,000
Accounts Receivable 25, 000
(Allowance for uncollectible debts) 3,000
Cash 32,000
Wage expense P 15,000
Advertising expense 3,000
Interest expense 100
Depreciation expense-Equipment 1,000
Accumulated Depreciation-Equipment 1,000

______
P174, 100 P174, 100
 Maotka Wholesale Enterprise
Income Statement
For the Month of September 30, 2019

Sales Revenue 65, 000

Cost of goods sold (25, 000)
Gross Profit 40,000

Other Expenses:
Utilities expense 5,000
Bad debts 3,000
Wage 15,000
Advertising 3,000
Interest Expense 100
Depreciation expense 1,000
Total Other Expenses 27,100
Net Income 12,900

Maotka Wholesale Enterprise

Statement of Changes in Equity
For the Month of September 2019

Share Capital Retained Earnings Total Equity

Balance at September 1, 2019 0 0 0
Issue of Share Capital 70,000 70,000
Net Income for September 2019 12,900 12,900
Less: Dividends _______ (5,000) (5,000)
Balance at September 30, 2019 70,000 7,900 77,900

Maotka Wholesale Enterprise

Balance Sheet
As of September 30, 2019

ASSETS

Current Assets:
Cash P32,000
Accounts Receivable 25,000
Less: Allowance for uncollectible debts (3,000) 22,000
Prepaid Rent 5,000
Inventory 15,000
Notes Receivable 15,000
Total Current Assets 89,000
Property and Equipment
Equipment 25,000
Less: Accumulated Depreciation (1,000) 24,000

Total Assets 113,000

LIABILITIES AND EQUITY

Current Liabilities
Accounts Payable P20,000
Notes Payable 15,000
Interest Payable 100
Total Current Liability 35,100

Equity
Share Capital 70,000
Retained Earnings 7,900
Total Equity 77,900
Total Liabilities and Equity 113,000

vii. Closing Entries and Post-Closing Trial Balance

Closing Entries
September 30
Sales Revenue ------------------------------------------------65,000
Income Summary--------------------------------------------65,000

September 30
Income Summary----------------------------------------------52,100
Cost of Goods Sold------------------------------------------------------25,000
Utilities Expense----------------------------------------------------------5,000
Bad Debts--------------------------------------------------------------------3,000
Wage Expense -------------------------------------------------------------15,000
Advertising Expense -----------------------------------------------------3,000
Interest Expense ----------------------------------------------------------100 -
Depreciation Expense ----------------------------------------------------1,000

September 30
Income Summary-------------------------------------------------7,900
Retained Earnings--------------------------------------------------7,900

POST CLOSING TRIAL-BALANCE

ACCOUNT TITLE DEBITS CREDITS

Note Payable 15, 000

Accounts Payable 20, 000
Interest Payable 100
Equipment 25, 000
Note Receivable 15, 000
Inventory 15,000
Prepaid Rent 5, 000
Accounts Receivable 25, 000
(Allowance for uncollectible debts) 3,000
Cash 32,000
Accumulated Depreciation-Equipment 1,000
Share Capital 70,000
Retained Earnings ______ 7,900
117,000 117,000