CHAPTER 4

EXERCISES

1. a. 3,000,000 + 5,500,000+4,500,000 =P13,000,000 revenue for Oct.

b. 3,000,000 + 4,000,000 = P7,000,000 revenue for Oct.

2. a. 25,000 + 10,000 = P35,000 salary expense for May

b.. 20,000 + 25,000 = P45,000 salary expense for May

3.
Cash Basis Income Statement Accrual Basis Income Statement
Revenues Revenues
Cash from Music Lessons P7,000 Sales of Music Lessons P10,000
P
Expenses Expenses
Wages Paid 600 Wages Expense 600
______ Utilities Expense 200
Cash Income P6,400 Net Income P9,200
. .
4. Revenue should be recognized: 1. OVER TIME 2. OVER TIME- delivery dates not completion of contract
3. IN TIME-completion date

5.
Income Statement of Financial Position
Statement
Revenues Total Total Owner’s
Business Transactions - Expenses Assets Liabilities Equity
1 Owner invested P 100,000 cash in business. +100,000 +100,000
2 Incurred legal expenses and paid P10,000. -10,000 -10,000
3 Paid cash for employee wages P15,000 -15,000 -15,000
4 Issued note for cash borrowed, P300,000. +300,000 +300,000
5 Received P80,000 cash for service provided. +80,000 +80,000
6 Bought car P500,000. 50% cash, balance note +500,000 +250,000
- 250,000
7 Bought office equipment credit P180,000. +180,000 +180,000
8 Provided services on credit, P75,000. +75,000 +75,000
9 Collected 50% on receivable from clients. +37,500
-37,500
10 Owner withdrew cash, P5,000. -5,000 - 5,000
Net Income to Owner’s Equity. 130,000 +130,000

Totals 955,000 730,000 225,000

6.
Income Statement Capital Statement
Consultant Fee Revenues P250,000 Luna, Capital, June 1 P800,000
Rent P25,500 Net income 150,500
Salaries 60,000 Drawings (33,000)
Telephone 7,200 Divine Capital, June 30 P917,500
Advertising 6,800 99,500
Net Income P150,500

Depreciation expenses (280,000 x 2%) P 5,600 . Net income will decrease to P144,900.
This will also decrease assets and net worth.
7.
Account Medical Medical Accounts Galing,
Cash Receivable Supplies Equipmen Payable Capital Explanation
t
54,200 3,850 75,000 25,000 108,050
a) 40,000 40,000 Medical Fees
b) (15,000) (15,000)
c) 10,000 10,000 20,000 Medical Fees
d) (15,000) (15,000) Rent
e) 8,025 8,025 Medical Fees
f) 12,450 12,450
g) 13,000 (13,000)
h) (1,500) (850) Salary Expense
(250) Repair Expense
(400) Utilities Expense
i) (3,980) (3,980) MedSupplies Expense
7
j) (10,000) (10,000) Drawings
75,700 5,025 12,320 75,000 22,450 145,595
Total Assets 168,045 = Liabilities and Capital 168,045
Family Medical Clinic
Statement of Comprehensive Income
For the month ended July 31, 2019

Medical Fees P28,025

Less Operating Expenses
Rent Expense P15,000
Salary Expense 850
Repair Expense 250
Utilities Expense 400
Medical Supplies Expense 3,980 20,480
Net Income P 7,545
Family Medical Clinic
Statement of Financial Position
July 31, 2019

Assets Liabilities & Owner’s Equity

Cash P 75,700 Accounts Payable P 22,450
Accounts Receivable 5,025 Galing Capital P108,050
Medical Supplies 12,320 Drawings (10,000)
Medical Equipment 75,000 Net Income 7,545 145,595
Total P168,045 Total Liabilities & Capital P168,045
8.
Date Cash Furn Accts Equipt Supplies Leasehold Dep for Utilities Notes DeJesus
Recble Improve Rent Payble Payble Captal
May 120,500 8,000 345,000 1,500 15,000 10,000 150,000 350,000
31
June
2 ( 300) (300) Taxes & Licenses
5 (2,815) (2,815) Taxes & Licenses
8 ( 500) ( 500) Taxes & Licenses
12 ( 5,750) (5,750) Communication
18 (1,500) (1,500) De Jesus Personal
20 800 (800) Electricity
25 (5,000) (5,000) Rent Expense
30 18,500 500 19,000 Game Fees
(10,000) (10,000) Salaries
( 750) (750)
113,135 8,000 500 345,000 750 15,000 10,000 800 150,000 341,585

Playnet. Com
Statement of Comprehensive Income
For the month ended April 30, 2018

Internet & LAN Game Fees P19,000

Less Taxes and Licenses P 3,615
Salaries 10,000
Supplies 750
Rent 5,000
Communication Expense 5,750
Utilities 800 25,915
Net Loss P6,915
Playnet.Com
Statement of Changes in Equity
For the month ended April 30, 2018

De Jesus Capital, Beg P350,000

Drawings ( 1,500)
Net Loss ( 6,915)
De Jesus Capital, End P341,585

Cash Flow:
Net Income Fr Operation Financing Investing
Taxes & Licenses P(3,615) P(3,615)
Communication (5,750) (5,750)
Salaries (10,000) (10,000)

8
 Rent ( 5,000) ( 5,000)
Utilities ( 800) -
Supplies ( 750) ( 750)
Internet & LAN Games 19,000 18,500
(P6,915)
Operating (P6,615)
Investment 350,000
Drawings (1,500)
Rent deposit (10,000)
Leasehold Improvement (15,000)
Furniture & Fixtures ( 8,000)
Supplies ( 750)
Equipment (195,000)
Total (P7,365) 348,500 (P228,000)
Cash balance end P113,135

9.
Account Furniture Accounts Notes Cely
Cash Receivable Supplies Equipment & Fix Payable Payable Capital
63,500 16,500 111,000 8,000 14,000 35,000 150,000
a) 50,000 54,000 104,000 Service fees
b) (26,800) (800) Utilities
(26,000) Salaries
c) (17,500) (17,500)
d) (12,000) (12,000) Supplies Expense
e) 7,500 (7,500) Utilities
f) (5,000) 4,000 (1,000) Kalaw Drawings
g) 100,000 ______ _____ _______ _______ _______ 100,000 ______
_
164,200 54,000_ 8,500 111,000_ 8,000_ 21,500_ 117,500 206,700_

Income Statement
True Advertising
For the month ended April 30, 2018
Service Fees P104,000
Expenses: Utilities P 8,300
Supplies 12,000
Salarie 26,000 46,300
s
Profit P 57,700

10. Cash Flows:

From Operation From Investing From Financing
Service Fees P50,000 Acquisition of Investment P150,000
Expenses: Utilities P 800 equipment (87,500) Drawings ( 1,000)
Supplies 20,500 Borrowing 100,000
Salarie 26,000 47,300
s
Net Cash Inflow P 2,700 Cash outflow (P87,500) Cash Inflow P249,000

11.
Due From Feria,
(Date) Cash Customers Supplies Furniture Equipment AP NP Capital Explanation
61,000 14,500 50,500 25,000 15,000 50,000 100,000 Investment
-8,000 Taxes & Licenses
-6,000 Registration Fees

1) 45,000 45,000 Processing fee

2) 28,000 28,000 Commission Income
5) (10,000) (10,000)
8) ( 7,250) 7,250
10) 8,000 8,000 Commission Income
12) ( 7,500) 15,000 7,500
14) 5,000 5,000 Processing Fee
15) (15,000) (15,000) Salaries
18) 12,000 12,000 Processing Fee
20) 1,000 1,000 Processing Fee
24) ( 5,000) ( 5,000)
25) 6,000 ( 6,000)
27) 3,500 3,500 Commission Income

9
28) 9,000 ( 9,000) Utilities
29) 12,000 4,500 Processing Fees
30) 7,500 Commission Income
(22,500)
( 7,500) Rent
(15,000) Salaries
31 (3,500) (3,500) Supplies
98,750 9,500 18,250 50,500 40,000 26,500 40,000 150,500

b. Feria Travel Agency

Capital Statement
For the month ended May 31, 2015

Capital, Apr. 30 P 100,000

Net Income for May 50,500
Capital, May 31 P150,500

c. Feria Travel Agency

Balance Sheet
May 31, 2015
Assets Liabilities & Owner’s Equity
Cash P 98,750 Accounts Payable P 26,500
Accounts Receivable 9,500 Notes Payable 40,000
Supplies 18,250
Furniture 50,500 Total 66,500
Equipment 40,000 Feria, Capital 150,500
Total P217,000 Total P217,000

d. Feria Travel Agency

Cash Flow Statement
For the month ended May 31, 2015

Cash flow from Operating Activities:

Receipts from customer P 105,000
Disbursements for expenses ( 49,750) P 55,250
Cash flow from Investing Activities:
Acquisition of fixed assets ( 7,500)
Cash flow from Financing Activities:
Payment of note ( 10,000)
Increase in cash 37,750
Cash, Apr. 30 61,000
Cash, May 31 P98,750
12.
Accts Delivery Notes Accts Fedor Capital Revenues Account
Date Cash Supplies
Recvble Van Payable Payable (Drawings) (Expenses) Title
7/1 100,000 100,000
2 -20,000 120,000 100,000
3 -15,000 -15,000 Rent
5 22,000 22,000 44,000 Service fees
9 -2,000 -2,000
12 1,500 +1,500
15 12,500 -12500
17 7,500 -7,500 Gas and oil
20 15,000 -5,000 10,000 Service fees
23 -25,000 -25,000
26 -2,500 +2,500 -5,000 Utilities
29 -7,500 -7,500
30 -30,000 -30,000 Salaries
(1,000) -1,000 Supplies
-4,500 4,500 Net loss
47,500 4,500 500 120,000 75,000 4,000 93,500

Fed Deliveries
Income Statement
For the month of June 30,2015
Revenues P54,000
Expenses: Rent P 15,000
Gas 7,500
Utilities 5,000
Supplies 1,000
10
 Salaries 30,000 58,500
Net Loss P 4,500
Fed Deliveries
Statement of Financial Position
June 30, 2015
Cash P 47,500
Accounts Receivable 4,500
Supplies 500
Delivery Panel 120,000
Total P172,500
Notes Payable P 75,000
Accounts Payable 4,000
Fedor, Capital 93,500
P172,500
Fed Deliveries
Statement of Owner’s Equity
For the month of June 30, 2015
Capital, Jan 1
P100,000
Less: Drawings
2,000

98,00
Less: Net Loss
4,500
Fedor, Capital June 30
P93,500
13.

Cash
Operating
Financing
Investing

100,000

100,000

-20,000

-20,000

-15,000
-15,000

11
22,000
22,000

-2,000

-2,000

12,500
12,500

15,000
15,000

-25,000

-25,000

12
 -2,500
-2,500

-7,500
-7,500

-30,000
-30,000

47,500
-5,500
98,000
-45,000

14.
Cash
Accts Recble

Supplies

Furniture

Equipment
Accounts Payable
Wong, Capital
Revenues

13
(Expenses)

Change in capital

July 1

+ 50,000

+ 10,000

+ 60,000

2
- 25,000

-24,500
- 500
Rent
Utilities

120,000
+ 120,000

6
-2,500

2,500

8
+ 32,000

+ 32,000
Prof Fees

10

+27,000

+ 27,000
Prof Fees

15
- 6,200

14
- 6,200
Wages

18
+ 15,000
-15,000

25
+40,000
+60,000

+100,000
Prof Fees

28
- 5,000

-5,000

Wong,Drawings

28
- 4,000

-4,000

31
-6,200

-6,200
Wages

31

+5,600

-5,600
Utilities

-2,000

15
 -2,000
Supplies Used

88,100
72,000
500
10,000
120,000
121,600
60,000
116,000

Income Statement
For the month of July 2019
Revenues P159,000
Expenses: Rent P 24,500
Utilities 6,100
Supplies 2,000
Salaries 12,400 45,000
Net Income P114,000
Statement of Financial Position
July 31, 2017
Cash P 88,100
Accounts Receivable 72,000
Supplies 500
Furniture 10,000
Equipment 120,000
P290,600
Accounts Payable P121,600
Wong, Capital 169,000
P 290,600

Statement of Owner’s Equity

For the month of July 2019
Capital, July 1 P 60,000
Less: Drawings 5,000
55,000
Add: Net Income 114,000
Wong, Capital July 31 P169,000

15.
Cash Operating Investing Financing
50,000 Investment P50,000
(25,000) Rent (24,500)
Utilities ( 500)
( 2,500) Supplies (2,500)
32,000 Prof Fees 32,000
(6,200) Wages (6,200)
15,000 Prof Fees 15,000
40,000 Prof Fees 40,000
( 5,000) Cash drawn (5,000)
( 4,000) Equipt paid (4,000)
(6,200) Wages (6,200)

88,100 47,100 (4,000) 45,000

16.
Villa's Machine Works
Income Statement
For the month ended June 30, 2018
Service Income P40,000
Expenses: Utilities P 7,500
Rent 11,250
Salaries 15,000
16
 Advertising 5,000 38,750
Operating Income 1,250
Interest Expense 1,000
Net Income P 250

PROBLEMS

1. a. P140,000 (P100,000 actual payment and P40,000 incurred but not yet paid)
b. P 75,000 Depreciation Expense. Going Concern Principle & Expense Recognition Principle.
c. P 42,000
d. P1,500,000 and P1,400,000
e. March 2010
f. P1,500 as Representation Expense. Entity Concept
g. P1,750 as Owner’s drawing following the Business Entity rule.
2.
Cash P 19,500 Accounts Payable P35,000
Accounts Receivable 65,000 Notes Payable 150,000
Supplies 23,000 Owner’s Equity 322,500
Repair Equipment 400,000
Total P 507,500 507,500

Owner’s Equity end P322,500

Owner’s equity, beg 140,000
Net income P182,500
Expenses 144,000
Revenues earned P327,000

3.
3 Accounts Deposit Accounts Warren,
Cash Receivable Equipment for Rent Supplies Payable Capital
May 3 + 50,000 50,000 Investment
6 +100,000 +50,000 50,000 Investment
11 - 4,500 + 4,500
14 - 30,000 + 30,000
15 +100,000 +100,000 Prof Fees
21 - 50,000 - 50,000
22 - 500 - 500 Advertising
27 +120,000 +120,00 Prof Fees
0
28 - 15,000 - 15,000 Drawings
29 - 5,000 - 5,000 Seminar Fee
-1,500 -1,500 Membership Fee
30 - 23,500 - 17,500 Rent
- 6,000 Utilities
31 - 4,500 - Salaries
4,500
- 500 - Supplies Used
500

15,500 120,000 100,000 30,000 4,000 0 269,500

b) Revenues P220,000
Expenses: Advertising ( 500)
Seminar Fee ( 5,000)
Membership ( 1,500)
Rent (175,000)
Utilities ( 6,000)
Salaries ( 4,500)
Supplies ( 500)
Net Income P184,500
c) King Capital May 3 P 50,000
Additional Investment 50,000
Net Income 184,500
17
 Drawings ( 15,000)
King Capital May 31 P269,500

d) Assets
Currrent:
Cash P 15,500
Accounts Receivable 120,000
Supplies 4,000 P139,500
Non-Current:
Equipment 100,000
Rent Deposit 30,000 130,000
Total Assets P269,500
King, Capital P269,500

4.
Cash Operating Investing Financing
50,000 50,000
( 4,500) ( 4,500)
(30,000) (30,000)

100,000 100,000
(50,000) (50,000)
(500) ( 500)
(15,000) (15,000)
( 5,000) ( 5,000)
(1,500) (1,500)
(23,500) ( 23,500)
( 4,500) ( 4,500)
15,500 60,500 (80,000) 35,000

Problem 5
Accounts Furniture & Accounts Notes Rent Brown, Explanation
Cash Receivable Fixtures Buses Payable Payable Payable Capital
7/1 1,000,000 1,000,000 Investment
2 ( 150,000) 300,000 150,000
8 1,999,800 1,999,800
11 ( 100,000) ( 110,000) Advertising
12 240,000 240,000 Transport Fares
15 ( 125,000) ( 125,000) Salaries
20 40,000 40,000 80,000 Transport Fares
21 70,000 70,000 Cargo Fare
25 ( 50,000) ( 50,000) Drawings
27 ( 40,000) ( 40,000) Utilities
28 75,000 ( 75,000) Rent
29 480,000 360,000 Transport Fare
120,000 Cargo Fare
30 ( 125,000) (125,000) Salaries
31 ( 90,000) (90,000) Gas & Oil
1,150,000 40,000 300,000 1,999,800 150,000 1,999,80 75,000 1,265,000
0

PTL
Income Statement
For the month ended July. 31, 2019
Revenues: Transport Fares P680,000
Cargo Fares 190,000 P870,000
Less Expenses:
Advertising P100,000
Utilities 40,000
Salaries 250,000
Rent 75,000
Gas & Oil 90,000 555,000
Net Income P 315,000

PTL
Capital Statement
For the month ended July 31, 2019
Brown, Capital, June 1 P 1,000,000
Add Net Income 315,000
Total 1,315,000
Less Drawings __50,000
Brown, Capital, June 30 P 1,265,000

18
 PTL
Statement of Financial Position
July 31, 2019
Assets Liabilities & Owner's Equity
Cash P 1,150,000 Notes Payable P1,999,800
Accts Receivable 40,000 Accounts Payable 150,000
Furniture & Fixtures 300,000 Rent Payable 75,000
Buses 1,999,800 Advincula, Capital 1,265,000
Totals P 3,489,800 P3,894,800

6.
a) Cash from customers P830,000
b) Cash paid for expenses P480,000

Net Cash inflow from operation P 350,000

Net Cash outflow from investing activities ( 150,000)
Net Cash inflow from financing activities 950,000
Cash balance July 31 P1,150,000

7.
Accounts Accts Rent Note Advincula,
Cash Receivable Buses Furniture Equipt Payable Payable Payable Capital Explanation
7/31 1,150,000 40,000 1,999,800 300,000 150,000 75,000 1,999,800 1,265,000
8/1 (75,000) (75,000)
3 1,200,000 1,200,000
4 ( 12,500) ( 12,500) Taxes & Licenses
10 525,000 450,000 Transportation
75,000 Cargo Fares
12 ( 85,000) ( 85,000) Repair & Maintenance
14 150,000 150,000
15 (175,000) (175,000) Salaries & Wages
18 40,000 (40,000)
22 247,500 175,500 Transportation Fares
72,000 Cargo Fares
25 45,000 45,000 90,000 Transportation Fares
29 (72,500) (72,500) Repairs & Maint.
30 ( 75,000) ( 75,000) Rent
(175,000) (175,000) Salaries
(134,525) (134,525) Gas & Oil
31 165,000 165,000 Passenger Fares
56,550 56,550 Cargo Fares
1,424,025 45,000 3,199,800 300,000 150,000 300,000 0 1,999,800 2,819,025

PTL
Income Statement
for the month ended Aug. 31, 2019
Revenues:
Transportation P880,000
Cargo 203,550 P1,083,550
Expenses:
Gas & Oil 134,525
Repairs 157,500
Rent 75,000
Salaries 350,000
Taxes & Licenses 12,500 729,525
Net Loss P 354,025
PTL
Capital Statement
For the month ended Aug. 31, 2019
Capital, July 1 P 1,265,000
Additional Investment 1,200,000
Net Income 354,025
Capital July 31 P 2,819,025
PTL
Balance Sheet
Aug. 31, 2019
Assets Liabilities & Owner's Equity
Cash P 1,424,025 Notes Payable P1,999,800
Accounts Receivable 45,000 Accounts Payable 300,000
Buses 3,199,800 Brown, Capital 2,819,025
Equipment 150,000
Furniture & Fixture 300,000 ________
Total P5,118,825 Total P5,118,825

PTL
Cash Flow Statement
For the month ended Aug. 31, 2019

Cash flow from operations:

19
 Cash inflow from revenues earned P1,078,550
Cash outlflow for expenses 804,525 P 274,025
Cash balance Aug 1 1,150,000
Cash balance Aug 31 P1,424,025

A CHALLENGING PROBLEM

1. Operating expenses (150,000 + 220,000 + 280,000 + 124,000) P 774,000

Net loss 50,000
Total revenues P724,000
2. Total RevenueS (724,000 x 90% x 2) P1,303.200
Total expenses projected:
Advertising P170,000
Rent 220,000
Wages 280,000
Utilities 217,000
Representation 20,000 907,000
Net Income P 396,200

Conclusion: The projection will give a positive result and the owner's goal of turning the loss into profit will be achieved.

3.Hospitality trait of Filipinos:

a. When a person visits a friend's house, the host greets him or her with a very warm welcome. The host will
immediately let their visitor sit down and will prepare a meal or a snack plus drinks for the visitor. The host will insist
that the friend not leave the house with an empty stomach. A host will always make sure you had a great time visiting
them.
b. People offer their guest room to visitors if they're going to spend the night.
c. Meals offered to guests are very special. A host always finds a way to prepare great tasting food that her visitor
wants to eat.
d. They let the guests eat first, or most often serve all the food even if it was really prepared for their family
consumption.

SOLUTION IN EX 4 OF 23RD ED BOOK.

Revenues Cash Other Assets Liabilities Equity
(Expenses)
P 74,500 P150,500 P 75,000 P150,000
a. Revenues, 80% in cash P100,000 P 80,000 20,000
b. Paid bank loan (25,000) (25,000)
c. Equipment (50,000) 50,000
d. Expenses, 25,000 unpaid (75,000) (50,000) 25,000
e. Cash contribution 60,000 60,000
f. Owner’s drawing (10,000) (10,000)
Net profit P25,000 25,000
79,500 P220,500 P 75,000 P225,000

Net profit is only P25,000. Cash is higher at P79,500 or P5,000 because:

Net cash from operation P30,000
Net cash from investing (50,000)
Net cash from financing 25,000
Cash increased by P5,000

Total assets P300,000 = Liabilities P75,000 + Equity P225,000

c) ROE 25,000/187,500 = 13.33% Average capital 150,000 + 225,000 = P187,500
2
d) Yes a capital of P150,000 to P225,000 and an attractive ROE of 13.33% against 5%.

20